SENIOR INTERDEPARTMENTAL GROUP ON INTERNATIONAL ECONOMIC POLICY (SIG-IEP)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R000400560013-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 35
• Document Creation Date: December 21, 2016
• Document Release Date: May 6, 2008
• Sequence Number: 13
• Publication Date: August 1, 1983
• Content Type: MEMO

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DATE I INITIAL
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THE SECRETARY OF THE TREASURY
WASHINGTON 20220
August 1, 1983
UNCLASSIFIED
(With Confidential Attachments)
413 - D~
MEMORANDUM FOR THE VICE PRESIDENT
THE SECRETARY OF STATE
THE SECRETARY OF DEFENSE
THE SECRETARY OF THE INTERIOR
THE SECRETARY OF AGRICULTURE
THE SECRETARY OF COMMERCE
THE DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET
/DIRECTOR OF CENTRAL INTELLIGENCE
UNITED STATES TRADE REPRESENTATIVE
CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS
ASSISTANT TO THE PRESIDENT FOR
NATIONAL SECURITY AFFAIRS
ASSISTANT TO THE PRESIDENT FOR
POLICY DEVELOPMENT
ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION
DIRECTOR, FEDERAL EMERGENCY MANAGEMENT AGENCY
SUBJECT Senior Interdepartmental Group on
International Economic Policy (SIG--JET')
A meeting of the SIG-IEP is scheduled for Wednesday,
August 3, at 4:00 p.m., in the Indian Treaty Room (Room 474,
Old Executive Office Building). The agenda is as follows:
1. Agricultural Export Subsidies;
2. Possible Redraft of MOU on Tin Disposals;
3. International Debt Update; and
4. Report on UNCTAD VI..
Papers on agenda items 1 and 4 are attached; item 3
will be an oral report. A paper on item 2 will be sent
shortly.
Attendance will be principal, plus one.
Donald T. Regan
UNCLASSIFIED
(With Confidential Attachments)
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Issue
At its meeting on May 27, 1983 the Trade Policy Committee
requested a paper setting forth a policy on the use of subsidies
for U.S. agricultural exports in order to provide leverage in
negotiating the reduction or elimination of foreign agricultural
export subsidies. This paper attempts to present a unified
policy dealing with both the problem of foreign subsidies and the
apparent failure of the international dispute settlement system
to resolve this problem.
Recommendation
The U.S. must devise a strategy which gives the countries
using agricultural export subsidies a positive incentive to make
the multilateral system work and to make the structural changes
necessary to eliminate agricultural export subsidies. As is now
evident, resort to the GATT dispute settlement process has not
worked. Therefore, we should consider adopting the following
policy:
A. Continued Negotiation. Continue bilateral discussions
in the present framework with the EC and press for multi-
lateral consultations and negotiations on relevant articles
of the GATT and Subsidies Code.
B. Pressure on foreign subsidy budgets. Continue efforts to
modify domestic agricultural programs in a manner consistent
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with foreign trade goals as well as. with domestic policy
goals, for example, freezing target prices and reducing loan
rates.
C. Countersubsidies to discourage foreign subsidized
competition in third country markets. Use export subsidies,
including blended credit and indirect subsidies, on a case-
by-case basis, to provide the U.S. with the necessary
leverage to support its efforts to provide a stronger
discipline on the use of export subsidies in the-agricultural
field and to ensure the viability of the GATT and the
Subsidies Code. This policy must be implemented in such a
manner that (1) foreign countries will. find it in their own
interest to negotiate rules calling for more discipline on
the use of export subsidies; (2) foreign export subsidy
practices are discouraged and neutralized; (3) the adoption
of subsidies by non-subsidized suppliers is not encouraged.
Moreover, the policy should be sufficiently short-term that
no U.S. sector becomes dependent upon government-assisted
export sales.
The following guidelines should be followed in implementing
this policy:
,1. Export subsidies should be granted in a manner con-
sistent with U.S. obligations under international trade
agreements.
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2. Export subsidies should focus directly on the
foreign subsidizing competitor and not harm the interests of
non-subsidizing third countries.
3. Export subsidies should target markets and products
where the U.S. has been displaced or pre-empted from those
markets by foreign subsidized products and where, in the
absence of foreign subsidies, the U.S. otherwise would be
competitive.
4. Subsidization should be of minimal cost to the U.S.
Treasury and consideration should be given to selling surplus
agricultural products to raise revenue to implement this
policy.
5. The amount of subsidization should not be more than
is necessary to offset estimated foreign subsidies.
D. Countermeasures to discourage foreign subsidized
competition in U.S. market. Where any country has used
export subsidies on non-primary agricultural products
exported to the U.S. in contravention of its Subsidies Code
obligations and where, because of a failure in the dispute
settlement process of the Code, the Committee fails to recom-
mend an elimination of the practice, (as in the present pasta
dispute) the U.S. should consider restricting imports of
those products to offset the effects of the subsidy, using
the President's authority under Section 301. The
appropriateness of such action shall be determined on a case-
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by-case basis after TPSC review and analysis.
Background
For the last 18 months a major thrust of U.S. diplomatic
efforts in the trade field has been aimed at seeking a resolution
to the problems created by widespread use of export subsidies in
the agricultural sector by our trading partners. The recent
U.S.-EC high level talks on agriculture, concluded on June 22,
1983, did not produce the desired results. Furthermore, the
current stalemate in the Subsidies Committee concerning the U.S.
wheat flour and pasta complaints is not only increasing the bi-
lateral tension, but is also casting serious doubt on the viabil-
ity of the GATT, both as a body of substantive rules governing
trade and a mechanism for dispute settlement Therefore, the
efficacy of the Subsidies Code is being increasingly called into
question. In light of this situation the U.S. has three ob-
jectives:
1. Restore confidence in the viability of the GATT and the
Subsidies Code to deal with the problems of agricultural
trade:
a) as mechanisms for resolving trade disputes; and
b) as providing a body of substantive rules which will
effectively impose more discipline on the use of
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agricultural export subsidies.
2. Obtain long-term changes in the EC's agricultural export.
policies.
3. Provide relief to U.S. agricultural producers and ex-
porters whose competitive position is being adversely
affected by export subsidies.
It is not likely that the wheat flour and pasta disputes
will be resolved in the near future. The Chairman of the GATT
Subsidies Committee has been working very hard to persuade non-EC
signatories that the pasta report should be adopted, but the
issue will not be discussed again by the full Committee until
September, 1983. Meanwhile, a high-level meeting with the EC has
been scheduled for July 26 in Brussels to discuss resolution of
both cases, and on July 27 the first meeting of the informal
bilateral working group on subsidies will take place. It will be
important at both of these meetings to inform the EC that, if the
stalemate in the Subsidies Committee persists, the U.S. may be
compelled to take unilateral action to protect its interests.
