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

55. Memorandum From the Assistant Secretary of the Treasury for International Affairs (Leland) to the Cabinet Council on Economic Affairs¹

Washington, undated

SUBJECT

• Global Negotiations

The President’s address to the World Bank/International Monetary Fund Annual Meeting established basic guidelines for U.S. economic relations with developing countries: engage in substantive, realistic discussions; work through existing international economic institutions; put aside artificial “North-South” bloc politics.² This approach will guide us through and beyond Cancun and should be the basis for the Administration’s decision regarding further U.S. participation in the proposed U.N.-based Global Negotiations (GN).

There is no reason for the President to alter his longstanding position of deferring any U.S. decision on GN until after Cancun. The exchange at Cancun should be on substantive issues—investment, tax, trade, food, etc.—bypassing traditional North-South political issues like GN (in particular, their procedural aspects). Cancun presents a unique opportunity for this Administration to make its mark in the area of relations with developing countries and to shift discussions to a more substantive, pragmatic ground.

While a decision on GN has, for many, assumed symbolic significance as a measure of the “success” of the Summit (many countries expect the United States finally to “sign on”), such a decision in fact need not be a crucial element to a positive Cancun outcome. Essentially, the ‘mere’ occurrence of the Summit will mark the event as a success. The fact that 22 Heads of State will have had a virtually unprecedented exchange of views for two days will have to be defined in positive terms. Moreover, it is clearly not in the interest of other participants to seek to embarrass President Reagan at Cancun.

Ultimately (after Cancun), it will be both in the U.S. interest and consistent with the President’s announced policies to decide against U.S. participation in GN. The concept is directly opposite to the approach laid out by the President: a highly political (North-South) forum, subsuming or overriding the functions of international organizations, approaching economic development subjects as wealth transfer rather than wealth creation issues, and, in essence, seeking to guide if not overturn market forces.

Agreeing to resume GN preparations, for the sake of political harmony and “statesmanship”, offers no prospect that the ensuing process would be at all manageable. Rather, it would be highly contentious; a successful effort to mold more acceptable procedures and agenda is not in the cards, if only because developing countries have shown little or no ability to compromise on key points and will inevitably use bloc politics to resist change. (For the same reasons, they are unlikely to be able to embrace an “alternative” Cancun followup process as a substitute for the GN to which they are so heavily committed.)

Individually, Finance Ministers of some advanced developing countries have indicated to us that, given the present agenda of existing institutions, GN are both unnecessary and unlikely to accomplish substantive results. Their ability to “break ranks”, however, is highly constrained.

U.S. agreement at Cancun to resume GN preparations might yield a temporary appearance of unity there—but it would only put off confrontation on unacceptable proposals to a later day, at GN itself. As a political exercise, GN would be extremely hard for the United States to boycott when we became isolated on key substantive issues—which, in the light of past experience, would be inevitable. We would be under extreme pressure to agree to proposals against our interests and against the interests of existing institutions. A scenario of this sort illustrates the real politics behind GN and is one reason why IMF Managing Director de Larosiere, for example, who has championed LDC interests, has privately urged the United States not to participate in GN.

1. Source: Department of State, Bureau of Economic and Business Affairs, Investment Policy Files, 1981–1984, Lot 85D193: Cancun Summit—Global Negotiations. No classification marking. Printed from an uninitialed copy. Sent under the same October 2 covering memorandum from Lollis to multiple recipients, in which Lollis wrote that this memorandum was passed out by Regan at the October 1 meeting of the CCEA. See footnote 1, Document 54.
2. See footnote 3, Document 38.