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

115. Information Memorandum From the Assistant Secretary of State for International Organization Affairs (Newell), the Assistant Secretary of State for Economic and Business Affairs (McCormack), and the Chairman of the Policy Planning Council (Bosworth) to the Deputy Secretary of State (Dam)¹

Washington, July 22, 1983

SUBJECT

• UNCTAD VI and its Consequences

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.² 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 were 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 and well-coordinated pre-conference preparations in the OECD North-South Group as well as the fundamental similarity 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 got our message across 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 disillusionment with universal fora as a means to deal with their economic concerns and their inclination towards greater reliance on bilateral economic relationships. This is a useful reaction. A pragmatic and productive North-South economic relationship can best be advanced in bilateral and regional contexts and in the specialized agencies. What this means for the future of the multilateral North-South dialogue, however, will become clearer when we see how LDCs pursue their interests at the fall UNGA and at UNCTAD’s Trade and Development Board (TDB), as well as in the specialized agencies (i.e., the September Bank/Fund meeting).

II. Unfinished Issues.

The following is our initial reading of the major issues which will warrant high-level attention:

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 increasing pressure to join, we may soon have to decide if and when the Agreement should be submitted to Congress.³

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.

Trade.

Three potentially sensitive issues resulted from the Belgrade trade resolution: (1) TDB review of developments 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.

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 and Treasury are concerned 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 simply review the basket items. An ECDC resolution was passed, but only by avoiding reference to the fundamental issue of universal participation. We will be faced with this issue at the October TDB meeting.

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 implications for 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. We will continue to be faced with these fundamental disagreements in the TDB and the GATT. Failure to resolve them will impair achievement of our long-term trade objectives.

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 successfully resisted Conference 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.

It is 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.

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.

1. Source: Department of State, Bureau of Economic and Business Affairs, Investment Policy Files, 1981–1984, Lot 85D193: UNCTAD VI—Outcome and Assessment. Confidential. Drafted by James Landberg (EB/SEN) on July 20; Manuel Barrera (EB/GCP), Michael Shelton (EB/ICD), Charles English (EB/ODF), Basora, and Bernard Engel (IO/E) contributed; cleared by Constable, Streeb, Boeker, and Bailey. Hill’s stamp appears on the memorandum.
2. A July 6 memorandum from Leland to Regan summarizing the results of UNCTAD VI highlighted two cables that cited the U.S. decision to join other developed countries in accepting the proposed resolution on monetary issues as “the most important development in bringing the conference to an acceptable conclusion.” The U.S. shift in position on this issue undercut French efforts to isolate the U.S. and “stalled the threat” of the G–77 “from walking out of the conference and declaring it a failure.” (National Archives, RG 56, Records of the Office of the Secretary of the Treasury, Official Files, 1983, UD–10D28, 56–86–2, Box 44, Memo to the Secretary, August ’83)
3. See Documents 336 and 337.