Foreign Relations of the United States, 1981–1988, Volume I, Foundations of Foreign Policy

320. Information Memorandum From the Director of the Policy Planning Staff (Solomon) to Secretary of State Shultz¹

Washington, March 24, 1988

SUBJECT

• Global Trends Revisited: A Next Phase in the Analysis?

INTRODUCTION AND SUMMARY

Since your December 4 speech, global trends have been put on everyone’s agenda.² The phenomena you have stressed as bringing about fundamental changes in the world are recognized by most observers. But the political implications of these changes have not been thought through. Or, where they are addressed—as by Soviet policy planners—the answers are not our answers. There is no consensus on where these changes may be taking us in our relations with our allies or adversaries. Perhaps the most challenging question for the United States is how to exercise coalition leadership in a rapidly changing economic, political and security environment of more capable nation-states.

We must advance our analysis to identify issue areas where fresh thinking might be useful, especially where policies have yet to be worked out. The goal should be a comprehensive policy framework reflecting global trends that incorporates economic, political and security aspects. While the Soviets recognize the need to respond to the changes underway, they do not have a game plan. Following our April 7–8 policy planning talks with the Soviets, I hope to give you some further thoughts on the implications of our differing analyses for U.S.-Soviet relations.³ END SUMMARY

NATURE OF CHANGE

Most commentators agree on the basic elements of change (synthetics, globalization of manufacturing and finance, rapid product development, computers and telecommunications, services, and biotechnology). The implications they draw for the U.S. differ in some measure; but you and some others argue that with the right policies (although there are also important differences about the policy mix), the U.S. is well positioned to succeed and lead in this new era.

Paul Kennedy,⁴ in contrast, maintains that the notable shifts in economic power undercut the U.S. capacity to lead. He concludes that we must reduce our commitments and adjust to a diminished role in a world where we are less competitive—economically and politically.

It is interesting to contrast both these views with what the Soviets have revealed about change and the implications they are drawing for the Soviet Union. Based on what we learned from last October’s policy planning talks in Moscow,⁵ and my sitting in on your discussions with Prime Minister Ryzhkov, the Soviets agree with Western commentators on the basic elements of change now underway.⁶ They also recognize that they must respond to these global changes if they are to become competitive in other than a military sense. But they do not have a game plan. Rather they have thrown up a number of vague or half-baked concepts—such as their Comprehensive System of International Security in the UN—as a way of trying to stay in the game and constrain our room for maneuver.

To date, the discussion of change and its impact on U.S. leadership has focused mainly on economic issues. We have highlighted the political and security dimensions as well. We must think comprehensively about the impact of change on U.S. leadership and how to maintain our leading role in a multipolar world. How does the U.S. exercise leadership with a coalition of (economically) more equal partners? How must we adjust our foreign policy to deal with this new environment?

As a first cut at these fundamental issues, let us identify how change will affect U.S. interests in key areas of the world.

A. Western Europe. The target date for EC internal market integration is 1992. Will this mean more or less economic competition with the U.S.? What are the political implications of internal market integration? Will further progress in U.S.-Soviet arms negotiations cause Western Europe to reconsider its alliance relationship with the U.S.?

B. Japan–Asian NICs. Will the post-Nakasone era reflect an increasingly disruptive pattern of economic (and political and security) relationships with Japan? We and the Japanese are best positioned to take advantage of the changes taking place. Will this increase competition? How will U.S.-Japan relations affect relations with the Asian NICs? Is the Pacific Basin really where the 21st century lies, especially if the Asian NICs are drawn into even closer economic relations with Japan at the expense of third country economies?

C. LDCs. Those LDCs left behind by the Information Revolution represent potentially fertile ground for instability and regional conflict. How can we manage democratic transitions and encourage development in areas which may not have a high priority while U.S. Government resources are constrained? How do we prevent even a better-behaved Soviet Union from using LDC economic distress to cause problems for the U.S. and our allies?

D. Soviet Union. Our relationship with the Soviets will shape U.S. foreign policy across the board. We must explore the consequences of “new” U.S.-Soviet relations beyond purely reactive terms. What do we want from our relationship with the Soviets at a time when our relations with Western Europe and Japan may become increasingly unstable? Is it in our interest to bring the Soviets into closer contact with the changing international economic environment?

