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

117. Action Memorandum From the Assistant Secretary of State for Economic and Business Affairs (McCormack) and the Assistant Secretary of State for International Organization Affairs (Newell) to the Deputy Secretary of State (Dam)¹

Washington, December 23, 1983

SUBJECT

• Review of US Policy Towards UNCTAD

Issue for Decision

UNCTAD VI and the subsequent October Trade and Development Board meeting added to our disillusionment with the Organization’s ineffectiveness and the increasing sterility of the North-South dialogue. The G–77 also pursues its NIEO objectives incessantly in the UNGA, ECOSOC, and UNESCO, and calls for new mechanisms (i.e. Global Negotiations and/or an international monetary conference) to promote its demands. Aside from the great amount of time and effort involved in protecting US interests in these discussions, we get much of the political blame for the current deadlock in the “dialogue”. A new approach to UNCTAD is needed; one with more fruitful possibilities for US interests and which complements our efforts in other UN organs. US policy options and our recommendations are outlined below.

Background

Although UNCTAD has had some modest accomplishments, such as GSP, more often it has had, or threatened to have, a negative influence on the international economy and related US interests. A particular concern is the UNCTAD Secretariat, which is biased against market principles and private initiative and spawns unsound schemes which the G–77 adopts (our 25% share of the Secretariat budget was $13 million in FY84).

We have limited the damage by devoting considerable effort to our UNCTAD participation, and by exerting strong leadership in the OECD. Many of our OECD colleagues would be more conciliatory towards the G–77 in our absence out of concern for their commercial and political interests among LDCs.

Improvements which would make UNCTAD more acceptable to us include: 1) a more favorable climate for discussion of market forces, private investment and domestic economic policies, 2) a more objective and accountable secretariat, and 3) limits on repetition, duplication, and politicization of issues.

We see three realistic options for US policy:

OPTION I: Withdraw from participation in UNCTAD.

Pros:

— Withdrawal might shock LDCs into taking a more practical and realistic approach to the North-South dialogue.

— It would reduce pressures on us to agree to measures of dubious economic merit, such as the Common Fund.

— Damage to US interests from UNCTAD programs adopted in our absence would be limited by our key global economic role.

Cons:

— We would risk outcomes more damaging to our interests than at present. The US private sector generally supports our active involvement in UNCTAD for this reason.

— On most issues we have achieved OECD support for tough US positions, not only at UNCTAD, but in other bodies where the G–77 presses its demands, e.g. the UNGA. Withdrawal would threaten OECD unity and our leadership role.

— Other OECD countries and the Soviets would try to take advantage of our departure to strengthen their political and commercial relations with LDCs.

OPTION II: Continue our participation, but work within UNCTAD for improvements, while reducing our costs and effort. This would include selective reduction of our involvement in UNCTAD activities. (We have already agreed on this at the interagency working level). We would reduce delegations to the minimum level and size necessary to protect our interests.

Pros:

— Would be easy to implement, consistent with our traditional posture in UNCTAD, and preserve our OECD leadership role.

— It recognizes that UNCTAD has achieved some modest positive results.

Cons:

— This option is unlikely to produce any significant improvement in UNCTAD. Past US efforts of a similar nature have been ignored by the G–77 and the Secretariat.

— Failure to act more strongly will add to the image of US impotence in the UN.

OPTION III: Launch an effort with our OECD partners to achieve a major reform of UNCTAD. If the OECD does not support our initiative, we will have to decide whether or not to proceed alone.

The OECD North-South Group has already agreed to review the dialogue process. We would discuss our proposals at the next North-South Group meeting (January 24–25).

Our ideal solution would be to abolish UNCTAD or convert it to a specialized agency, as is occurring with UNIDO. This would give us direct control over our contribution to UNCTAD’s budget. Neither of these alternatives would be acceptable to the G–77 or most of the OECD, in our estimation, but might serve as a starting point for negotiations.

More realistic objectives, however, would include:

1. Actively working for selection of a new UNCTAD Secretary General (the present SG is due to leave in 1984) with whom we could work for UNCTAD reform and Secretariat improvements.

2. Reorganization of UNCTAD to avoid duplication of issues properly discussed in other agencies.

3. Integration of UNCTAD and ECOSOC, or their joint reorganization to avoid duplication.²

4. Agreement with the G–77 that UNCTAD meetings would avoid fruitless repetition of discussions.

5. Strict accountability and management control of the Secretariat, including external audit of budgets and programs.

We will need to make clear to our OECD partners that failure to take our concerns seriously or to achieve improvements in UNCTAD could result in a stiff US reaction, which might include:

1. US unwillingness to attend many UNCTAD meetings, including the proposed UNCTAD TDB at ministerial level in 1985, or the next UNCTAD Conference.

2. A determined US effort to reduce UNCTAD’s budget.

3. Ultimately, US withdrawal from UNCTAD participation.

Pros:

— Would convey a clear signal to our OECD colleagues and the G–77 that we are unwilling to continue indefinitely with the present situation and that we will consider more drastic action if our views are not taken seriously;

— Failure to act strongly will perpetuate the G–77’s effort to whittle away at us in UNCTAD and other fora;

— If we failed to obtain OECD support we could still go it alone or fall back to Option II.

Cons:

— Would require greater USG time and energy than Option II. The results might not be worth the effort;

— We would suffer some embarrassment if in the end we called off our effort without success;

— A hostile G–77 reaction could adversely affect our other UN interests.

Recommendation

A decision to withdraw from UNCTAD at this juncture (Option I) is premature. Option II does not sufficiently reflect our growing unhappiness with UNCTAD or offer the prospect for significant improvement. EB, IO and S/P, therefore, recommend Option III as offering the best prospect for improving the present situation. If the OECD does not agree to support our proposals we will have to decide whether to proceed on our own.

If you agree, we will seek concurrence of other USG agencies involved and will then launch our initiative with a demarche to OECD capitals preparatory to the January OECD North-South Group meeting.³

1. Source: Department of State, Files of the Under Secretary of State for Economic Affairs, W. Allen Wallis, Chrons; Memo to the Secretary/Staff and Departmental/Other Agencies; Memos to the Files; White House Correspondence, 1987–1987, Lot 89D378: Chron File—December 1983. Confidential. Drafted by Landberg on December 16; cleared in EB, EB/ODF, EB/OMA, E, IO/E, IO, and S/P, and in substance in EB/IFD. Sent through Wallis and Eagleburger. Wallis did not initial the memorandum. Hill initialed the memorandum on January 19, 1984.
2. The spring ECOSOC session covers social issues, while the summer session concentrates on economic and development matters. The latter duplicates much of the UNCTAD discussions. [Footnote is in the original.]
3. Dam did not indicate his agreement or disagreement with the recommendation.