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

146. Memorandum From the Special Assistant to the Deputy Secretary of State (Edson) and the Executive Assistant to the Deputy Secretary of State (Walker) to the Deputy Secretary of State (Dam)¹

Washington, August 26, 1983

SUBJECT

• Taking Stock

The current popular perception is that this Administration lacks a foreign policy “success.” In the public mind, “success” may be synonymous with results in the three major issue areas—Central America, the Middle East, and arms control. Tangible “success” in those areas, however, will probably take time and patience—which, as the Secretary has said, should not be confused with indecision.

Obviously, we should not permit our policy to be railroaded by the public clamor for “success.” Nevertheless, policy isn’t made in a vacuum, and the Administration needs public support for its policies. Moreover, the criticism about our lack of success is demoralizing: Jimmy Carter’s “malaise” may not exist in the country at large, but we sense that it pervades Foggy Bottom. Finally, while the current spate of criticism can be attributed to the White House’s traditional pre-election year need for results, it could also represent a more fundamental loss of confidence in the seventh floor’s ability to run the building (rather than vice versa). For all these reasons, we must stoke the fires in the building, capture peoples’ imagination, and move our policy forward wherever practicable.

This means, generally speaking, that we must stop paying obeisance to the folkways of the building. Indeed, several calculated moves—be they process-oriented, or personnel-oriented—that run contrary to the folkways of the building may be just what the doctor ordered for malaise.

For the Secretary, the task of moving our policy forward translates into a question of identifying a few areas on which to focus his resources over the next 18 months, and in which he can make a significant contribution. The first step in this process is to recognize that the Secretary’s discretionary time is limited. Whether we like it or not, the inertia of foreign policy is such that the bulk of the Secretary’s time must be devoted to the major issue areas—arms control, Central America and the Middle East. Accordingly, this paper first examines those three areas in an effort to identify possible openings for constructive action, and then identifies some other issues wherein the Secretary would get the biggest return for his investment of time and influence. Finally, the paper notes how we might better present our track record.

[Omitted here is information on arms control, Central America, and the Middle East.]

OTHER ISSUES

There are a variety of issues—other than arms control, Central America, and the Middle East—that could yield results were the Secretary to commit himself to them. In choosing among them, we believe the Secretary should play to his strengths—economics and mediation.

(1) International Economic Affairs.

The Secretary has been criticized for the lack of a success in arms control and the Middle East. However, he has yet to receive what is potentially the most damning criticism of all: a failure to show progress in his own area of expertise—international economics. That alone might be a compelling reason for making a push in the economic area. In addition, there are increasing signs that the debt situation is deteriorating, particularly in key strategic countries such as Venezuela and the Philippines. Moreover, economic development is quickly becoming a cornerstone of our Central America and Africa policies. Finally, the idea of a debt moratorium is gaining adherents, especially in Latin America. All of these points argue in favor of some initiative in the economic area.

Arguing against an economic initiative is the bureaucratic pitfall of potentially cutting across Treasury’s bow. And from a substantive perspective, doing nothing (except promoting our own non-inflationary recovery) may be a better solution to current global economic problems than doing something (although proposing an acceptable alternative now to the status quo may preempt more radical alternatives later).

On balance, we believe the pros outweigh the cons and that the time is ripe for an international economic initiative led by the Secretary. Such an initiative could involve any one of the following:

○ Endorse Hugh Corbett’s Ministerial Group. The advantage of this idea is that it is already on the drawing board and the Secretary has already been asked to chair it or kick it off. Moreover, if at least the nominal country representatives were to be foreign ministers, then the Secretary would not seem to be usurping Don Regan’s role. (Certainly, some kind of acceptable division of labor could be worked out with Treasury.) The downside risk, of course, is that foreign ministers are notorious for proposing economically unsound solutions.

○ Initiate a Latin American Debt Conference. The advantage of this idea is that we would be attacking the heart of the problem, since the bulk of the debt burden is in Latin America. Moreover, a conference— on our terms and under our aegis—might head off the current clamor for a debt moratorium. Our objective would not be to create new institutions, but to develop new mechanisms (such as Feldstein’s proposal utilizing the Exim Bank) for alleviating the LDC debt burden. The downside risk of a Latin Debt Conference is that, unless it were properly coordinated, it is sure to ruffle feathers at Treasury.

○ Launch a Pacific Basin Economic Initiative. This idea would create fewer bureaucratic problems with Treasury. We should consider, however, whether there is a sufficient rationale—be it economic or political—for such an initiative. The Pacific Basin is economically better off than most areas of the world. More importantly, such an initiative would tend to lump together a group of politically diverse countries, thus undercutting the need to treat China differently in view of the role of the “China card” in U.S.-Soviet relations. Nevertheless, a Pacific Basin Initiative, if properly structured, could complement the President’s upcoming trip² and serve as a vehicle for practicing what we preach regarding free trade, open markets, etc.

In addition to these initiatives, we would argue that consideration should be given to an even bolder idea—namely, the articulation, by the Secretary, of a global economic strategy (call it an International Economic Compact). This would build on the President’s Cancun speech, the Secretary’s North-South speech, and our UNCTAD address.³ Its purpose would be to articulate a policy superstructure that coherently links the CBI, the African economic initiative, GSP renewal, and any or all of the above suggestions. In effect, we propose that George Shultz issue his own “14 Points” speech, outlining how the economic relationship between North and South should develop over the next 20 years. Granted, this is grandiose-sounding. But the international economic area presents the Secretary with his best opportunity for making a lasting contribution to U.S. foreign policy. Moreover, many of the elements of a global economic program already exist, or can be practically implemented. What remains is for someone to be tasked with drawing them together into a comprehensive program.

[Omitted here are information on mediation and the authors’ concluding thoughts.]

1. Source: Department of State, Executive Secretariat, S/S–I Records: Deputy Secretary Dam’s Official Files, Lot 85D308: Memos To/From S 1983. Confidential. Edson initialed for Walker.
2. Reagan visited Tokyo November 9–12 and Seoul November 12–14.
3. For documentation on the 1981 Cancun Summit and UNCTAD, see the Global Negotiations compilation of this volume.