The TPSC Section 301 Subcommittee is currently reviewing a
recommendation which would implement Recommendation D above in
the case of EC export subsidies on pasta products.
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UNCTAD VI: ASSESSMENT AND FOLLOW-UP
I. General Assessment
The US achieved all of its minimum objectives at
UNCTAD VI, but the Conference's contribution to a more
pragmatic North-South dialogue over the longer term is
still unclear.
By avoiding a conference breakdown, we protected our
basic interest in a cooperative atmosphere for negotiation
at the bilateral and regional level and in the specialized
agencies. We prevented significant encroachment on the
specialized agencies and thus protected our systemic-'economic
concerns. New momentum or broadening of participation for
any future monetary conference was avoided. The Soviet
bloc not only was largely ignored by the_ LDCs, but for the
first time was unable to avoid specific reference-to its
responsibilities for supporting their development.
The rest of Group B displayed surprising unity and
support for most US positions. This partly resulted from
the G--77's inflexible negotiating posture, but it also
derived from the fortuitous timing of the Williamsburg
Summit, well-coordinated pre-conference preparations in
the OECD North-South Group and the fundamental similarity
of most of our positions.
Despite these damage limiting accomplishments, little
positive was achieved and UNCTAD gained some new toeholds
from which to move in directions we do not like. While we
communicated our message to a wide audience, there was little
"meeting of the minds" on how to assess or deal with global
and North-South economic problems nor on the degree to which
LDCs should share-responsibility for strengthening the trade
and financial systems.
Reports from our overseas posts on initial reactions to
UNCTAD VI indicate disappointment but no real surprise by
most G-77 governments with the meagre results. Other OECD
governments share our disappointment at G-77 unwillingness
to accept mutual responsibilities, for example in resisting
protectionism or making more effective use of aid, but some
were encouraged that so many resolutions did pass by consensus.
Many LDC governments also expressed to us disillusion-
ment with universal fora as a means to deal with their
economic concerns and their inclination towards greater
reliance on bilateral and regional economic relationships.
This is a useful reaction. A pragmatic and productive
North-South economic relationship can best be advanced in
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bilateral and regional contexts and in the specialized
agencies. What this means for the future of the global
North-South dialogue, however, will become clearer when we
see how LDCs pursue their interests at the fall UNGA and at
UNCTAD's October Trade and Development Board (TDB), as well
as in the specialized agencies (i.e., the September Bank/
Fund meeting).
II. Major Issues Requiring Follow-up
The following summarizes the major issues which will
warrant high-level attention in the coming months. Detailed
assessments for each of the major areas of concern -
Commodities, Trade, Money and Finance, Least Developed
Countries, and Basket Items - are annexed to this summary:
Commodities.
The Common.-Fund received a boost from the Canadian and
Malaysian announcements that they-will ratify and from
statements by the Directors of the Tin and Rubber Agreements
that they expect to associate with the Fund. It now appears
that the US will be seen as the only obstacle to the Fund's
coming into force. Since we can expect continued demands
that we join, we may soon wish to review whether and when the
Agreement should be submitted to Congress.
We will also have to decide whether to try to influence
the results of the UNCTAD "experts group" on compensatory
financing by supporting a solid US economist as one of the
experts or to dissociate ourselves from it.
Three potentially sensitive issues resulted from the
Belgrade trade resolution: (1) TDB review of develop-
ments in the trading system, (2) TDB "monitoring" of the
standstill and rollback commitments in the trade resolution,
and (3) UNCTAD's continuing work in services.
The section of the trade resolution on services does not
prejudice GATT's work on services, but neither does it
contain the explicit acknowledgment of GATT's competence in
services which we sought. This omission, and our concern
with an expanded UNCTAD work program in services, led us to
vote against the services section. Whether this will
provoke a further hardening of the LDC position will have to
be judged in future GATT and TDB consideration of services
issues.
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Money and Finance.
The US and Group B agreed to resolutions on money and
finance issues which are more specific and detailed than any
we have supported in UNCTAD in recent years. Although these
resolutions have some positive features and were carefully
caveated by Group B reservations, we anticipate that the
LDCs will try to use them inappropriately in the IMF, IBRD
and elsewhere.
There are only two specific items which call for immediate
action, however: the compensatory financing issue (mentioned
under commodities above) and a decision at this October's
TDB on whether to support creation of an Export Credit
Guarantee Facility (ECGF). Nevertheless, we will need to be
vigilant in UNCTAD and in other fora against LDC efforts to
misuse or misrepresent the UNCTAD VI results on money and
finance topics. We will also need to decide whether to
return to the prior US posture of refusing to discuss most
money and finance issues in UNCTAD in any detail.
Basket Items.
We were largely successful in our efforts to limit dis-
cussion on basket items to a review of work already underway
in UNCTAD. A resolution on Economic Cooperation among
Developing Countries was passed, but only by avoiding refer-
ence to the fundamental issue of universal participation.
We will be faced with this issue at the October TDB meeting.
It has important political as well as trade implications for
US interests.
Transfer of technology and shipping resolutions give
UNCTAD an ambitious work program for the next two to three
years. Our efforts to promote institutional reform failed
but will be followed,up in the TDB. The East/South item was
handled with a procedural resolution which torpedoed Soviet
efforts to make propaganda gains.
III. The Broader Implications of UNCTAD VI.
We see three broad issues which have substantial implica-
tions for long-term US interests in the wake of UNCTAD VI.
The first is how to deal with the North-South impasse
which occurred at the GATT Ministerial and UNCTAD VI on
trade. This primarily involves the need to progressively
integrate advanced LDCs into the global trading system and
the institutional roles of GATT versus UNCTAD. We also
should not rule out the possibility of further LDC stonewalling
in GATT in order to get a new international trade organization.
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We will continue to be faced with these fundamental disagree-
ments in the TDB and the GATT. Failure to resolve them will
impair achievement of our long-term trade objectives. A
review of US Trade Strategy vis-a-vis developing countries
seems warranted in light of the difficulties we encountered
at the GATT Ministerial and UNCTAD VI.
The second is the future of the North-South dialogue
and its relationship to the specialized agencies (IMF, IBRD,
GATT, etc.). We stressed at UNCTAD VI that the proper place
for negotiations is in the specialized agencies. We success-
fully resisted a Belgrade reference to a future monetary
conference, and interest has diminished in Global Negotiations.
But failure to show some responsiveness to LDC concerns in
the specialized agencies could rekindle LDC emphasis on
multilateral confrontation as a way to press for economic
and political benefits, especially if OECD recovery
fails to ameliorate their economic situation dramatically.
Even under optimistic assumptions, it is highly
unlikely that the G-77 and the Non-Aligned Movement will
completely give up on a multilateral North-South dialogue;
they have little to lose by continuing it. We may now have
a chance, however, to keep the balance on the side of
cooperative LDC participation in the specialized agencies,
and on our bilateral and regional relations. One approach
would be to try to strengthen the IMF/IBRD Development
Committee as a forum for the integrated discussion of
development issues.
