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

116. Memorandum From the Executive Assistant to the United States Special Negotiator for Economic Matters (Landberg) to the Assistant Secretary of State for Economic and Business Affairs (McCormack)¹

Washington, July 28, 1983

SUBJECT

• The North/South Dialogue in the Wake of UNCTAD VI: Where Do We Go From Here?

Before leaving on vacation I want to leave with you my own thoughts on the next steps in the North-South dialogue.

We achieved our minimum objectives at Belgrade because we obtained Group B unity on most issues, articulated a well-thought-out and firm U.S. position, and used flexible negotiating tactics. The G–77 helped by being inflexible and by deciding not to engage in confrontational tactics. We need to continue to build on the united U.S./Group B approach at UNCTAD VI and to foster continued G–77 moderation in future North-South encounters.

U.S. Objectives

Our principal objectives for the future should be to encourage developing countries to adopt a pragmatic, cooperative attitude in the specialized agencies and to progressively integrate them into full membership in the global trade and financial systems.

Secondly, we want to avoid or minimize a reappearance of LDC confrontational tactics and/or non-cooperative or disruptive behavior in the trade and financial systems, including in the specialized agencies. We are already near an impasse on the future of the trading system, both in terms of shared responsibilities for future liberalization and on the respective roles of GATT and UNCTAD. This situation poses serious obstacles to our long-term trade interests.

Upcoming Events in North-South Fora

It would be tempting to conclude that LDC disappointment with the meagre results of UNCTAD VI will lead them to abandon or downgrade the North-South dialogue in favor of more realistic discussions in the specialized agencies. Alas, the political dynamics of the process alone are unlikely to permit this. Third world leaders have too much to gain from universal fora where they can posture before their domestic constituencies and before each other by tweaking the noses of the industrial powers. Moreover, many of the largest LDCs (India, Mexico, Brazil) still believe in the North-South dialogue as a vehicle for making incremental economic gains.

Thus, we will continue to be faced by North-South economic meetings and by the fundamental disagreements so evident at Belgrade. Upcoming events include the fall UNGA, the September Bank/Fund meeting, the October TDB and UNCTAD meetings on ECDC, technology transfer, shipping and ECGF, starting in late September.

Fortunately, we have some breathing room. The G–77 will not have had time to regroup its forces for these meetings, so it is likely to continue the relatively non-confrontational negotiating posture used at Belgrade, and substantively, with the Buenos Aires platform. It should be relatively easy for Group B to protect its interests provided it maintains the unity and positions displayed at Belgrade.

Possible G–77 Alternative Courses

As these events unfold, however, I expect that the G–77 will itself engage in the process of reassessing its prospects and options in the North-South dialogue. The G–77 Ministers customarily meet late in the UNGA. The next Non-aligned Summit will occur in the spring of 1984. We may be challenged by new and presently unpredictable initiatives arising from those meetings. We should encourage a constructive outcome of these LDC deliberations as we proceed through the fall schedule of North-South meetings.

The G–77 has several alternative courses to follow. One choice is between seeking new vehicles for the North-South dialogue (Global Negotiations or an International Monetary Conference) or accepting present venues for pursuing their multilateral objectives.

Global Negotiations seem to be fading. They were not mentioned in the final documents at Belgrade. The structural reform emphasis of Global Negotiations had a secondary importance in the G–77’s program for UNCTAD VI. A more conservative Algerian Government may mean reduced interest by this heretofore major GNs advocate. Finally, as the G–77 assesses the results of UNCTAD VI, and particularly the firm US position there, it could well conclude (correctly) that the likelihood of persuading this U.S. administration to agree to GNs is nil. There is a good prospect, therefore, though not a certainty, that Global Negotiations will disappear into oblivion.

A monetary conference, on the other hand, has several important proponents and could fulfill in part the new vehicle the LDCs sought in Global Negotiations. This issue may not easily go away.