E. China. The size of the Chinese economy and its adaptation to change may lead to a more competitive China. Much depends on the progress of reform and the continued opening-up of the Chinese economy. What pattern of U.S.-Chinese relations is appropriate in this environment of change? Do we treat them as part of the emerging Asian NICs, or maintain their current special status? If Japan and China begin to jostle for influence in Asia (again), what will be the impact on U.S. relations with both?

GLOBALIZATION OF MARKETS

Globalization is recognized as the most fundamental economic change taking place today. Domestic markets and national boundaries are less important. It is difficult to grasp the magnitude of global activity—and its impact on our economy. Managing our economic relations with our allies will occupy an increasingly important place in our foreign policy.

Our economic policy tools have not caught up with these changes, especially in the trade and investment area. The issues are clear. How do you establish the country of origin for a product consisting of inputs coming from several countries and from firms established with capital from yet other countries? Is an international trade strategy based on the GATT multilateral system of lower “trade barriers” and expanded MFN the correct one? As firms increasingly use investment to circumvent trade barriers, how can we coordinate our investment strategy with our trade policy?

In addition to making our strategy for trade remedies and trade liberalization take account of global trends, two other issues require serious attention: technology transfer; and intellectual property. U.S. policies in these areas are exceptions to our broad embrace of globalization and free exchange of information. First, technology transfer policies must be evaluated in light of the rapid spread of technology and weaponry around the world. Second, our approach to intellectual property must reflect the high speed of technological advance and the new forms of property (e.g. computer software, plant seed genetics) that have complicated the traditional approaches to trademark and copyright protection.

SECURITY IMPLICATIONS

What do we do about the spread of arms technology around the world? Do we need a global armaments COCOM in which both we and the Soviets can participate? Are there particular technologies (e.g. biotechnology with military applications) which require non-proliferation regimes?

On another level, we must be involved with the DOD planners, looking out 15–20 years in terms of national security strategy. We must anticipate the impact that changing U.S. security strategy will have on relations within the alliance and with the Soviets.

What about burden sharing? We debate this problem as if the nature of the Western alliance and East-West confrontation remain as they have been throughout the post-war period. Does that make sense? With expanding economic and technological capabilities, shouldn’t we examine the nature of the defense commitment by Japan and other Western countries in the post-INF world?

MULTILATERALISM

In some cases economic convergence among countries is leading to increased competition for markets. Such competition may pose a greater challenge to alliance cohesion than political and military conflict. Economic developments are also leading to intergovernmental arrangements that are potentially significant in political and security terms as well. For example:

A. Regional organizations such as the EC and ASEAN. I mentioned earlier that EC internal market integration in 1992 will require creative thinking on our part to deal with the economic—and potentially the political and security—implications of this step. While ASEAN is only a rhetorical flourish compared to the EC, economic and political changes (restrictions in the U.S. market, shifts in U.S.-Japanese relations) could spark greater ASEAN integration. Another interesting regional development will be within COMECON as Soviet reforms and Eastern European reactions build pressures for radical change in intra-bloc economic relations. What about failed attempts at regionalism, such as LAFTA? Do these new global trends increase the likelihood of success for new regional groupings? Except for the EC and possibly ASEAN, we do not sense a strong shift to regional approaches.

B. Expanded bilateral trade arrangements. Depending on progress in the GATT, the U.S. may seek to expand its bilateral free trade area (FTA) approach. A successful pattern of FTAs in this hemisphere would have significant political impact as well, leading to closer U.S. relationships with practical economic benefits for heavily indebted Latin countries. (By contrast, political and economic disruption could follow for those countries outside the FTA structure.) This coupled with similar trends elsewhere could splinter the Western economic framework into three trading (and perhaps political) blocs: 1) U.S.-Latin America, 2) Western Europe-Africa, 3) Japan-ASEAN. What would be the impact of such developments on the GATT, the MFN principle, and multilateralism generally?

A crucial political issue for the U.S. is where we want to go with the United Nations system. Just when we think we can do without the UN, especially the UNGA and New York secretariat, an Afghanistan, Persian Gulf, or Arab-Israeli situation arises in which the UN can play a significant role for us. Further, the Soviets are seeking a UN involvement on global trends issues. Should we deal with these issues in a UN context? Most important, we need to address a major disconnect in U.S. policy toward the UN—squaring our desire for reform with our unwillingness to have an effective UN which in the wrong hands could damage our interests.

