Foreign Relations of the United States, 1977–1980, Volume I, Foundations of Foreign Policy

99. Address by the Under Secretary of State for Political Affairs (Newsom)¹

San Francisco, California, November 16, 1978

The U.S. and the Third World: Partners or Plaintiffs

Eight years ago I spoke to the Commonwealth Club on the subject “The United States and the Third World.” That was in 1970, the year of the 25th anniversary of the founding of the United Nations. My remarks at that time dwelt on the growing influence of the newly independent nations in the United Nations and in world affairs generally. I dwelt also on growing differences which were appearing between the views of these countries and those of the United States. This was true with respect to the process of decolonization, trade, and racial discrimination.

In 1970 most Americans were only vaguely aware of the potential power and influence of the developing countries. The general opinion was that the newly independent countries of this century would not, for many years to come, be major factors in either economic or political affairs.

A series of events over the last 6 years has shaken that view. In 1973 the Arab oil-producing states successfully mounted an embargo against the United States. Once the oil-producing states understood their power as a result of the embargo, they moved successfully to raise the price of oil dramatically. Other developing countries, instead of expressing dismay at the impact of the price rises on their own economies, saw benefits for the developing world in general in relating similar tactics to other commodities. In 1974 in Algiers the new international economic order was born with its strong demands for greater equality in economic relations between the developed and the developing countries.²

North-South Dialogue

The new international economic order in the form of a declaration of U.N. purposes and of the obligations of industrialized states to make sweeping changes in trade, aid, and investment policy, was brought before the sixth special session of the United Nations in 1974.³ The United States found itself virtually isolated as European countries expressed at least rhetorical sympathy for the thrust of this new order. That session brought home starkly to American policymakers for the first time the potential impact of these demands on our political as well as our economic relations with the developing world.

The next 2 years, then, saw the beginning of a fundamental reassessment of how the have and have-not nations would relate to each other. At the seventh special session, in September of 1975, with the memory of the fruitless confrontations the previous year still fresh in their minds, both sides began to rethink their respective positions and to search for areas of constructive dialogue and possible cooperation.⁴ One of the results was the formation, in December of that year, of the Conference on International Economic Cooperation (CIEC) with 8 members from the developed world and 19 from the developing world.⁵ While CIEC did not, over the some 18 months of its existence, succeed in finding accommodation between all of the issues where the North and South differ, it did contribute measurably to the ongoing dialogue and resulted in concrete progress on some issues such as food and agriculture and technical assistance. And while CIEC did narrow some gaps between the North and the South, many of the developing countries were unhappy with their exclusion from the limited membership of the CIEC.

As a result, CIEC was succeeded by the Committee of the Whole which includes all member states of the United Nations. This is now an important forum for discussion of economic matters relating to the North-South dialogue. The developing countries would like to give it a decisionmaking role. We continue to believe decisions on major economic issues should be made by existing organizations having responsibilities in the specific functional areas, for example, the GATT [General Agreement on Tariffs and Trade] for trade, the IMF [International Monetary Fund] for monetary affairs.

There were other elements to the dialogue. The year 1976 saw the Nairobi meeting of the U.N. Conference on Trade and Development, known as UNCTAD 4.⁶ While providing its share of confrontation, this meeting saw the United States continuing to signal its willingness to maintain a constructive dialogue regarding the demands of the developing countries. This willingness to engage in dialogue was, however, clearly separated from any affirmation of the legitimacy of all the other demands of these countries. Subsequently, at Colombo, Sri Lanka, the nonaligned nations met and found that economic issues had replaced political issues as the prime vehicles for expressing their aspirations and frustrations.⁷

I have been speaking to you about the Third World. I know that there are those who question the validity of this term. They rightly point out that there is a tremendous difference between the least developed and the middle countries. This is true. Nevertheless, the strong feelings which exist among these countries arising from a common heritage of colonialism, from their perception of themselves as economically developing nations and from a feeling that they lack a voice in major economic decisions affecting them, give these countries a solidarity which is a reality. That solidarity withstood differences over the oil crisis. It has withstood general differences of view, for example, between those countries that are interested in debt relief and those countries which are more concerned about their international credit standing.

Importance of the North-South Relationship

It has been my experience that audiences attuned to the more exciting political aspects of foreign affairs do not find equal stimulation in discussions of economic issues. Yet, the average American citizen—concerned for his job, his standard of living, and the value of the dollar at home and abroad—has good reason to pay attention to the demands, sometimes excessive, of the Third World nations. Only a few statistics will illustrate why.

• In 1977, 35% of total U.S. exports—$42 billion—went to developing countries.

• The United States sells more manufactured goods to the developing countries than to Western Europe, Japan, and all the Communist countries combined.

• The developing countries accounted for more than half of all U.S. exports of industrial machinery, electrical machinery, and aircraft.

• They bought 50% of our wheat exports, 60% of our cotton exports, 70% of our rice exports, and 90% of our coal exports.