Finally, and related to the above, is the question of
whether and how the US should proceed with its participation
in the UNCTAD system. We intend to undertake an interagency
assessment of this question prior to the October TDB.
Attachments: Tabs A-E: Detailed Assessments of UNCTAD VI
Treatment of Issues in Areas of:
A - Commodities
B - Trade
C - Money and Finance
D - Least Developed Countries
E - "Basket" Items
Tab F - Assessments by G-77 and Group B
Countries
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Drafted: EB/SEN:JLandbecg:jw/jmr
7/26/83, 632-0828/Disc 1 B1-5
Contributors: EB/GCP:MBarrera
EB/ICD:MShelton )I, Nn
EB/ODF:CEnglishC
EB/ODF:ABasora J47*t*-P.
IO/E:BEngel
Clearances: EB:EGConstable IO:GStreeb GS ~'~ ~{-r~o3
S/P : PBoek e r 'r ; ,t A-*1?
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UJflLNIIAL
ASSESSMENT OF UNCTAD VI
COMMODITIES
Considering how intolerable we found the Group of 77
(G-77) resolutions on commodities as drafted at Buenos
Aires, it is fair to say that the U.S., along with generally
strong Group B support, was able to limit the damage
done at UNCTAD VI to within acceptable limits. The one
resolution we felt compelled to vote against, which requests
the Secretary General of UNCTAD to convene an expert group
to study the need for an additional complementary financing
facility, is still better than the original G-77 request
for UNCTAD-sponsored negotiations on such a facility. Our
efforts to introduce the concept that developing countries
also have responsibilities to promote investment and trade
in processed commodities failed when the relevant paragraphs
in the resolution on processing, marketing, and distribution
(PMD) were eliminated at the last minute. Decisions on a
half dozen difficult issues including stockpiles, hides
and skins, provisional commodity agreements, the effective-
ness of existing commodity agreements, and frameworks for
international cooperation on PMD, were--deferred to future
sessions of the UNCTAD Committee on Commodities (COC). The
commodity-related development at UNCTAD VI which may have
the greatest consequences on the U.S. was the increase in
the number of countries ratifying or pledging to ratify the
Common Fund Agreement. Pressure will now be brought to bear
on the U.S. to ratify this Agreement since the U.S. will now
rightly be seen as the principal stumbling block to the
Agreement's coming into force.
COMMON FUND
More important than the resolution on the Common Fund
were the Canadian and Malaysian announcements that they will
ratify the Agreement as well as the informal statements by
the Directors of the Tin and Rubber Agreements that those
ICAs will soon pledge their intention to associate with the
Common Fund. It now appears increasingly likely that 90
countries will ratify the Common Fund Agreement, but without
U.S. ratification and our $75 million contribution it will
be virtually impossible to obtain the level of paid-in
capital required to bring the Agreement into force. Conse-
quently, we can expect increasing pressure in various UN
fora and in bilateral contacts with many LDCs and OECD
countries to submit the Agreement to Senate for ratification.
We joined the consensus for the Common Fund resolution
without a reservation statement since several paragraphs
reiterate a 1982 UNGA resolution that we accepted and since
we achieved satisfactory compromises on the rest. Both
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the UNGA and the UNCTAD resolutions urge states to sign and
ratify the Agreement "without any further delay". Addressing
our concern that none of the buffer stocking ICAs have
announced their intention to associate with the Fund when
and if it comes into effect, one of the paragraphs of the
resolution invites governments belonging to ICAs to consider
associating their organizations with the Fund. This issue
may come up at the September meeting of the Rubber Organization
Council. We may soon have to reconsider whether to stick
with our public line that we will consider submitting the
Common Fund Agreement to Congress for ratification when a
sufficient number of eligible ICAs are prepared to associate
with the Fund.
COMPENSATORY FINANCING
This was the issue where OECD countries were initially
most widely divided. The Nordics at one end of the spectrum
were prepared to accept the G-77 proposal for an UNCTAD
sponsored meeting to prepare for negotiations on a new
complementary facility while the U.S. and Canada hoped to
preclude any further UNCTAD deliberations of this subject.
The compromise solution, promoted by Canada and Australia
which won Group B backing, was to request the Secretary
General of UNCTAD to convene an expert group to examine
the impact of compensatory financing and to then consider
the need for an additional facility. However, during
negotiations with the G-77, language was added to the Group
B draft resolution instructing the expert group to consider
also the nature, rules, and financing and modalities of
an additional complementary facility. Consequently, in, the
end we voted against this resolution while several Group B
and Soviet bloc countries abstained. Now we must decide
whether we want to try to influence the deliberations of the
20-man expert group by nominating a private American for
that group and how we should react when the expert's
conclusions are submitted to the Trade and Development
Board before 1985.
PROCESSING, MARKETING, AND DISTRIBUTION OF COMMODITIES
The key trade-off on this resolution came when the G-77
dropped its demand for negotiations on frameworks for
international cooperation on PMT) and Group B dropped its
demand that the frameworks consist of a set of principles
or guidelines. Instead, the resolution adopted by consensus
simply decided that a special session of the COC should be
convened to elaborate the frameworks.
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The Group of 77 was completely unwilling to accept
paragraphs calling on LDCs to promote favorable investment
climates in their countries and to avoid measures impeding
the trade of processed commodities. Since Group B was
unwilling to accept resolutions calling on only industrialized
countries to do these things, the proposed paragraphs on
trade and investment were dropped altogether from this
resolution.
At the yet unscheduled special session of the COC
we will want to incorporate our ideas about investment and
trade of processed commodities. In a similar fashion, we
can fully expect the LDCs to pursue their demands for a new
fund to finance commodities processing projects, more
technical assistance in marketing, and other ideas that they
see as "elements of frameworks for international coopera-
tion" in PMD.
NEGOTIATIONS ON A NEW INTERNATIONAL WHEAT AGREEMENT
This is another issue on which Group B countries were
initially widely divided. The European countries were
willing to accept the paragraph in the G-77 resolution on
implementing the Integrated Program for Commodities (IPC)
which urged a resumption of the UN negotiations for a new
wheat agreement. Ultimately, the U.S. and Canada were
successful in separating wheat from the IPC resolution and
in promoting a resolution that simply urged the International
Wheat Council (IWC) to consider the resumption of negotia-
tions. However, the G-77 only accepted this resolution
after' inserting several qualifying phrases that forced us to
make a statement of reservation after joining the consensus
on this resolution. The G-77 insisted that the "next
session" of the IWC consider the "early" resumption of
negotiations "taking into account the interests of developing
countries".
