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

99. Telegram From Secretary of State Shultz’s Delegation at New York to the Department of State and the Embassy in the United Kingdom¹

New York, September 29, 1982, 1811Z

Secto 13020. Department Please Pass all OECD Capitals. Subject: Secretary’s Sept. 28 UNGA Bilateral With UK Foreign Secretary Pym: World Trade and Development.

1. (C—Entire text).

2. Summary: During their September 28 bilateral breakfast on the margins of the UNGA, Secretary Shultz and Foreign Secretary Pym agreed that growing protectionist sentiment must be resisted. Pym pledged that the UK could do so vigorously, and he joined his UN Ambassador in urging that attention being given to Global Negotiations at the UNGA be redirected to concrete approaches to the GATT Ministerial in November.² The Secretary urged that world leaders be prepared to strike off in new directions to challenge the world’s trading and development problems. End summary

3. The Secretary raised the issue of the world trading system and the need to support free trade. He said that he was frustrated by his inability to get others to address this issue in depth even though the GATT Ministerial will take place in November. Pym said the UK attitude with regard to free trade is similar to that of the U.S. The UK, of all countries, cannot support protectionism. He could not imagine a greater catastrophe than a move in the direction of protectionism, and the UK could be counted on to resist passionately any such process. The Secretary observed that there is mounting protectionist sentiment in the U.S. which must be resisted. Pym noted that this issue is related to the steel question but one has to fight to the end for the principle of anti-protectionism.

4. The Secretary said that there did not seem to be enough confidence among world leaders that anything could be done at meetings to encourage them to invest time and political capital in laying the groundwork for productive meetings such as the GATT Ministerial. In his view, a three-fold strategy is needed. In the first place, we must fight off protectionist tendencies. Secondly, we must work hard on GATT codes resulting from the Tokyo Round.³ Finally, we must strike off in new directions. A good offense is the best defense. It changes the mood. The Tokyo Round produced substantial achievements, one of which was to beat off a generally pessimistic mood in the 1973–75 period that was not unlike the one we are seeing today.

5. Pym said he completely agreed with the Secretary. However, Britain experienced economic expansion in the mid 70’s. Now it faces zero growth and a lack of confidence. The Versailles Summit did not show enough imagination, and we appear to be drifting. At this point we need some dramatic looks—or at least a more determined look—at new directions. With unemployment at an historically high level in EC nations, those countries should be much more imaginative about how they cope with economic challenges.

6. UK PermRep Thompson said he had a sense that delegates had come to the UNGA hoping for Global Negotiations but have become aware that such negotiations are not going to take place during this session. In his view, that is welcome because one can now raise one’s eyes and focus on the GATT Ministerial in November and UNCTAD next June.⁴ He believes that it would now be possible to reach general agreement that time at the UN should not be wasted on Global Negotiations when everyone recognizes that they will not take place.

7. The Secretary observed that the development outlook is very difficult at present. We face a world that is vastly over-extended in debt. As a result, financial institutions are going to be much more cautious as they address the problems before them. At the same time the concept of world savings is changing considerably. The importance of oil prices had put the savings pool in the hands of the few in recent years, but that situation is changing very fast. We have to think of investment as drawing on this savings pool. Assistance on commercial terms draws on this pool as does concessional aid. We must make certain that we make the best use of world savings. This has a great bearing on assistance to the poor nations, and thinking in terms of the rich giving to the poor simply is not in the cards.

8. The Secretary added that the problem of dealing with unstable commodity prices and its effect on the developing countries must be of concern to all. The fall in commodity prices has had a devastating effect on numerous countries. Pym observed that these economic forces had played a large role in leading to political destabilization. The Secretary said he would like to focus further on income support activities of the type that had resulted from the Lome Convention, and Pym said he believed the convention might provide a good pattern.⁵ In his view the pool of savings is essentially controlled by the oil producers. The Secretary said that had been the case but now we have a situation in which Saudi Arabia may have a negative trade account. Petroleum production is way down. This suggests a shift in recent patterns, one that has been so great that the financial system has had a difficult time accommodating it.

9. Moreover, the Secretary said, savers have had different ideas as to how best to put money out on loan. The Arabs have generally relied on keeping their funds on a relatively short leash. We tend to think hard about the position of an Argentina, Brazil or Poland when they [garble] but not about what people’s attitudes will be a year from now. Pym observed that in the new era we face there is a real danger that we will talk ourselves into a worse situation. The two Secretaries agreed that we must identify the reality of the situation and be able to work with it creatively.

10. Also present at the meeting were: UK Ambassador Wright, UK PermRep Thompson, FCO Political Director Bullard, Private Secretary Fall. U.S. Ambassador Kirkpatrick, Under Secretary Eagleburger, EUR Assistant Secretary Designate Burt and EUR/NE Deputy Director Pendleton (notetaker).

Shultz

1. Source: Department of State, Central Foreign Policy File, Electronic Telegrams, D820504–0781. Confidential; Immediate; Exdis. Shultz was in New York for the UN General Assembly meeting. Reagan named Shultz Secretary of State on June 25, after Haig’s resignation on the same day. Shultz assumed the Office of the Secretary on July 16.
2. The 1982 GATT Ministerial took place from November 24–27 in Geneva. Under an April 28 memorandum to the members of the Trade Policy Committee, Brock forwarded a proposal for a GATT round of trade negotiations between developed and developing countries, which he wanted to be the centerpiece of the U.S. approach to developing countries at the GATT Ministerial. (Reagan Library, National Security Affairs, Office of the Assistant to the President Files, Chron File, [Case file unavailable]; NLR–812–88–15–2–5) The memorandum and the proposal are scheduled to be printed in Foreign Relations, 1981–1988, vol. XXXVI, Trade; Monetary Policy; Industrialized Country Cooperation, 1981–1984. In telegram 201537 to the GATT Min Collective, July 21, the Department further explained the U.S. North-South round of trade negotiations proposal and requested LDC posts to brief appropriate host government officials. (Department of State, Central Foreign Policy File, Electronic Telegrams, D820377–0515) In telegram 11985 from Geneva, December 3, the Mission reported on the GATT Ministerial declaration from the November meeting, which did not include a commitment to a North-South trade round of negotiations. (Department of State, Central Foreign Policy File, Electronic Telegrams, D820626–0981) Further documentation on the 1982 GATT Ministerial is scheduled to be published in Foreign Relations, 1981–1988, vol. XXXVI, Trade; Monetary Policy; Industrialized Country Cooperation, 1981–1984.
3. Reference is to the multilateral trade agreements that were negotiated at the 1973–1979 Tokyo Round of GATT negotiations. See Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Document 209.
4. The sixth session of UNCTAD was scheduled to meet June 6–30, 1983, in Belgrade.
5. A reference to the Lomé Convention, a trade agreement between the European Economic Community and African, Caribbean and Pacific (ACP) countries. The first agreement, Lomé I, was signed in 1975.