• The United States imported goods worth $67 billion from developing countries in 1977—45% of our total imports.

These are impressive statistics, but they are hard to relate to our everyday lives. It perhaps comes closer to home if we address the importance of the North-South relationship in terms of questions like:

• Will your gas tank be full?

• How much will it cost to fill it up?

• How much more would you need to pay for a chocolate bar, for coffee, for copper wire, if the developing countries should seek to emulate the Organization of Petroleum Exporting Countries and restrict supplies or raise prices?

• How many workers would be laid off in your community if developing countries shifted their purchases from the United States to other suppliers?

Each issue has implications for our daily lives as well as for our relationship with two-thirds of the peoples of the world. The developing nations have addressed themselves to several key issues. Each one presents us with problems, particularly in a time of economic difficulties. Approval of new departures for any one of them could face strong opposition in the Congress. Yet each one is a key to whether we shall be partners or adversaries in our relations with the developing world. Let me take briefly each one in turn.

Economic Issues

Trade. The first is trade. The developing countries want improved access to our markets for their exports. They want special and preferential treatment for their manufactured products.

We believe improved market access is desirable and in our own interest. In the event of injury to domestic industry, of course, we must take temporary measures to protect jobs and producers, preferably through adjustment assistance or, if necessary, through restrictions at the borders.

There has been hard bargaining with many developing countries in the multilateral trade negotiations which have just wound up work in Geneva. These extended and complex negotiations have offered the developing countries an opportunity to gain benefits. Unfortunately, we feel they have not fully availed themselves of these opportunities.

Foreign Aid. The developing countries also seek an increase in the transfer of resources which they need for economic development. They wish a level of economic assistance from developed countries which would represent seven-tenths of 1% of such countries’ gross national product. The implications of this demand are illustrated by two simple facts.

• The enthusiasm for foreign aid in the United States is declining. In 1970 we ranked seventh among the developed countries in the percentage of our gross national product transferred concessionally to developing countries. Today we have dropped to twelfth.

• We have changed our approach to foreign aid in part as a result of congressional legislation. In the face of a continued need by many countries for infrastructure assistance, particularly in Africa, we are concentrating more and more on the needs of the poor. We look to the multilateral institutions to provide infrastructure assistance. We are unable to supply straight budgetary assistance to meet the special problem of middle-income countries. This problem is particularly acute in the Caribbean.

Some of the most active negotiations have related to commodities. The developing countries have given a high priority to stabilizing broad fluctuations in commodity prices which have such a profound effect on countries depending almost entirely on one or two primary products.

We have now indicated our acceptance in principle of the idea of a common fund which would be used to help commodity agreements to stabilize commodity prices.⁸ We still have differences over the form of such a fund and whether it would also be used to provide resources not directly related to stabilization of commodity prices. Those who follow both our relations with the developing countries and our relations with Congress will hear more of the common fund in the days ahead.

Debt Relief. Debt is a highly important and highly emotional issue, as it is with individuals. We have always taken the position that debt relief should be conditioned upon a debtor country promising to undertake a comprehensive sound economic development or stabilization program, one that would insure that excesses in resource mismanagement are not repeated. Many feel strongly that the developed countries have an obligation to relieve them of their debt burden. We are now committed to debt forgiveness for the poorest countries and are studying how much relief we should provide in 1980.

The two principal multilateral financial institutions—the World Bank and the International Monetary Fund—were founded well before the creation of most of the nations in the United Nations today. Newly independent countries and many other Third World countries as well wish to move away from voting in international institutions based on financial contributions toward a one state, one vote system giving a preponderant voice to the developing countries. Such a move in the minds of many in the United States would represent a departure from the objectivity and nonpolitical character of these institutions.

Technology Transfers. Developing countries today must often pay very large amounts in order to obtain the rights to technology which they feel important for their industrial development. They are seeking to liberalize the transfer of technology believing that this would speed up the closing of the gap between rich nations and poor nations. They also seek support for expanding their indigenous capacity to develop and adopt such technology.

There is, of course, a vast quantity of technology which is noncommercially held, and we have ongoing programs which seek to make that available to the developing countries. On the other hand, technology of commercial value held by firms in the investing nations has a value which these firms, understandably, do not wish to relinquish without a return on their investment. Various ways by which this privately owned technology can be more easily transferred are under consideration. The matter remains a significant and controversial issue.

Foreign direct investments are an important source of economic resources and technology for the developing countries. Differing views exist, however, on whether such investments are beneficial to the developing nations. For more than a year the U.N. Commission on Transnational Corporations has sought to elaborate a code of conduct within which such corporations could operate to the satisfaction of both sides. In the view of the developed world, private foreign investment represents one of the best and least political means by which transfers of both capital and technology can be effected. And while the corporate investors are willing to accommodate to demands for sharing of ownership and management which will provide greater benefits and opportunities for the people of the countries involved, they must ask and receive some kind of assurance that, once having invested their capital, the rules of the game will not be changed in ways which result in the loss of their investment.

