Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

10. Memorandum From the U.S. Special Negotiator for Economic Matters (Meissner) to the Under Secretary of State-Designate for Economic Affairs (Rashish), the Assistant Secretary of State-Designate for Economic and Business Affairs (Hormats), and Henry Nau of the National Security Council Staff¹

Washington, April 21, 1981

SUBJECT

• Formulating a U.S. Policy toward a Multilateral Political Dialogue on the Functioning of the Market Oriented International Economic System

I. Preamble

Since the early 1960’s the developing countries (LDCs) have coalesced in a very loose political structure to demand changes in the market oriented international economic system. The basic premises of the LDCs have been

a) that the participants in the economic system can be divided into two homogeneous groups, developed and developing countries;

b) that the system is basically static and development requires transferring wealth and institutional power from one group to the other, i.e., development is a zero sum game;

c) that the reason why development has not taken place in LDCs is that the system discriminates against LDCs and must be changed, and

d) that to gain maximum negotiating leverage negotiations should link all economic issues and be carried out in bodies with universal membership and equal voting rights.

It has been the general experience of the U.S. since WW II that international economic issues are best dealt with in specialized fora with a minimum of linkage. These fora may have weighted representation (IMF or IBRD) or have equal voting rights (GATT). Furthermore, the basic premises of the developing countries are not acceptable: participants in the system are heterogeneous, all countries are developing, international interdependence is a positive sum game, and development is a national phenomenon which the international system can contribute but cannot determine.

II. U.S. Participation in a Global Dialogue

Despite sharing the above analysis, both the Nixon/Ford Administration and the Carter Administration committed U.S. diplomacy to the concept of a North/South dialogue. In both Administrations the motivations were primarily political, although the Conference on International Economic Cooperation (CIEC) had identifiable economic objectives in the area of energy. During the past five years fundamental U.S. policy interests in the LDCs have remained the same although the diplomatic tools to achieve these objectives and the weighting of importance among objectives have shifted. U.S. policy toward the developing world has been primarily bilateral and regional. The North/South dialogue, while being of high political profile, has not changed U.S. real interests in the developing world.

Although the U.S. does not desire a dialogue, the dialogue has provided the U.S. with some benefits:

a) keeping international pressure on the OPEC countries to moderate prices;

b) providing a rhetorical platform to resist increased protectionist pressures;

c) supplying a political safety valve for frustrations generated by slow economic development;

d) diverting, in some cases, overly politicized rhetoric from specialized fora into general political fora where the probability of institutional damage is minimized, and

e) educating all participants to the rationale for their differing positions.

The political pressure for a global economic dialogue will continue and probably intensify. OECD economic growth over the next four years will be slow, meaning soft markets for raw materials and other exports from the LDCs. Payment imbalances will continue, and oil importing LDCs and DCs will have continued difficulty. Structural change in the developed economies will be slowed by lower growth rates and protectionist pressures will continue to be high, especially in those sectors where LDCs have the greatest comparative advantage. Economic interdependence of Japan and the EC coupled with slow economic growth will foster strong political motivation in these countries to accommodate LDCs through a procedural device such as a global dialogue. Furthermore, Japan and the EC desire an energy dialogue and are willing to pay for it by joining the GNs. The U.S. may well find itself isolated and therefore should develop a position which will allow the structuring of the most advantageous dialogue for our interests.

III. A U.S. Position on a Multilateral Political Dialogue on Economic Issues

The U.S. position toward a North/South dialogue should be compatible with our basic policy toward LDCs. The structure of the dialogue should rest on the recognition of the heterogeneous nature of the developing world. It should try to engage those LDCs who have the greatest stake in the economic system. It should be a selective rather than universal forum. To the best of our ability we desire to negotiate individually among sovereign states and not through caucuses. To the extent that we desire to make the dialogue meaningful and attempt to influence the policies of other governments, it would be best to have representatives from capitals rather than diplomats based at external posts.