IMPLEMENTATION OF THE INTEGRATED PROGRAM ON COMMODITIES
All of the intolerable paragraphs of this resolution,
as originally proposed by the G-77, were either watered down
or bracketed during negotiations. However, many of the
contentious subjects surfaced again in the Chairman's draft
submitted to the final plenary, forcing us to make strong
statements of reservation after joining the consensus on
the resolution. One small victory for Group B was the
transformation of the paragraphs proposed by the G-77
which urged that developed countries "refrain from adopting
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internal policies that could destabilize commodity markets
and discourage efficient producers," to one which "urges
that countries should refrain from applying policies that
would destabilize...". This was the one instance where LDCs
implicitly recognized that they too have responsibilities
not to disrupt commodity markets.
Subjects on which the compromises reached were less
satisfactory include:
-- Hides and Skins: G-77 efforts to add this
product to the IPC list of commodities were side-tracked
into vague language requesting the COC "to take appropriate
action to provide a forum for interested ... governments to
consider ... the elaboration of project proposals or other
arrangements on hides and skins within the context of the
Integrated Program for Commodities." The G-77 accepted this
language on the assumption that it laid the foundation for
an international commodity agreement on hides and skins but
most Group B countries are prepared to argue that the
existing FAO intergovernmental group on hides and skins is
the appropriate forum.
-- Review of the Existing ICAs: We accepted the G-77
request for a special session of the COC to review the
role of ICAs in attaining the objectives of the IPC after
reaffirming that ICAs are independent international instruments.
The UNCTAD Secretariat and the G-77 will probably push their
arguments for greater use of export quotas at this special
session of the COC so we should prepare to counter with
arguments in favor of buffer stocks.
-- Provisional Agreements: The G-77 draft calling for
immediate negotiations on price sustaining provisional
commodity agreements was modified to language calling on the
COC to examine the, feasibility of provisional agreements
"which could be applied on a temporary basis by interested
producing and consuming countries with the objective of
mitigating sudden collapses in prices." All Group B
countries are opposed to provisional agreements, consider
them totally unfeasible, and hope to kill this idea once and
for all at the next COC. We should be prepareed to state that
the U.S. would never participate in provisional agreements
designed only to mitigate price collapses as defined by
this resolution since they would not protect consumers
against sharp price rises.
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-- Stockpiles: Despite tremendous sensitivity about
this issue by France, Japan, the U.K., and the U.S., Group B
was only able to water down the G-77 language which originally
called for the COC to adopt a code of conduct and a sur-
veillance system for stockpile operations. The compromise,
which we accepted with a strongly worded reservation,
focuses only on disposals and requests the COC "at its next
regular session to review the problems involved in the
implementation" of a 1970 decision by the COC that disposals
should not disrupt commodity markets. This language would
only affect the U.S. in the near future, since no other
country is likely to dispose of surplus "non-commercial
reserves and stockpiles". Still, we can expect strong Group I3
support for our efforts to keep this debate limited to one
session of the COC and to keep the UNCTAD Secretariat out of
strategic stockpiles operations.
Drafted: EB/ESM/ICD:JMShe1ton J7%~.~ ij') C.i;;
Cleared : EB/ESM/ICD : JOMahony j,__) 64
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Assessment of UNCTAn VI
I. Assessment of Conference
UNCTAD VI achieved nothing substantive in the trade field.
The trade resolution was largely a rehash of previous UNCTAD
commitments (see annex). The Conference did not narrow appreciably
the large gap between our vision and LDCs' vision of what is
needed to promote development The intellectually worthwhile
portions of the four weeks of discussion could have been covered
adequately in four days. The outcome fell far short of the
G-77's Buenos Aires platform. Preliminary readings by U.S. embassies
in developing countries, however. indicate that most LDCs did
not expect significant results from the Conference and are not
upset by the outcome. Judged in terms of damage limitation,
therefore, the Conference was a "success" for the United States.
Judged in terms of real contribution to U.S trade interests,
the Conference was irrelevant. U.S. participation in the trade
aspects of the Conference, therefore, can be justified only
on political grounds.
If one is determined to find a positive result from the
Conference, one could note the unity of Group B in insisting
that developing countries have responsibilities to resist protec-
tionism and to contribute to the strengthening of the trading
system based on GATT- A major reason for four weeks of stalemate
on trade was Group B's refusal to accept the G-77 premise that
protectionism occurs only in developed countries. Thus it became
quite clear that the developed countries, not just the United
StatCA, feel very strongly that developing countries. cannot
be only "takers" from the trading system but must progressively
become 'givers" too.
II. Long-Term Implications
The UNCTAD Secretariat clearly has a long-run objective
of displacing the GATT as the international institution with
responsibility for establishing trade rules, monitoring compliance
with the rules and conducting multilateral trade negotiations.
This intention is evident in the Secretariat's trade documentation
for UNCTAD VI, its promotion under institutional matters of
a comprehensive trade organization, and its efforts to build
an UNCTAD track record in new areas, such as services, in which
the GATT does not have longstanding activities. The Group of
77 gave formal support to this objective both in its Buenos
Aires declaration and in its negotiating positions at UNCTAD
VI. In 'the end, however, most LDCs seem much less concerned
about the institutional objectives of the UNCTAn Secretariat
than about specific improvements in access to developed countries'
markets. In the LDCs' view, if the UNCTAD Secretariat can deliver
some trade benefits to LDCs by seizing the initiative from GATT
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or by applying pressure on developed countries, that's a windfall
for which they are grateful. At this stage, however, the developing
countries are not willing to make substantive concessions in
order to obtain a bigger piece of the trade action for UNCTAD.
Accordingly, the United States can continue to resist strongly
UNCTAD'a institutional encroachment upon GATT without any detrimental
effect upon our bilateral relations with developing countries.
A "Horatius at the bridge" stance by the U-S. in UNCTAD,
however, could incite an LDC backlash in the GATT. It remains
to be seen if this occurs in services as a result of our UNCTAn
VI vote. In any event, it is a potential cost of a firmer approach
in UNCTAD.
The attractiveness of UNCTAD for the LDCS will diminish
significantly if the GATT moves meaningfully in areas of importance
to LDCs. The most important thing in this regard is for the
GATT to become an instrument for improving LDCs' market access
in developed countries. Active U.S. support for full implementation
of the GATT Ministerial work program on safeguards, rules and
activities relating to developing countries, quantitative restric-
tions and other non-tariff measures, and textiles and clothing
would do more for our trade relations with LDCs than anything
we could do in UNCTAD.
in terms of promoting U.S. views of trade's role in development,
the superiority of market-oriented trade policies and the need
for progressive liberalization of advanced LDCs' trade regimes,
UNCTAD is not promising at all. The senior levels of the Secretariat
have a strong bias against these ideas, and their bias pervades
all of UNCTAD's "analytical" work on trade. Moreover, the group
system of negotiating makes it virtually impossible to establish
pragmatic coalitions that cut across groups or to have a,meaningful
dialogue. The group system also puts such a premium on G-77
solidarity that any attempt to discuss the heterogeneity of
LDCs' trading experiences is perceived as a political attack
upon the South. Since differentiation is at the heart of U.S. trade
policy toward the, LnCs, this situation makes UNCTAD largely
infeasible as a forum for making significant progress in this
area.