Political Issues

I have dwelt today upon the economic issues which are under constant discussion between the developed nations of the North and the developing countries of the South. When nations gather, increasingly these are the concerns that trouble them most. And these concerns have a direct impact on political relations which in turn can affect the climate in which the economic issues are resolved. One soon finds that there is no distinction between political and economic affairs when the livelihood and security of nations is involved.

The strong efforts of the United States to resolve the problems in the Middle East have a direct bearing upon our access to the vital resources of this region and to the economic health of the nations processing these resources.

The political issues of South Africa, Namibia, and Southern Rhodesia can cloud our dialogue with African states on other issues, even when our position on such matters as trade, development assistance, commodity policy, and debt rescheduling is clear and positive.

The danger of political instability in key areas threatening our national security is ever present. One needs only to look at events in Iran and consider the effects of a change in the orientation of that country on our strategic and economic interests in the area, or to look at Nic-aragua and think about the implications of spreading unrest in Central America, our doorstep, to understand the political-economic interrelationship.

Finally, there are a whole series of foreign policy issues of prime importance to us—nuclear nonproliferation, human rights, arms control—which cannot be moved forward in a meaningful fashion without the cooperation of the Third World countries.

Ultimately, in our national interest, we wish to do what we can to see that Third World societies evolve in ways which are compatible with the kind of world we wish to live in and leave to our children. If we ignore these countries, their needs, and their aspirations, we will forfeit our ability to exert this influence which can be so important to our own future.

So, the issues that we face in dealing with the Third World have implications not just for our daily lives, but also for our national security now and our future in the society of men. Thus, the fostering and strengthening of the dialogue between the North and the South is extremely important to all of us.

Fostering a Positive Dialogue

The coming year will see a large number of international conferences devoted to fundamental questions of relations between developed and developing countries. Negotiations have recently begun under UNCTAD auspices on a new international wheat agreement; in April the law of the sea conference will resume consideration of who controls the vast mineral resources of the deep seabeds; in June UNCTAD 5 convenes in Manila; in August the U.N. Conference on Science and Technology for Development begins in Vienna; and in 1980 we expect a U.N. General Assembly special session on development. Moreover, progress is being made in developing a positive dialogue with the Third World.

One can point to the Association of the South East Asian Nations. These five nations—Indonesia, the Philippines, Singapore, Malaysia, and Thailand—are important friends and trading partners particularly of the states on the west coast. They are keenly interested in all of the North-South issues. They have taken a leading and constructive role in the international discussions of these issues. They have had direct dialogues with the United States, the European Economic Community, Japan, Canada, and Australia. In addition, they are reconciling difficult trade matters among themselves. They are demonstrating by their own growth the very great potential which exists in the developing countries. They have received and deserved strong support from us. Their progress demonstrates that despite the complexity of these issues, dialogue can bring positive results for both.

In 1978 relations between the United States and the Third World remain a significant part of our foreign policy agenda. As much as any other issue these matters bear directly on your daily life and mine. It is the hope of those of us who deal with them that, despite the complex nature of these issues, they will receive the serious attention of those concerned with foreign affairs. We hope in turn that organizations such as those represented here today will lend their support for a positive and constructive role for the United States in this ongoing discussion with nations which represent three-fifths of the world’s population.

1. Source: Department of State Bulletin, January 1979, pp. 30–32. All brackets are in the original. Newsom delivered his address before the International Relations Section of the Commonwealth Club and the World Affairs Council of Northern California.
2. The fourth conference of the Heads of State or Government of the Non-aligned Countries, or Non-aligned Movement (NAM), met in Algiers, September 5–9, 1973, and proposed the establishment of a new international economic order (NIEO). On January 30, 1974, Algerian Representative to the United Nations Abdellatif Rahal, proposed a convocation of an UN special session to discuss development issues.
3. The Sixth Special Session of the United Nations General Assembly met in New York, April 9–May 2, 1974. For additional information, see Foreign Relations, 1969–1976, vol. XXXI, Foreign Economic Policy, 1973–1976, Document 257.
4. See footnote 11, Document 62.
5. The Conference on International Economic Cooperation met in Paris December 16–19, 1975. For Scowcroft’s report to Ford on the conference, see Foreign Relations, 1969–1976, vol. XXXI, Foreign Economic Policy, 1973–1976, Document 300.
6. See footnote 7, Document 47.
7. The fifth annual conference of the Non-Aligned Movement took place in Colombo, Sri Lanka, August 16–19, 1976.
8. The Common Fund negotiations began in Geneva in November 1977; see footnote 3, Document 58. Talks on the Common Fund were scheduled to resume in Geneva on November 14, 1978. On November 16, The Washington Post reported that the Carter administration agreed to make a direct contribution to the Fund. (Hobart Rowen, “U.S., in Key Shift, Accepts Demand of Third World,” p. A–21) See also Foreign Relations, 1977–1980, vol. III, Foreign Economic Policy, Document 318.