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

108. Memorandum From the Chairman of the Policy Planning Council (Bosworth) to Secretary of State Shultz¹

Washington, April 20, 1983

SUBJECT

• U.S. participation at UNCTAD–VI

The number and variety of submissions you have received on the UNCTAD–VI issue reveal some wide areas of agreement:

— all view UNCTAD as an LDC-dominated forum where the U.S. has limited influence;

— all agree that UNCTAD is not the forum where serious specific agreements can be negotiated on trade, financial, commodities or investment issues;

— all also agree that we need to present a spirited and confidently assertive exposition of U.S. policy on development at the Conference;

— finally, there is agreement that the U.S. has important economic, political and security interests in LDCs attending the Conference and that many of these are in a severe crisis to which we and our allies must continue to respond.

Disagreements arise over the role the UNCTAD meeting should play in our overall North-South strategy which clearly sees the real action taking place in other international institutions—the GATT, the IMF, the development banks in particular; and over the question of whether a tough or “responsive” tone for the U.S. at UNCTAD best serves our interests in encouraging LDC pragmatism and moderation in other institutions. Allen Wallis has also raised the issue of whether we should press to convert UNCTAD into a specialized agency where we would have more financial leverage on its activities.

It seems to me that our overall strategy should be to

— present a constructive U.S. position that lays out part of the agenda for future action in other institutions, as well as by the LDCs themselves.

— be prepared to discuss all subjects related to economic development of LDCs.

— work for some modest UNCTAD resolutions to encourage movement where we and our OECD allies can reasonably perform (e.g. some encouragement for a North-South trade round in GATT, asking the World Bank to develop an approach to agricultural/food crisis in Africa).

— protect ourselves, where necessary, by making it clear that when the LDCs insist on placing on the agenda proposals we cannot support, these simply will not prosper in the competent institutions.

U.S. Positions at UNCTAD

In presenting our position we should emphasize the following:

— We should make a spirited and thorough presentation of U.S. views on the development process, emphasizing the primacy of the domestic policies of the LDCs and the need for structural reforms, in particular greater use of markets, the price mechanism and private initiative, to allocate resources;

— we should emphasize the joint responsibility of the North and the South to maintain the open and stable international financial system that underpins growth;

— we should give major attention to the results achieved to date and at the Economic Summit, including the IMF quota increase, continued emergency financing for LDCs, and the President’s leadership opposing protectionism.

— we should change our previous “low profile” in UNCTAD discussions of East/South issues, and actively point out the failures of the Soviet bloc in aid and trade with the LDCs;

— on finance, we should state that the LDCs’ proposal for an International Conference on Money and Finance for Development, a vehicle for debt relief and reform of the major international financial institutions, is premature until greater convergence of economic performance takes place, i.e., progress on inflation.

With regard to Conference resolutions, we could support the following initiatives:

— on investment, encourage LDCs to open doors for private investment and offer to help gain recognition and support for their efforts in this regard through negotiation of bilateral investment treaties and support of the World Bank’s multilateral investment insurance scheme, and a GATT study of the trade effect of investment barriers;

— on trade, urge the Conference to issue a general declaration endorsing freer trade and opposing protectionism applicable to all members of the Conference and support for a new North/South trade round to be negotiated under the auspices of the GATT; (with an organizational conference(s) and pre-negotiations in late ’83 and ’84 and U.S. legislative mandate in ’85);

— on commodities, accept a special conference on the processing, marketing and distribution of commodities, as requested by the LDCs, but specify that we must be able to raise our own issues during such a meeting, e.g., LDC-trade-distorting action on commodities;

— also on commodities, ask the Conference to request the IMF to examine the operation of its Compensatory Financing Facility with a view to better coverage of LDC export earnings shortfalls and improved (i.e., more rigorous) conditionality;

— on food, emphasize the risk of deep crisis in Africa because of declining food production and indicate our willingness (using primarily PL–480 Title III) to cooperate in a World Bank led effort to help African nations in the reform of their agricultural sectors.

These modest initiatives will need further interagency coordination, but they are all feasible. (Most difficult will be the item on IMF compensatory financing since Treasury wants to cap this facility, rather than improve it, as suggested here and by Allen Wallis). This minimal list will convince at least our fellow industrialized country partners, and some LDCs, that we take seriously the agonizingly difficult problems the developing countries are now facing.

Allen Wallis’s suggestion that we consider converting UNCTAD into a specialized agency of the United Nations, (to give us both better financial control and the option to get out) is one that needs examination, but not on the eve of this upcoming Conference. Time is simply too short to explore it thoroughly, line up support and have any chance of carrying the day at Belgrade in June. The time to explore this is after the conference and in the light of its outcome. It could be considered in a more general USG review of North/South issues which all of us agree would be desirable.

Tactics, Including Coordination with Other Countries

Our best tactic would present much of this position in the speech you are planning to give on North/South issues, preferably within the next few weeks.² This would stake out a constructive U.S. stance for UNCTAD VI. But by speaking before and looking beyond UNCTAD VI, you do not dramatize its role. We need to use the OECD Ministerial meeting scheduled for May 8–10, and the special meetings of ministers of trade and finance which follow, to coordinate our position on the key issues of trade, finance and commodities. The Williamsburg Summit would then give us an opportunity to put the final touches on a coordinated approach by all major industrialized countries to the UNCTAD meeting, which begins only four days after Williamsburg ends.

The crucial point here is that even if we go forward with the above items for our UNCTAD position, the United States will still be the least forthcoming on development issues of the major industrialized countries; we need to line up the others so that they do not undercut us once we get to UNCTAD.

U.S. Representation at UNCTAD-VI

All memorandums submitted mention Bill Brock as a logical candidate to head the U.S. delegation. This choice seems a good one, particularly if we wish to highlight the trade issue at the Conference. Allen Wallis’s suggestion that he accompany Brock also seems a good one.

1. Source: Department of State, Executive Secretariat, S/S–I Records, The Executive Secretariat’s Special Caption Documents, Lot 92D630: Not for the System April 15–30, 1983. Confidential. Drafted by Boerner. A stamped notation on the memorandum reads: “Not for the System.” A stamped notation reading “GPS” appears on the memorandum, indicating Shultz saw it. Shultz wrote: “SB, good memo. G.” on the memorandum. The initials “KS” are also written on the memorandum.
2. Shultz delivered his speech, “The U.S. and the Developing World: Our Joint Stake in the World Economy,” on May 26 before the Foreign Policy Association in New York. For the text of the address and the question-and-answer session following the address, see Department of State Bulletin, July 1983, pp. 57–62.