III. Future .S PAL.tj ci i en in UNCTAD
If the United States decides to continue active participation
in UNCTAD, we should do so in the trade area only to the extent
that UNCTAD deals meaningfully with the issues of protectionism
in developing countries and the progressive integration of LDCs
into the trading system (in addition to the issues of protectionism
and structural adjustment in developed countries). We should
be prepared to take firm stands on these issues and on the issue
of GATT's primacy, even if this raises the temperature appreciably
in the TDB. There is no evidence that taking such stands within
the TDB would be detrimental to our foreign policy or trade
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policy interests.
Although Group B demonstrated impressive unity at Belgrade
on the issue of LDC protectionism, it's not clear that many
of the other Group B countries would stick with us in taking
a harder line in the TDB and its committees. Most seem to derive
political and psychological satisfaction from achieving consensus
within UNCTAD meetings. Nevertheless, we should explore within
the OECD the prospects for a firmer Group B stand within UNCTAD
on the issues of LDC protectionism and graduation. The Trade
Committee Working Party meeting to review UNCTAD VI (scheduled
for September 12 and 13) would provide an opportunity for such
a discussion. In addition, we would exchange ideas within the
OECD on a possible strategy for implementing graduation/integration
within GATT and in our respective bilateral relations with the
advanced LDCs.
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Contents on UNCTAn VI Trade Resolution
The UNCTAD VI trade resolution (Document Tn/L 259) covered
five areas: (1) protectionism, (2) structural adjustment, (3)
the international trading system, (4) GSP, and (5) services.
With the exception of services, the resolution was adopted without
dissent (although with two important Group B reservations on
the TDB's review of the resolution and its study of the international
trading system) . The services. portion of the resolution was
adopted by vote, with the U. S. voting against it and the rest
of Group B giving an interpretive statement for their affirmative
votes.
The section on protectionism adds very little to the Manila
commitments on resisting protectionism, on standstill and rollback.
The only potentially troublesome element on protectionism is
the reference in paragraph 6 (a) for the TDB in its annual review
of protectionism "to monitor the. implementation of., resolution."
Group B stated at the time of adoption that" ...the TDB should
monitor only the general situation and should not involve itself
in the consideration of individual countries' implementation
of the various commitments in this resolution. Recommendations
by the TDB should, moreover, relate to the general problems
of protectionism." The sections on structural adjustment and
GSP involve no substantive change from pre-UNCTAD VI commitments.
The section on the international trading system authorizes nothing
more substantive than already is contained in Manufactures Division
Director Figueredo's previous presentations to TDB meetinqs.
Nevertheless, there is a danger that the Secretariat will use
this small opening to push ahead on its objective of establishing
new rules for the trading system and new principles for multilateral
trade negotiations, both outside the GATT. It was for this
reason that Group B made its statement in the final plenary
that "any review or study by the TDB should be of a general
character and should not be- aimed at establishing a new set
of rules for international trade."
The section on services calls on UNCTAD to continue its
studies, which have been undertaken pursuant to UNCTAD's charter
and TDB resolution 250 (XXIV). While the resolution contains
no language that is prejudicial to the GATT's work on services,
it does not contain an explicit acknowledgement of GATT' s? competence
in services; this omission is the reason for the negative U.S. vote.
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UNCTAD VI Outcome on money and Finance Issues
From a short-term damage-limitation perspective, the money
and finance outcome was reasonably successful. Measured
against broader and more positive goals and the potential
for damage in the longer term, however, the balance is
mildly negative. There were very few areas in which we were
able to get new support for or acknowledgement of U.S.
viewpoints, and even in these instances the language
was fairly watered down. Not only did the final resolutions
fail to advance our interests very tangibly, but the
"dialogue" we had been promised was so stilted that we doubt
much if any significant persuasion occurred. Nevertheless,
as a result of Group B solidarity and our own persistence in
negotiation, the final resolutions on money and finance
were a far cry from the Buenos Aires platform. With the
possible exception of the complementary financing study
called for in the resolution on compensatory financing,
they do little or no damage to U.S. interests.
Although the monetary and financial resolutions were reasona-
bly balanced, there are elements in the money, debt, and
compensatory financing resolutions which could create
difficulties in the future and which would require careful
monitoring. The UNCTAD Secretariat will try to exploit
these resolutions to the maximum to expand their work
progams. The G-77 may also seek to use these resolutions in
the specialized agencies to further their objectives. In
addition, the willingness of Group B at Belgrade to engage
in detailed discussion of, and negotiation of resolution
language on, major monetary and financial issues may have
created a troublesome precedent -- in light of the adoption
by consensus of a detailed resolution on monetary issues.
A more precise evaluation of the plusses and minuses requires
comment issue by issue.
International Export Credit Guarantee Facility (ECGF)
No harm done, and in fact a step may have been taken towards
killing the idea at the next TDB. There was virtual Group B
unanimity against it and only lukewarm G-77 support in
evidence.
Official Development Assistance (ODA)
Here too there was no harm done and even a few positive
points $uch as mention of the need for increasing aid
effectiveness, improved donor recipient coordination, and a
call upon all developed donor countries to provide informa-
tion on ODA flows (Group D is the clear target). Although
the resolution calls for redoubled efforts to meet the 0.7%
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ODA target by 1985, the resolution language and the Group B
statement of interpretation make it absolutely clear that
the U.S. is in no way committed in view of its longstanding
reservations on targetry. This time, there was no "beauty
contest", and the G-77 became fully aware that many other
Group B countries -- not just the U.S. -- had serious problems
with time-bound targets.
Multilateral Development Institutions
Although no harm was done, in several places the resolution
verges upon unwarranted intrusion into the work of the IBRD
and into on-going replenishment negotiations (IDA VII and
IFAD II). For example, there is mention of a proposal for
5% per annum growth in IBRD lending, of increased program
and structural adjustment lending, of keeping the energy
affiliate idea under review, etc. There is also a mention
of "continuing significant growth" in MDI lending overall,
although it is clear from the text that this is an overall
goal and does not apply to any individual bank or window.
On the positive side, the language mentioning all of the
above issues is properly filled with caveats and the opera-
tional part of the resolution simply "invites" the World
Bank and the other MDIs to consider these matters rather
than appearing to give the Bank guidance. Although the G-77
pushed extraordinarily hard to get wording calling for a
significant increase in real terms in IDA VII (and, to a
lesser extent, in IFAD II), this pressure was successfully
deflected. Group B held together very well in insisting
that UNCTAD should not interfere in on-going replenishment
negotiations and that it should not give detailed guidance
to other institutions.