MISSING ELEMENTS IN GLOBAL TRENDS

We have identified most of the major global trends that will challenge U.S. foreign policy. There are four additional areas, however, which bear further exploration:

A. Population. Population growth patterns pose serious challenges. In the U.S., and the West generally, an aging population has profound implications for the economy and society. For the Soviets, population growth highlights the nationality issue as both a political and economic problem. In the developing world, countries whose future in manufacturing depends on low wage rates face a far more complex environment. Technology reduces the advantage of low wages in LDCs with a growing population.

B. Environment. Environmental degradation is becoming an increasingly serious problem in developing as well as developed countries. The Soviets are stressing the environment as important to their “new thinking” in foreign policy. Could this be a test area for serious U.S.-Soviet cooperation on an international level, even in the UN? It threatens neither country’s vital interests, traditionally defined, and has positive gains for both.

C. Space. The post-Challenger period has dampened enthusiasm for highlighting space as an area of significant American technological achievement. Yet, we have undertaken a considerable effort to negotiate with our allies on a cooperative space station venture. SDI aside, there are many technological and economic implications arising from space. The growing number of countries participating in space and the tie-in between peaceful and military applications require some looking ahead on our part.

D. Management of Foreign Policy. If we take global trends seriously, we ought to be examining whether the Department of State is organized and equipped to deal with such significant changes. Global trends are being grasped as individual foreign policy issues. We are not ready to deal with them as an interrelated complex of developments that are changing the nature of international relations. We need a coherent program for applying different management practices and information technology to crisis management, analysis and planning functions.

CONCLUSION

We are only beginning to get a sense of the implications of global trends for the U.S. leadership role in the world. These issues provide a framework for articulating an integrated foreign policy in a forward-looking framework for reasserting U.S. global leadership.

We will be dealing with some of these issues in our April 7–8 policy planning talks with the Soviets. Based on these talks, we hope to give you some further thoughts on the implications of our differing analyses for U.S.-Soviet relations. This will influence the foreign policy framework we see evolving. This should be helpful as we plan ahead for the transition to a new Administration. It conceivably would provide you material for a second, more policy-oriented statement on global trends and their implications for U.S. leadership in the world.

1. Source: Department of State, Executive Secretariat, S/P Files, Memoranda and Correspondence from the Director of the Policy Planning Staff to the Secretary and Other Seventh Floor Principals: Lot 89D149, S/P Chrons MARCH 1988. Confidential. Drafted by Kauzlarich. Pascoe initialed the memorandum and wrote “3/25.” Shultz’s stamped initials appear on the memorandum. A stamped notation indicates that it was received on March 25 at 6:40 p.m. Solomon sent the memorandum to Shultz under a March 25 covering note indicating that it was “Kauzlarich’s think piece on where we might head in the global trends analysis.” Shultz wrote “interesting” and “basis for discussion” at the bottom of the covering memorandum. (Ibid.)
2. See footnote 14, Document 316.
3. In telegram 118153 to Moscow, April 14, the Department provided an overview of the U.S.-Soviet planning talks, which took place in Washington, April 7–9. (Department of State, Central Foreign Policy File, Electronic Telegrams, D880320–0455)
4. Professor of history at Yale University and author of The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Random House, 1987).
5. In telegram 432 from Moscow, November 2, 1987, the Embassy provided an overview of the U.S.-Soviet policy talks, which took place in Moscow the week of October 26. (Department of State, Central Foreign Policy File, Electronic Telegrams, D870902–0056)
6. Presumable reference to Shultz’s February 22 meeting with Ryzhkov in Moscow, which Solomon also attended. Referencing their previous meeting in April 1987, Ryzhkov indicated that “many changes had taken place in the world and in bilateral relations. A successful summit had occurred and the INF agreement had been signed. The latter was an historical step, an historical document. Further, there was room for satisfaction over the groundwork done during this past year in other areas—START, the conventional mandate and nuclear testing.” He continued, “Further, there had been progress on regional conflicts, for example, on Afghanistan. New Soviet policies and this visit would make it possible to make more progress on this latter issue.” The memorandum of conversation is printed in Foreign Relations, 1981–1988, vol. VI, Soviet Union, October 1986–January 1989, Document 124.