194. Summary Minutes of Meeting of the Interdepartmental Committee of Under Secretaries on Foreign Economic Policy0
[Here follows a list of participants (16).]
WAYS IN WHICH THE US MIGHT USE INTERNATIONALORGANIZATIONS MORE EFFECTIVELY IN THE FORMULATION AND EXECUTION OF FOREIGN ECONOMIC POLICY
Presentation
Harlan Cleveland, Assistant Secretary of State for International Organization Affairs, made the presentation.
We can start with the proposition that, whether pursued bilaterally or in one or another of the international economic organizations in which we participate (there are 49 to which we make regular contributions), our purpose is to put the resources that go beyond our borders in the service of our national aims, if we can figure out what the resources are and what our aims are.
A standard canard used to be that we had to choose between bilateral and multilateral ways of acting. This sterile argument ran out of gas after about ten years. Now the canard is that we have to choose between one or another of the international organizations, for example, the UN versus the Latin American regional arrangements. This is a sterile assumption also, because we use such instruments as there are and as we use them for such particular purposes as seem to give the greatest advantage.
There are a good many cases in which the multilateral arrangements served where bilateral arrangements wouldn’t have served as well, although most of our relations will continue to be on a country-to-country basis.
In the trade field the old idea was that the way to negotiate was bilaterally and apply the results to the rest of the world under most-favored nation treatment. This really didn’t turn out to be a very good way of handling trade negotiations because it didn’t take into account the advantage which could be obtained through reciprocal concessions from third countries. The result was that we devised GATT, with a kind of round-table procedure rather than an across-the-table procedure. Similarly in the payments field, both the EPU and in the IMF were considered [Page 427] a better way to provide short-term credit and monitor exchange restrictions than could be done on a country-by-country basis.
In the aid field we found that the deep involvement inherent in an aid program—necessary aid if to be effectively used—the interference of outside people in public administration and budget processes (the very stuff of sovereignty)—was a problem that could be handled if we had adequate relations with a country but were difficult to work out with some countries—particularly sensitive newly independent ones. The working out of some functions with some countries directly through international agencies has become increasingly important. It also became possible to develop long-range financing in the multilateral field through the IBRD and the IDA faster than it was possible to present the proposal to the American people and Congress under a bilateral program.
The problem for all of us is partly to prevent ourselves and our colleagues from getting so enthusiastic about one particular instrument that it becomes a substitute for all the other instruments that are available when we need all we have and probably others that are not invented yet.
Our difficulty is that in the developmental field we have a staggering number of organizations involved in the affairs of a typical less-developed country. This proliferation has become a problem in itself. The number of organizations which are routinely found involved with the Ministry of Finance in country “X” is about 16, and in Latin America it gets up to 30, counting the American agencies, the international agencies and the regional agencies. You get a kind of competition between these organizations in the less developed countries. This puts on the LDC the burden of coordinating the developed countries—the very kind of burden the LDC can’t support.
Our problem in IO and also in the regional bureaus is first to develop some doctrine and agreement about what these organizations are supposed to be doing, what we want them to do, and what serves our interests for them to do.
The problem in the development field is getting the receiving countries to get set up so they can coordinate the external input they require. What is the best way of doing that? One way is to have fewer competitive agencies trying to sell technical assistance. Part of that solution is coordination on our side of the dotted line. Part of it is developing in the receiving countries the capability of managing their own destinies—their economic planning and financial and personnel support for their plans.
These two things need to be done: a) pulling together the external agencies so there are only two or three groups in each country instead of 16-30, and b) getting the receiving country itself able to make rational sense out of all of the input. (There should not be over-emphasis on [Page 428] health projects, for example, just because the WHO may be a better salesman than the FAO.)
We are beginning to make a certain amount of progress on the UN side. The Committee of Eight has now been established, and the ECOSOC has addressed itself to this problem of coordination. The establishment of the OECD may do the same thing with respect to bilateral programs in these less-developed countries. If we can get both of these enterprises further along, we may end up with two groups operating in related fields—one in technical assistance and preinvestment, and the other in the bigger money operations that will have to be bilateral. The World Bank gets into it by consortia on the money side and the UN Special representative can perform on the multilateral technical assistance side. There has to be an idea as to whether the best channel of influence on countries in the development of their planning machinery is bilateral or UN agencies or some other form of multilateral arrangements such as the Pan American Union of the OAS.
Since Mr. Cleveland’s concern is with multilateral organizations, he concentrated on them. Each specialized agency has a budget and we are represented on all of the Executive Committees of the specialized agencies. The budgets come up at a moment when it is too late to do anything very much about them. Not only that, but the growth of the budgets for each specialized agency is really a matter of faith for most of the people going as delegates to these meetings. At Agricultural meetings, for example, the Ministers of Agriculture are present and of course they come to the conclusion that agriculture is more important than anything else. The “budget bureau nastiness” is not present at these meetings. The same thing is true in the health field and, in fact, of every specialized field. We are not tackling the over-all budget problem for these agencies as early as we could—i.e., when budgets are being developed instead of when it becomes a problem of confidence in the agency if any questions are raised.