External Debt
Here too little if any real harm done, although some of the
language is mildly suggestive of generalized approaches to
debt relief, of mixing development criteria with debt
relief and adjustment considerations, and of an expanded
scope of involvement of UNCTAD in the debt field. There is
also highly artful language inviting the IMF to respond more
"positively and pragmatically" to the new dimensions of
adjustment problems faced by developing countries. On the
plus side, however, there are ample caveats on every sensitive
point, such as reminders that the industrial countries will
continue to take a case-by-case approach. We also got some
desirable highlighting of the need for adjustment, for
timely consultations with the IMF, for reestablishing (of
LDC) creditworthiness, and for providing the IMF and others
with relevant data on external debt. There is also a clear
indirect call to the communist countries to provide equal
rescheduling terms to those provided by the Paris Club. A
very strong and unified Group B statement of clarification
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indicates that nothing in the resolution can be used to
undercut the IMF or the Paris Club and its case-by-case
approach. The Group B statement also clearly implies that
the UNCTAD Secretariat is neither "competent" nor "relevant"
in the debt field or that the resolution expands UNCTAD's
mandate in any way. As long as the creditor countries stand
together as firmly as they did in their Belgrade statement
of interpretation on this resolution, there should be little
or no problem.
IMF Issues
Here too the resolution is harmless if the major OECD
countries stick to the very strong Group B statement of
interpretation. This, in effect interprets the resolution
as meaning no more than what the U.S. would like it to
mean. (This is what we got in return for not voting no.)
In the text of resolution itself, as in the resolution on
commodities, there was an attempt to prejudge the issue of
whether increased compensatory financing should be provided
to offset LDC commodity earnings shortfalls. There also is
suggestive language here and there, artfully designed to
imply a case for increased SDRs, higher IMF quotas, and
increased LDC access to the different IMF "windows". In all
cases, however, the language was carefully caveated to
prevent the resolution from prejudicing deliberations in the
IMF.
On the positive side, the monetary resolution gives clear
recognition to the role of the IMF, to the need for sound
LDC policies and to the need for LDCs to consult with
the Fund in early stages of emerging difficulties. Negotia-
tions on the monetary resolution were by far the most
difficult, and onslaughts by the G-77 on issues such as -an
aid/SDR link, new low-conditionality windows at the IMF and
an attempt to tamper with conditionality were halted only
with difficulty.
Foreign Direct Investment
Although Group B tabled a rather modest resolution on
the potential benefits of foreign investment, the G-77
showed considerable wariness. When prodded towards the end,
they did indicate potential flexibility and engaged in some
informal negotiating -- but in the end the resolution was lost
in the confused and negative atmosphere of the final day.
International Monetary Conference
Although the Indians pushed very hard for a resolution
on the subject, there was resolute opposition on the part
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of the Williamsburg 7, with support in the rest of Group
B. (However, the French Foreign Minister did overrule
his own Finance Ministry and indicated openness to the idea
in the final days at Belgrade.) We were also able to use
our revised instructions on the monetary resolution to
approach the Conference President (Yugoslav Foreign Minister
Mojsov) to enlist his support in insuring that no reference
to a monetary conference would appear in the final conference
statement. These factors, plus divided views within the
G-77, helped get the idea dropped in the closing hours.
Implications for the Future
None of the resolutions -- when taken with the Group B
interpretive statements -- themselves seem likely to do any
significant harm, except possibly in the area of "comple-
mentary financing". Nevertheless, the UNCTAD Secretariat
did gain some new toe-holds. Furthermore, the overall
pattern which emerged was one of the G-77 pushing very hard
to influence, via UNCTAD, the policies of the IMF, the MDI's
and the Paris Club, despite oft-repeated G-77 professions
of respect for the autonomy of the specialized agencies in
principle. While we are not in any way constrained by the
resolutions as to what we do in the IMF, IBRD, etc., we will
need to be alert to attempts by the Indians, Brazilians,
Mexicans and others to use the resolution language to win
debating points in these and other fora in the future.
While we generally held the line -- and even got a little
something here and there -- this required very tenacious
negotiating, and heavy lobbying and maneuvering to keep
others in Group B from going further than we could so as
to be "forthcoming" on matters of interest to the G-77.
As to the value of this forum for getting the US message
across, most of the time was spent haggling over resolutions
and there was little real dialogue. Furthermore, given the
press dynamics, we got mostly negative rather than positive
publicity for our ideas. In terms of North/South relations,
a tense, confrontational atmosphere prevailed throughout
most of the Conference -- closing with professions of deep G-77
disappointment and some of the usual scapegoating of the US
as the reason for "failure"to meet their aspirations. n
Drafted: EB/IFD/ODF:AA sora; Treasury/OASIA:ADress !4i n ' RJ
104A5 7/13/83 X29426
cc: Treasury:TDawson
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OUTCOME OF UNCTAD VI ON LEAST DEVELOPED COUNTRIES
The resolution on least developed countries as finally
adopted was one of the relatively better results of UNCTAD VI.
Both Group B and the G-77 have reasons to be pleased, the
former because although a little was given no great damage
was done; the latter because something was gained, even if it
fell far short of their original demands.
The negative aspect for the U.S. and Group B stems from
the fact that a full-blown negotiation was permitted to take
place at all. Originally this topic was supposed to be
treated in plenary debate which we had hoped would do little
more than reaffirm prior commitments. However, the G-77
managed to gain agreement to the establishment of a short
term working group, which inevitably turned into another
regular negotiating body which operated for most of the
conference. This allowed the G-77, in effect, to attempt a
renegotiation of the Substantial New Program of Action for
the LLDC's (SNPA).
The SNPA is a carefully balanced document resulting from
a tough negotiation at the Paris Conference of LLDCs.
Opening it up to selective changes desired by the G-77
threatened to destroy the balance among the obligations of
the LLDCs, and the donor community and the role of UNCTAD in
implementation and monitoring.
The threat of imbalance was particularly bothersome
because the G-77 chose in some cases to focus on issues and
institutions that had not been of key importance to the SNPA,
or, in some cases, even a part of it. This applied
especially to the attempt to gain agreement on a more
generalized approach to debt alleviation, to an effort to
alter IMF policy on conditionality and to the G-77's
desire to achieve rather specific agreement on compensation
for losses from shortfalls in commodity earnings. In the
case of aid targets there was also an effort, partly suc-
cessful, to achieve much greater specificity and commitment
than reflected in the SNPA.
On these issues the outcome from the U.S. point of view
was mixed, but in the final analysis, very little damage
was suffered.
-- Aid targets were made more specific, but the U.S.
has always disassociated itself from such targetry. Thus,
our reservation was anticipated by all parties. Other
donor countries, however, may find the language of this
resolution somewhat more burdensome.