For U.S. interests any global dialogue would primarily be political, but we should structure it to best achieve our political ends. Since we are not looking for substantive results, the process is most important. The objective is to be engaged in a dialogue. Actual preparatory work is just as important as the actual dialogue. The longer the preparatory process, the better our purpose may be served. We have no reason to rush to conclusions.

In summary, the U.S. position on a multilateral dialogue should be as follows:

a) The U.S. should enter the process of preparing and carrying out another global economic dialogue if diplomatic political pressures deem it of value.

b) The process itself is the most important product. The longer it takes the better. Therefore, long preparatory processes should be welcomed. Our own objectives are better achieved if the dialogue has limited membership and representatives come from capitals.

c) The forum should be independent of present institutions so as not to question the mandates or competence of existing bodies.

d) We should not get into bloc negotiations or fixed caucuses, if possible.

e) Agenda should be very general so as to stimulate general discussion. The discussion should come to focus on the solution of problems where consensus is possible.

IV. U.S. Position on the UNGA Global Negotiations

A multilateral negotiation on international economic issues in the UNGA or a subordinate body would not fulfill the previously mentioned criteria:

a) The UNGA is a universal forum;

b) Representatives will only rarely be from capitals;

c) The LDCs are organized into a political caucus and represent themselves as a homogeneous group;

d) The forum is associated with other standing organizations in the UN system; and

e) The agenda will be, most likely, specific and the structure of the negotiation predetermined.

V. The Promise of the Mexico Summit

The Mexico Summit portends to evolve into a process that is more acceptable to U.S. interests. The Mexican Ambassador has already suggested to Mike Rashish the possibilities of a follow-on Foreign Ministers conference in January. If handled correctly, the Mexico Summit could lead to the development of a multilateral economic negotiation closer in format to U.S. preferences—

a) smaller group of participants—leading industrial, and developing nations;

b) disassociated with any UNGA specialized fora;

c) representation from capitals; and

d) a potentially general agenda.

If the Mexico Summit evolves into a global dialogue, it would be similar in nature to the 1975–1977 Conference on International Economic Cooperation (CIEC). The idea of a limited body would certainly be resisted by the more radical countries attending the Mexico Summit (Algeria, Guyana, Iraq) who find it politically easier to maneuver in larger forums where the LDCs caucus as a group. The homogeneous consensus structure allows their own national positions to be submerged into a group and gives them a veto over any initiative not in their interest.

VI. Global Negotiations and the Mexico Summit

In summary, there are three points in this paper:

a) that a global economic dialogue is probably inevitable and it might be beneficial during the period of difficult international economic adjustment over the next four years;

b) that such a dialogue in the UNGA or a body of its making is not in the U.S. interests; and

c) that the Mexico Summit could evolve into a process similar to CIEC, a structure more to U.S. liking.

How then to transition out of the GN quagmire and into the swamp of a CIEC II? A direct cut-off or killing of GN’s might well be damaging to the atmosphere of the Mexican Summit and the idea of a Mexican follow-on. A return to the preparatory process for GN’s might be just as injurious since we would be quickly isolated and the policy choice only to join or to kill the GN’s. (We would end up killing them.) The best option, therefore, is to stall; to allow the question of the GN’s to pass on to the next UNGA. We could then deal with the issue after the Mexico Summit.

The question then is what to tell the Sherpas in Paris, the Dutch (EC Presidency) during the first week in May, and von Wechmar on his next visit. Possibly it would be best to tell them the truth: A commitment to this type of negotiation is a serious undertaking, and prior to making that decision the President desires to have the advantage of the experience and perspective he hopes to gain in the Ottawa and Mexico Summits. Therefore, the United States desires no substantive decision and would like to see the issue put off until the next UNGA.

1. Source: Reagan Library, Douglas McMinn Files, Economic Summit Files, Mexico—General; NLR–369–10–58–6–2. Secret; Sensitive. Drafted by Meissner on April 20.