We don’t really have in our hands the raw material with which to affect the budgets of these organizations. The reason is that the ambassadors and USOM’s have regarded themselves as responsible for the bilateral relations with the country and regarded these multilateral operations as the responsibility of someone else, despite the fact that the US is a 40% stockholder. They regard the specialized agency operations as a foreign concern—as something even competing with their own programs—instead of thinking of themselves as responsible for the effective operation of FAO, WHO, etc., as they should be. Consequently, we don’t get in Washington a flow of the meaningful information at the country level with which our representatives to these organizations could be intervening in the budget processes early enough to make any difference.
[Page 429]We had a long discussion with the UK officials about this. Their Treasury is allergic to these increased budgets and said it couldn’t afford more for this purpose next year. We asked if they had any ideas how to carry out the Chancellor’s idea not to spend any more money but we didn’t get the impression that they had thought through the implications on the financial side. Their budget people said that these increasing budgets are terrible and had to have a ceiling, but there seemed no practical way to effect this and the UK officials going to these meetings are going along with the budgets because there is nothing else to do.
We need the assistance and cooperation both of the entire field establishment of the American Government and also of the American functional agencies—Agriculture, Public Health, etc. It is not going to be easy or very rapid, but it is extremely important that we get a better coordinated collection of UN agencies and a system for exercising our influence on their financial budget processes and their programming processes that is more effective than the present system. I believe these agencies as a group can be a very important facility for us in getting things done inside some of the less developed countries, particularly in Africa.
Another thing that it is important to focus on is the development of a doctrine on the relationship between these UN agencies and some other things we are doing in the field. There is little or no documentation in this Government about the place of multilateral agencies (UN or other) in the Alliance for Progress. The Budget Bureau very properly has raised the question of whether what we put through the international organizations should be counted toward the $500 million target. There are the questions of what we do through the UN Agencies and what we prefer to do through the OECD on development planning, on technical assist-ance and on coordinating capital investment programs of various kinds. The fact that the capital investment program is coordinated and carefully planned does not necessarily mean that we have it under control. The Indus Valley is an example—this was really the first consortium. It was beautifully planned; the only trouble is that the cost estimates have gone up 60% and will go up 100%. We didn’t really have this under control. The World Bank makes determinations about bids that are in excess of the planned estimates that we had agreed to without clearing back with the US Government.
Discussion
Mr. Hansen said we have been having a dialogue along this line. He was glad Mr. Cleveland, after having called the budget problems to our attention, put the emphasis on programming. The budget is strictly a place to convey decisions, it is a discipline of your operations. He has been completely frustrated in the sense that they were asked to approve [Page 430] budget requests and they found that even if they had questions to raise, the time that they should have been raised was a year or two ago. And when they asked what was really happening, except in a few cases, they were led to believe these things were normally growing and salaries were getting higher, etc. all bringing about a proportional increase. When they related it back to programming, they found no place where there was an evaluation.
Mr. Hansen said he found in Iran that the only answer was to establish an Iranian Government office to coordinate the assistance going into Iran. This was the only way to get hold of the problem. There is another aspect which should be looked into at the same time—the question of evaluating the particular competence of various organizations. There are some elements of strategy we should think about. This came up in connection with the Alliance for Progress, with respect to housing and how to deal with it in the program. We could have a number of organizations go in and offer assistance in housing. This could get out of hand. It might be best for the US to say to these countries—if you want housing assist-ance, go to the IDB but not to AID and other sources. This could apply to other areas where we could nominate certain types of funds for certain things. This is appealing in the first instance, but when you turn it around and look at the capability of organizations to serve the need for this, you find if they don’t have competition it gives rise sometimes to the worst elements of bureaucracy and is subject to influence and has disabilities. Another aspect of the question is where you are trying a large range of these activities you will find that some things are not susceptible to being handled by a multilateral organization because of problems of political interest or some other reason. One area of work where UN Specialized Agencies excel is in the pre-investment study. Mr. Hansen added that he hoped Paul Hoffman will emphasize that, e.g., geological surveys, things that do not get too deeply into national planning—as that is a political area. A UN agency in the administration of finance gives him the creeps, but there are other areas in which they have done a tremendous job. They can do resource studies and technicians can put together the standards of judgment that can be applied. But when the multilateral agencies get involved in the political procedures of a country, you get diminishing returns. We should analyze these things and decide where it is best to put the emphasis and there is no better time to do it than now, when we are trying to turn around a lot of attitudes.
Mr. Cleveland said it is not only a question of deciding whether the FAO or some other UN agency is a good one to do the kind of thing that needs to be done, it is also a question of the country. It doesn’t make sense in some countries, but in other countries you couldn’t get inside except through a multilateral agency.
[Page 431]Mr. Hansen said we need a strategy at different levels, different things. It is disheartening to see a US bilateral agency in basic competition with the IBRD or some other multilateral agency when we are in effect paying 40% of that agency’s bill.