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-- On IMF-related issues no damage was suffered; the
offensive proposals were withdrawn.
-- On debt the U.S. was forced to make an interpretive
statement because the language accepted by all others fails
to draw a clear distinction between retroactive terms
adjustment (RTA) or other equivalent measures designed to
enhance aid flows and debt relief undertaken to deal with
acute financial difficulties.
-- On commodity issues, nothing was agreed except to
extend a date set in the SNPA for submission of reports on
ways to help LLDC offset shortfalls. Since the U.S.
reserved on this matter at the time the SNPA was adopted,
it was necessary only to refer to this point.
-- On the role of UNCTAD no damage was done. Even the
G-77's effort to have the conference agree to a third meeting
of donors and recipients failed.
-- Finally, some balance with respect to the obligations
of the LLDCs themselves was achieved at the end of the
negotiating process, although the resolution is weaker on
this than the SNPA itself.
That the result of this negotiation turned out as well
as it did was in no small measure the result of Group B's
unity. In turn, this unity was itself partly due to the fact
that the EEC could never get its own act together on issues
where there might have been serious differences with our
positions. This was particularly true of the commodity
compensation matter, where the U.S. had anticipated an EEC
initiative to extend STABEX to all LLDCs.
Lessons from this experience, among others, are:
1. When the LLDCs operate as part of the G-77 within
the context of UNCTAD, it is not possible to carry on a
constructive dialogue. In this setting their style differs
little from that of the G-77 as a whole. Positions have
been adopted in advance, and there is no real flexibility.
Furthermore, the only thing that concerns the LLDCs in this
situation is how they might gain more aid or improved
treatment from the developed countries. They are not
interested in discussing their real development problems.
2. Within the group system of UNCTAD, the moderate LLDCs
can beheld hostage to the unrealistic demands of a few
radical members. Ethiopia, for example, was able to hold
the LLDCs to unrealistic positions on debt until very late
in the negotiation.
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3. Group B unity is of key importance in moving the LLDCs
to accept more reasonable proposals. A subsidiary point is
that good leadership within Group B can help; it is of key
importance in moving the LLDCs to accept more reasonable
proposals. Whenever the G-77 LLDCs sense weak leadership or
a split in Group B ranks, they will move to take full
advantage of it.
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UNCTAD VI - Assessment of Agenda Items 13A-G
("Basket" Items)
The objective of the USG was to hold the consideration of
the items in the basket to the level of a review, thereby
limiting the importance of any one of the items as well as
limiting any tendency on the part of governments or the
Secretariat to expand the mandate of UNCTAD. A secondary
objective was to rid the basket of the purely political item
calling for UNCTAD assistance to national liberation movements
(NLMs). Finally, we hoped to make some progress on our long
standing effort to improve certain institutional aspects of
UNCTAD. The results of the deliberations on the seven items of
the basket as well as the decisions and resolutions adopted
indicated that the US had only uneven successes in achieving
these objectives.
Our initiative on institutional matters failed in the face
of the lukewarm support by other developed countries as well as
an aggressively expoused counterdraft resolution put forward by
the G-77. While our draft emphasized "housekeeping" aspects of
the issue--namely, greater transparency on budgetary and
technical assistance activities, and establishment of a system
of evaluation--the counterproposal heavily emphasized
"structural questions," most especially that of UNCTAD's
relationship to other UN organizations and the highly volatile
question of the need for a comprehensive international trade
organization. This difference between the two groups' approach
to institutional matters is by now traditional and at UNCTAD VI
the debate and negotiations ended as they traditionally have,
that is, in stalemate. At the end a procedural decision was
taken forwarding the G-77 and Group B drafts to the TDB for
appropriate consideration.
It will be in the interest.of the US to continue to pursue
the objective of improving UNCTAD's institutional and
administrative arrangements set for UNCTAD VI, and we should
plan to do so vigorously at the next TDB.
There was positively no support for our view that the item
on national liberation movements should be stricken from the
agenda. Although moderate elements within the G-77 attempted
to water down language in resolutions dealing with the
Palestine and Namibian people, to permit the US to abstain
rather than vote against them, the effort fell short and we
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were forced to vote against the resolutions. A particularly
unattractive feature of the resolutions on the Palestine
peoples is that it expands the UNCTAD work program and increase
budgetary expenditures by setting up a special economic unit
within the Secretariat to monitor and investigate the policies
of the Israeli occupation authorities in the so called
Palestine territories.
The two most significant items in the basket were those on
technology and shipping. In each case, long and detailed
resolutions were adopted by consensus, setting out work
programs for the Secretariat and the appropriate
intergovernmental subcommittees of UNCTAD for the next 2-3
years. In the case of the shipping resolution, the Secretariat
was requested to prepared ten studies for consideration by
governments. Most of the studies will cover areas already
being considered by UNCTAD. We do not anticipate that the
results of the studies will be any more difficult to cope with
than such studies have been in the past. A feature of the vast
majority of UNCTAD Secretariat work is its bias toward the
interest of the developing countries. We can anticipate that
the new studies will contain the same traditional biases.
Particular US concerns on the issues of Registration of Ships
and the Code of Liner Conferences were fully protected in the
adopted resolutions.
The Technology agenda item was intensely negotiated during
virtually the entire UNCTAD VI Conference. The G-77
aggressively argued for the ambitious resolution contained in
the Buenos Aires Platform, much of which was unacceptable to
us. Group B solidarity and, in particular strong US and UK
positions, succeeded in squelching the bulk of G-77 proposals.
Group B generally succeeded in setting limits or. UNCTAD's
mandate, and achieved, inter alia, neutral references to the
Paris Convention revision, deletion of any call for a
pharmaceutical code (although*UNCTAD will propose collaboration
with WHO in the latter's project on facilitating pharmaceutical
supplies to LDCs), and restriction of study of the
Strategy/Work Program to the appropriate UNCTAD Committee on
Transfer of Technology (athough the Committee will hold a
special session for this purpose).
The Soviet Union failed completely in its objective of
bogging down the consideration of relations between the Eastern
European countries and the G-77 by interjecting East/West
political issues. The Group B countries, led by the US,
staunchly defended themselves, and eventually the G-77, tiring
of the futile East/West exchange, aggressively pushed the
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Soviets on the central issues of the item, namely, the question
of the levels of financial and technical assistance given by
the Eastern bloc to the developing countries. The bloc
countries resisted accepting the 0.7 percent of and target for
ODA. As a consequence of this, the discussion and negotiation
collapsed and the entire matter was pushed back to the TDB by
means of a procedural resolution.
Some non--committal movement was made on the item on
economic cooperation among developing countries (ECDC). There
will be a meeting of the ECDC Committee in October. It is
anticipated at that time the nagging questions of the
implementation of South-South cooperation without violating UN
principles of universality and sovereign equality of states
will once again be at the center of discussion.
