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

22. Memorandum From Henry Nau of the National Security Council Staff to the President’s Assistant for National Security Affairs (Allen)¹

Washington, July 9, 1981

SUBJECT

• Ottawa Economic Summit

There is always the danger that conflict, disarray and pessimism will characterize the outcome of the Summit. Some progress was made at the latest preparatory meeting—no bracketed language on the interest rate issue or World Bank Energy Affiliate (see attached draft communique at Tab A).² But serious differences remain on North-South and trade issues. East-West could become more contentious if we announce our opposition to the gas pipeline before or at the Summit. And there are two new governments, the United States and France, whose foreign policies are viewed as uncertain or inadequately formulated.

Unless the President clearly demonstrates that he knows where he is going, that America is leading, and that the other countries have differences with us but accept US leadership, the Summit may not succeed.

The following steps are suggested:

— the President put together the best possible case on his command thus far of the Congressional process as an indication of his confidence where he is going and his capability to get there [task Stockman and Weidenbaum]

— the President take the initiative to demonstrate his sensitivity to European and Japanese concerns about US economic policies (I have suggested the possibility that he call for a major conference in the fall to highlight international economic recovery in the 1980s. Another possibility is that the President call for a new consultative mechanism, perhaps institutionalizing the role of the personal representatives of the Summit leaders) [task Regan and Haig]

— the President appeal to Trudeau tomorrow³ to accept the American compromise on global negotiations and not to allow this relatively narrow issue to cause conflict at the Summit. (See attached paper on Global Negotiations and note the two paragraphs 2 in section III of Communique.) This is critical, since this issue will be played in the press as US isolated on its hard line position against developing countries (and if we cave, we will pay for it in these Negotiations for the next three years).

— the President consider asking that a definite date be set for the commencement of a new global round of trade negotiations (see attached paper on trade at Tab B).⁴ [task Niskanen and Brock].

These initiatives will have a favorable impact on the press coverage and atmosphere at the Summit. They will divert attention from the assembling clouds of conflict, disarray and pessimism.

Attachment

Paper Prepared in the National Security Council⁵

Washington, undated

GLOBAL NEGOTIATIONS

Trudeau will tell you that the United States is about to be isolated in refusing to agree to launching “global negotiations” between the industrial countries (North) and developing countries (South) at the United Nations this fall. Meeting in Luxembourg on June 29–30, the European Council, which includes among others the heads of governments of UK, Germany, France and Italy, declared that “the preparations for the new round of Global Negotiations should be completed as soon as possible” and that “a positive impetus . . . be given to this effect by the Summit Conferences in Ottawa and Cancun.” Japan also takes this position.

The present US position is that no decision to participate or do further preparatory work on the agenda and procedures of global negotiations should occur until after the Cancun Summit. We fear that, if the preparatory work for global negotiations is resumed before Cancun, the issues in these discussions will become the dominant issues at Cancun. Trudeau wants the Ottawa Summit to announce the industrial countries’ readiness to resume preparatory talks at the UN and to launch the negotiations at an early date. He contends that this is the only way to keep the developing countries from making Global Negotiations the central issue at Cancun.

The United States cannot accept the present terms for launching global negotiations. The developing countries demand that global negotiations exercise central direction over negotiations in the specialized agencies, such as the IMF and the World Bank, by providing guidance and objectives and assigning issues to these agencies. This weakens the role of the specialized agencies which the industrial countries currently control through weighted voting and amounts to a reallocation of decision-making power from the major contributors in these agencies to the borrowers.

Western Europe and Japan are relaxed about the dangers of such a UN gabfest because the Global Negotiations will operate on the basis of consensus and they count on the United States to take the onus for standing up and saying “no” to outrageous demands while they whisper sympathetic regret to the developing nations.

By holding out through the Cancun meeting, we have the best chance of turning the discussion away from these procedural and institutional issues to more substantive and meaningful aspects of our relations with developing countries. We seek to leave open the possibility that a good atmosphere at Cancun may alter the issues on which we are presently deadlocked in the Global Negotiations or perhaps even lead to widely acceptable, alternative forums to Global Negotiations.

1. Source: Reagan Library, Douglas McMinn Files, Economic Summit Files, Ottawa—Internal USG’s Preparations. No classification marking. Sent for information. Sent through Bailey. All brackets are in the original.
2. Not attached.
3. Reagan and Trudeau met on July 10. See Document 23.
4. Not attached.
5. No classification marking.