Mr. Coppock asked if we aren’t complicating things by getting European countries into the Latin American program? Why not let the Europeans be predominant in some other area?
Mr. Cleveland replied that there is a broader question there. The primary thrust of discussion in the DAC is to discuss among themselves what they are going to do bilaterally. He wondered if DAC should not also consider what they are doing about the Special Fund as they are the major contributors to the Special Fund. Of course, there is a limit beyond which you can’t go—setting up a kind of NATO caucus in the UN. Also, people talking in Paris may not be the kind that know the tactical situation, so maybe some discussions of this sort should be in New York. The caucus of the main contributors isn’t broad enough.
Mr. Coppock asked about the private groups that are providing technical assistance. If our Embassies or missions are to do a better job, shouldn’t they take them into account too?
Mr. Cleveland replied, yes, like the Ford Foundation and others.
Mr. Coppock then added that if the technical assistance were put on a cash or loan basis rather than a grant basis, might not the recipient country take more responsibility, so that we could drop out of the picture to some extent?
Mr. Cleveland said the essential problem is developing an administrative fiber in the other countries to do the thing that is too difficult for us. That is a difficult job.
Mr. Hansen said there is the matter of sorting out where to ask for support and from whom. The relationship very soon breaks down when you have a lot of agencies in a country. You have, in effect, the FAO dealing with the Ministry of Agriculture, and you have other agencies dealing with other ministries. It is a question of the proper utilization of these people. The resident UN or specialized agency representative can’t do much about it. It is hard to pull a man out if this kicks back and the Foreign Minister steps in. In Iran we tried an experiment that worked because we had a Central Planning Organization. The UN detailed people to the Central Organization and the Central Organization took the responsibility for detailing them to the other ministries and when they weren’t needed, it pulled them back and reassigned them elsewhere—something an outside agency couldn’t do. In talking with many resident representatives, Mr. Hansen found it was not just the problem of disengagement but also the quid pro quos required—space, secretaries, etc. They (the resident representatives) are inhibited unless there is a central place in the government to exert discipline.
[Page 432]Mr. Coppock asked if there is any real effort to get from the missions abroad a real size-up of the programs going on there?
Mr. Kaplan replied that a message was sent out early this year for the first time trying to get them to do something more than estimating what the various UN agencies would contribute to the country. We asked this year for an evaluation. We received very few answers before we had to get ready for the budget.
Mr. Cleveland said that even in the Congo, the AID country study says that it (the country team) knows nothing about the technical assist-ance programs coming from the various specialized agencies. He doesn’t know why not. Every country study as a matter of course should look at these technical assistance programs and regard them as ours as we are 40% stockholders.
Mr. Kaplan said there is a problem of coordination between technical assistance and capital assistance as a whole. Much of the problem of coordination of technical assistance takes care of itself—the agricultural group works with the Ministry of Agriculture, the health group with the health organization. That coordination is less significant than coordination of all the assistance that is going in, what bilateral arrangements there are, whether technical assistance is outstripping the availability of capital. In some areas there is a serious shortage of technical assistance while large amounts of capital are going into a country. This is true of management services. Lots of LDC’s have received much less technical assistance in training of managers and much more for training of people in agriculture, public health, etc. This is partly because of the availability of technicians and specialists in the agricultural and public health fields and partly because no specialized agency has managers.
Mr. Ioanes asked what we should do that we are not doing now?
Mr. Cleveland replied that the one most important ingredient is to use the field establishment of the US Government to work on this problem rather than just the Washington agencies. Use of this information in a logical fashion by delegates to all sorts of conferences and by resident representatives of the US with the various specialized agencies will mean that we can help manage these budgets rather than being in our present ineffectual position. There will be resistance to this—the reaction will be, “We are doing too much and shouldn’t take this on.”
Mr. Ioanes then asked how we can help in this area when you talk about planning and coordination in the field?
Mr. Cleveland’s reply was that Agriculture’s case is most direct when we come to the FAO budget—it went up 40% and there was nothing the US could do about it. That budget had started two years ago.
Mr. Coppock asked if anyone knew whether it is practical to get these reports in.
[Page 433]Mr. Cleveland said he was not sure that doing it once a year is the right thing. It should be rounded up when the country book is done, but it may be more complex than that. He thinks there is an opportunity here and spoke about it in a session with regional assistant secretaries a couple of days ago. He said he is trying to build a basis of consent for a strong instruction to go out.
Mr. Hansen remarked there might first be an across-the-board approach on a minimum level. It might be that we should pinpoint particular areas to be worked on intensively, including having a group to look into the programs—go to these key countries and make evaluations.
Mr. Cleveland said this is right. We might get some kind of a private organization—such as Rand—to investigate this problem in some of the key countries and perhaps take a whole new look at some of the specialized agencies. The specialized agencies go on from year to year without any one saying whether or not they should be doing this at all. For example, the Atomic Energy Agency was set up on two basic assumptions—one that uranium would be in short supply and the other that there would be commercial use of atomic power before long. Both assumptions were wrong, but we still have the agency.IO has a study going on that.