In any event, it appears in our interest to encourage the LDCs to content themselves with the existing North-South mechanisms (UNCTAD etc.) rather than seek new ones.

A second choice the G–77 has is between continued “moderation” in the dialogue or return to a more confrontational approach. (Moderation in this case means in terms of style, not substance, since LDC economic objectives are anything but modest from the U.S. perspective.) At Belgrade, and so far at the summer ECOSOC, the G–77 has avoided drastic political polemics and confrontation, despite the relatively non-forthcomingness of Group B.

A third choice is the relative balance LDCs will give to their participation in universal fora as opposed to participation in the specialized agencies. Although LDCs are unlikely to give up completely on UNCTAD, ECOSOC, etc., it would be in the U.S. interest for them to devote more of their energies to the specialized agencies provided this were done constructively. An unconstructive G–77 attitude, on the other hand, would probably be less disruptive to U.S. interests if it primarily occurred in an UNCTAD-type setting.

Factors Influencing the LDC Approach to the N-S Dialogue

The direction which LDCs take will be influenced by several major factors:

First is how well their interests and concerns are dealt with in the specialized agencies. The increase in IMF resources and its subsequent utilization.

Second is whether and at what pace global economic recovery spreads. Failure of recovery to spread will generate frustration and desperation, which will be manifested in N-S relations.

Finally is the continued unity of the OECD countries on major North-South economic issues. LDC options for adopting unconstructive courses are constrained by consistent and close coordination of Group B positions in UNCTAD, ECOSOC, and the UNGA. A breakdown of Group B unity would tempt the G–77 to try to isolate the U.S.

What Actions Should We Take?

1. First and most obvious, we should work actively in the OECD North-South Group, in Geneva, and at the UNGA to maintain Group B cohesion on N-S economic issues.

2. Secondly, clear, consistent and forthright enunciation of U.S. economic positions, along the lines of our posture at UNCTAD VI is essential. Our message was not welcomed by LDCs, but our leadership of Group B and firmness of purpose were recognized and seem to have had a salutary effect.

3. Third, we should do all we can, within our limitations, to assure that legitimate LDC concerns (particularly insofar as we have interdependent interests) are addressed in the specialized agencies. If LDCs continue to believe that their interests are ignored in these fora, they will pursue other courses. U.S. approval of the IMF quota increase is vital. Failure to do that will undercut our argument at UNCTAD VI that the real action is in the specialized agencies, and it also will make Group B unity in support of U.S. positions difficult or impossible.

It has been suggested that we consider putting more emphasis on the IMF/IBRD Development Committee as a place to discuss North-South economic issues, including trade matters. This may be useful. However, since these meetings are mostly attended by finance and trade ministry officials, LDC foreign ministries are unlikely to let themselves be squeezed out of the action, and will continue to look to the UN fora as a focus of the North-South dialogue. A basic question is whether constructive dialogue could occur in the Development Committee if it does not in other fora.

4. We should fashion an organized effort to discuss N-S issues in depth with key LDCs, with a view to defusing unnecessary conflict in multilateral fora and promoting our economic philosophy. India, Brazil, Mexico, some Arab states, and the ASEANs are countries to consider. More detailed discussion with India might have prevented some of the conflict over trade and monetary matters at UNCTAD VI, led on the G–77 side by Indian officials.

5. In the longer run, we may wish to consider whether to treat some of the most fundamental differences between us and LDCs, particularly the near impasse over trade, at a summit level a la Cancun. It seems unlikely that such a meeting could be organized in the remaining 18 months of this Administration, and there seems to be little international interest in such a meeting. It is something to keep in mind, however, as we proceed through the upcoming events in the “dialogue”.

6. Finally, we should take into account these general North-South considerations as we proceed with our interagency review of U.S. participation (or non-participation) in the UNCTAD system.

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 Landberg; cleared in IO, EB/IFD, S/P, E, EB/ODF, and IO/E.