Finally, the issue of special treatment for land-locked and
island developing countries was dealt with a straightforward
and non-controversial fashion. Once again, it was agreed that
although these disparate groups of states has some particular
and peculiar developmental problems to face as a result of
their geographic isolation, these problems do not require the
setting up of special funds or elaborate institutional
arrangements.
Almost all of the resolutions considered under the items in
the basket involve the question of the need for additional
financial resources. Lead by the US delegation, with notable
support from the UK, Group B was almost completely successful
in ridding the resolutions of language implying or explicitly
requiring the expansion of the UNCTAD budget.
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UNCTAD VI
Summary of Assessments by G-77 and Group B Countries
While we have not yet received a readout from all
major participants at the UNCTAD VI session in Belgrade, we
believe we have a fully representative sample. Our major
conclusion is the predictable one: while no country,
developed or developing, is satisfied with the results
of the Belgrade Conference, no one is surprised by the
results, given the nature of the process in UNCTAD.
Though UNCTAD VI may have demonstrated the ineffectiveness
of universal fora to pursue economic interests, we do not
expect LDCs to abandon their pursuit of concessions from
the West wherever possible. Group B countries, for their
part, appear willing to explore alternative approaches to
the dialogue, and the OECD North/South Group meeting in
September will provide an opportunity to outline possible
new avenues of approach.
Developing Country Reactions
Most of the developing countries we have approached
have expressed regret that UNCTAD VI showed such "meagre"
results in formulating solutions to development problems,
but none has expressed surprise at such an outcome.
Developing country attitudes toward UNCTAD in general are
split into two camps: one which professes indifference to
the forum, and another which actively seeks to advance LDC
interests through North/South fora. The first group tends
to consist of smaller LDCs, whose views are self-described
as "pragmatic". They tell us they see universal multilateral
fora such as UNCTAD essentially as irrelevant; their economic
relations, both with developed and other developing countries,
are bilateral and regional, and are unaffected by the
outcomes of what they see primarily as politicz.l shows. In
the reports we have received none of these countries has
tempered its cynicism with pragmatic suggestions for improving
the mechanism for a continued dialogue. Most, presumably,
will continue to participate in discussions whatever the
forum (though some question the practicality of doing so).
Those LDCs which have expressed a deeper interest
in the North/South process predictably see the failure
to achieve real progress at UNCTAD VI as caused primarily
by the West's intransigence. While a few countries blame
the U.S. for the impasse (the Indonesians describe our
attitude as "cynical contentment"), we are surprised at
the infrequently of this type of scapegoating by LDCs
in this round of reactions. Whether this reflects an
understanding of Group B's unity at Belgrade remains to
be seen.
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The reactions of two developing countries are of
particular interest, as they reflect what we can expect
from LDCs in upcoming North/South fora. India, while
bemoaning "little progress" at Belgrade (one interlocutor
described the Conference as a "non-event"), sees UNCTAD
VI as part of a larger, unfolding process in North/South
relations, in series with the NAM Summit last March, the
Williamsburg Summit, the upcoming annual IMF/IBRD meeting,
UN General Assembly and Commonwealth Summit. While progress
may be minimal at one session, he said, we must look to the
larger "process" for signs of momentum. Given this view, we
can expect continued pressure from India and the G-77
leadership for substantial developed-country concessions in
all upcoming fora and across all issues.
The Mexican reaction underlines this theme by pointing
to U.S. "isolation" at the Conference (despite evidence
to the contrary on most issues) as a positive outcome. We
interpret this view as reflecting the hope that the West can
be pressured -- with or without the U.S. -- to make further
concessions in the near term. Also of interest is Mexico's
expression of content that, for the first time, UNCTAD was
able to adopt a monetary resolution by consensus. Mexico
undoubtedly will be active in seeking an expanded role for
UNCTAD in this area, a point over which we will have to be
very careful. We therefore can expect a "business-as-usual"
approach by the G-77 leadership in seeking an expansion of
UNCTAD's mandate through work in UNCTAD's permanent machinery.
Developed Country Reactions
As we expected, OECD-member reactions to the results
of UNCTAD VI cover the spectrum of possibilities. Predict-
ably, the French conclusions are contrary to our own.
Foreign Minister Cheysson's intemperate attack on the U.S.
in Belgrade June 30, when the Conference was at an impasse
and breakdown seemed possible, reflected the French professed
view that the Europeans, whom he said were prepared to
be far more forthcoming to the LDCs, were held in check
by inflexible U.S. positions, especially on monetary and
financial matters. The French profess to see Belgrade as an
opportunity missed, and blame the U.S. for this outcome.
Less strident and condemnatory, the Italians nevertheless
agree with the French that the West must offer the South more
more than just the promise of growth and development through
world recovery. Given recent economic history, with recession
and increase in LDC debt burden, the Italians found the G-77
approach -- which they describe as an attempt to find new
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ways of dealing with international economic problems -- as
understandable. They are not surprised or disheartened by
UNCTAD's results, since they find the G-77's airing unaccept-
able demands in this basically political forum now customary.
This "business-as-usual" approach to UNCTAD was echoed, in
various forms, by a number of countries, including some of
the Nordics, but some express dismay that new avenues have
not been found.
While Group B generally accepts the Conference as a
qualified success -- only because it, did not end a total
failure -- the Group is divided between those (Sweden,
Austria) who believe it necessary to have universal fora,
to give smaller LDCs the opportunity to air their views,
and those who see such fora as unworkable (UK, Australia,
Switzerland). Among those who hold the latter view, some
have identified problems specific to UNCTAD which, if
resolved, might give UNCTAD a more useful role. Most often
cited are:
-- the role of the Group system in preventing a
differentiated approach to identifying individual country
problems and to setting out appropriate solutions. (A
few Group B countries cited the roles played by India
and Brazil in maintaining G-77 unity and thereby blocking
a differentiated approach -- a move which protected their
own interests, for example in resisting graduation.)
-- the attempt to be too all-encompassing in setting
UNCTAD's agenda. Some (Australia) favor limiting UNCTAD's
agenda to a few carefully chosen and well-prepared topics,
while others (UK) suggest UNCTAD might serve better simply
as a forum for the exchange of views on a macroeconomic
level, without negotiating specific interests.
The future role of UNCTAD in the North/South dialogue
will be addressed by the OECD North/South Group at its
meeting in September. Eric Roethlisberger of Switzerland,
chairman of the North/South Group, points to the dilemma
which the developed countries face if we attempt to seek
meaningful changes in a forum such as UNCTAD, to make
it more realistic and effective. Should we undertake to
do so -- a difficult task at best -- and succeed, we would
raise expectations in the developing countries that we are
willing to begin to treat UNCTAD as a serious forum, one in
which meaningful results are possible. Whether we are
prepared to do that to achieve the necessary changes in
UNCTAD is a question that Group B will have to consider
carefully.
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