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

36. Information Memorandum From the Assistant Secretary of State for Economic and Business Affairs (Hormats) to Secretary of State Haig¹

Washington, undated

SUBJECT

• Global Negotiations

This memorandum follows-up your request to me to consider how best to approach the issue of global negotiations. I should alert you at the outset that I am not at all confident that any approach, short of full support for Global Negotiations, can avoid the President’s being isolated on this subject at Cancun. But, after a fresh look at the problem, I have concluded that the following approach is worth a long-shot try.

ANALYSIS

The first questions which must be addressed relate to our objectives. Several possibilities come to mind:

— Are we attempting to accomplish something substantive through global negotiations?

— Are we simply looking for a way to avoid becoming isolated internationally, and having the President “ganged up on” at Cancun?

— Are we attempting to avoid a deterioration in the “atmosphere” of our relations with the developing countries, which could weaken our position in the Third World to the benefit of the Soviets?

To the first question my response would be that very little substantive good is likely to come out of global negotiations. In fact, were we to participate in such negotiations there will be significant political pressure on the US to make commitments which involve additional resource flows or greater LDC control over multilateral institutions. These can, of course, be resisted by the US, but we would take some political heat for doing so.

Highly politicized North versus South discussions in the UN have proved to be exercises in futility. What real progress has been made has occurred in the IMF, World Bank, GATT, and other groups in which North-South political divisions are not so sharply drawn, significant expertise exists, and direct economic gains and losses can be evaluated.

With respect to the second question, there is a substantial risk that unless he supports global negotiations the President will be isolated at Cancun. However, my strong impression is that the Heads of State care about a lot of other issues more than they care about global negotiations. While foreign offices feel strongly about global negotiations because of their political importance, particularly in preserving solidarity among the Group of 77 in the UN, heads of state have other major issues on their minds and will not make global negotiations a confrontational issue if they believe we have a positive program on major issues important to them.

The basic dilemma we must face, and must resolve, is that we do not have a program which is attractive to much of the developing world, even if some of the things we are doing (i.e. strengthening our economy and maintaining an open market for their exports) are very much in their interest. We do not have large trade concessions to make, are unlikely to provide new assistance (Treasury and OMB want to cut back on many programs) and there is hostility to commodity agreements. US credibility requires both that the President successfully sell an entirely new mind-set to the LDCs based on mutual gains and market oriented measures, not major resource transfers and that we have some positive proposals consistent with this philosophy.

Absent some acceptable alternative approach by the President, he can expect a certain amount of pressure on global negotiations in the Cancun meeting. But the public presentation after the meeting (however polite the others are to the President during the meeting) will highlight the US isolation. The Europeans and the Japanese can be expected to use this to show that they are more sensitive to LDC concerns than is the US.

Regarding the third question, the effect of our relations with developing countries, a souring of the atmosphere in the UN has traditionally not had an important impact on our relations with individual developing countries so long as we were constructive in our bilateral relations. However, those who are out to embarrass the US, for instance the Soviets indirectly through the Cubans, could use our opposition to global negotiations as a demonstration of US insensitivity. If we have an approach that clearly demonstrates our commitment to constructive relations outside global negotiations, that danger can be minimized.

A POSSIBLE SCENARIO

Based on the above conclusions, I would suggest a US initiative which stresses our commitment to negotiate with the developing nations in areas which are consistent with our market oriented philosophy, and our sincere commitment to assist their development efforts. The negotiations would be held primarily in functional forums, but for political reasons some role must be found for the UN General Assembly—something divorced from negotiations but imparting an international political flavor to the results.

INITIATIVES

In this context we would take four separate initiatives:

1. Announce our willingness to support efforts in the GATT, including as many developing nations as wish to join, to reduce existing barriers to international trade, particularly those affecting the poorest countries, and to further improve the international trading system. Countries not in the GATT would be invited to participate in these negotiations. The 1982 GATT Ministerial meeting would decide how best to conduct these negotiations.² This initiative would have to be worked out carefully in advance with the Congress, from which we may need to obtain new negotiating authority, as well as with the EC and Japan.

2. Call for high level discussions on how to improve the climate for increased domestic and foreign investment in developing countries, and on how to utilize official development assistance more effectively as a catalyst for private investment. This recognizes the likelihood that aid will not increase much in coming years, and that we therefore need to use it more effectively. This exercise could be chaired by the Executive Director of the International Finance Corporation (a World Bank affiliate designed to support private investment in developing countries).

3. Call for a high level meeting to determine ways a) to promote increased food production in developing countries, with particular emphasis on small farmers, and b) to improve international cooperation and preparation to deal with food emergencies. This could be done in the World Bank and FAO respectively.³

4. Call for a high level meeting to reach agreement on ways to promote and encourage increased energy production, and enhanced efficiency of energy use, in developing nations. This would show the convergence of interests among developed, OPEC and developing countries rather than emphasizing the divisions among them which occur if the issue of price and supply are discussed. An ad hoc group of the UN could be charged with this assignment.

The results of each of these negotiations or meetings would be discussed in the UN and could be embodied in a UN resolution.⁴

CAVEAT

While such initiatives would clearly be viewed as more forthcoming than a refusal to discuss any scenario for negotiating with developing countries, it is unlikely to be acceptable to many in the Group of 77. Global Negotiations to them are both highly symbolic and a vehicle for applying unified, political pressure on the developed countries, particularly the US, for more aid and important changes in the international economic system. They may regard our proposals as an effort to circumvent, or substitute for, Global Negotiations in New York, which remains the agreed scenario among the Group of 77. Further, if we propose such discussions we will have to decide whether to describe them as an alternative to Global Negotiations or to put forward the proposal without any reference to the New York Global Negotiations exercise.

If the proposed scenario sounds promising, I will prepare a more detailed proposal for your consideration.

1. Source: Reagan Library, Douglas McMinn Files, Subject Files, Global Negotiations; NLR–369–3–22–12–2. Confidential. Drafted by Hormats on August 22.
2. See footnote 2, Document 99.
3. An unknown hand wrote in the right margin: “a) Training—agr. scientists (See Venice communique) Agr. research b) Maybe WFP? for emergencies.” The same unknown hand wrote in the left margin: “Nothing new in [illegible]. Food strategies country-by-country [illegible] WFC. Best give to FAO. How do we do this if we don’t agree on reserve [illegible]?”
4. Nau circled this sentence and wrote in the right-hand margin: “but not for [illegible]!”