Foreign Relations of the United States, 1977–1980, Volume III, Foreign Economic Policy

310. Memorandum From the Under Secretary of State for Economic Affairs (Cooper) to President Carter¹

Washington, July 3, 1978

SUBJECT

• North/South Dialogue: Follow-Up on Your Discussions in Panama

As you requested, I have compiled two sets of papers on North/South economic issues. The first set (Tab C)² describes areas of agreement and disagreement between the U.S. and the LDCs (the so-called Group of 77 or the “G–77”). This was given to the Jamaicans and the Venezuelans on June 23 and we will shortly receive their comments. I will be traveling to Jamaica for discussions with Prime Minister Manley and his officials at the end of this week, July 7 and 8. The second set (Tab A)³ suggests possibilities for reconciling or at least narrowing the differences between us and the G–77. It would be helpful to have any guidance you might want to give before then, both to guide my discussion with the Jamaicans and to give some indication beforehand to the other participants at the Summit of your sense of priorities in this large and diverse domain.

The North/South dialogue covers a vast range of subject matters—trade, monetary affairs, foreign investment, technology transfer and so on. We have singled out eight of the most important areas in these papers. The developing countries are a diverse group with diverse interests in each of these many areas. They are held together by a common stand with respect to the rich countries and they have developed a “political platform” with something to appeal to everyone, held together with a strong appeal to the need for political solidarity. They schedule conferences in international bodies to provide pressure points on the developed countries (which in practice means the Western democracies—they have been peculiarly silent on the role of the communist countries). Apart from the UNGA, the major conferences coming up are UNCTAD V and the UN Conference on Science and Technology, both about a year from now.

There are serious, and in most cases, insurmountable, obstacles to reconciliation of our position with the current position of the G–77. This is for three reasons. The first involves the extreme character of many of the G–77 proposals. Some of these sound like caricatures of themselves but unfortunately they are not. (For example, one proposal calls on the governments of industrialized countries to regulate production of all synthetic products that are in competition with natural products.)

The second reason is the immobility of the G–77 with respect to their formal proposals. Their commitment to solidarity plus something-for-everyone leaves them practically no negotiating flexibility. Moreover, the Group can be intimidated by its own radical members from giving way on stated positions. For similar reasons, they have been unwilling to establish priorities among issues, although we observe that they seem to attach more importance to some issues than to others. We have attempted to loosen up the G–77 position by bilateral approaches through national capitals. These approaches have the desirable effect of maintaining a dialogue and assuring the developing countries of our genuine interest in their problems. But so far we have been able to make only limited progress in getting the G–77 as a group to be more flexible.

The third obstacle to reconciliation concerns our difficulty in persuading the Congress and more generally the public to contemplate seriously taking steps that seem to run so strongly against present U.S. conceptions of domestic and world order, and often seemingly against U.S. interests. Even when they may be in our interests, Congress is reluctant to spend funds for these purposes.

I conclude from these considerations that we cannot reconcile our positions with those of the G–77 in the near future on most issues. But we must continue to engage in constructive discussion with them, since the process of discussion reinforces the moderate voices within the G–77. There are, moreover, some things which we can and should do which will be well received by the developing countries, and others which we could do if we thought it necessary in the interest of mollifying them. These actions are called “accommodating moves” in the material at Tab A and are pulled together in the summary introducing them. The G–77 can perhaps be persuaded over time to move their positions, so that accommodating moves may eventually involve a reconciliation. (We have already actually made a number of accommodating moves since you have taken office, and these are listed at Tab B.)⁴

The most important areas for us to focus on, in terms of substantive value to the developing countries and our own long-range interests, are trade and aid:

—On trade, a) we should make our MTN offers on products of special interest to developing countries as generous as possible. We should also press advanced developing countries to make contributions to the MTN, and to encourage this we should be prepared to enrich the offers which we have already put on the table. Second, we should undertake not to impose countervailing duties against LDC export subsidies unless we can show injury to the domestic economy. Third, we should seek tight, internationally managed procedural rules around the European Community’s insistence on the introduction of “selective safeguard action” against individual countries.

b) More generally, we should maintain our markets open to the products of developing countries. We actually have quite a good record here, although developing countries are reluctant to acknowledge it. They focus especially on textiles. Our policy toward sugar is of great, both real and symbolic, interest to the developing countries, especially those in Latin America. It is important in the North/South context that we not move toward greater restrictions on sugar imports and preferably that we relax the restrictions that we now have.

—The volume of foreign aid, both bilateral and multilateral, is of tremendous importance substantively and politically. You know the domestic difficulties with this, so I will not rehearse them here.

It would be good to emphasize these two areas at the Summit. The Japanese and especially the Europeans are skittish on the question of trade, and we need to remind them of the vital importance to the economic prospects of developing countries of maintaining our markets open to their products. You also might mention there your planning targets on U.S. foreign aid for FY 1982, since that will indicate your commitment to this area despite the widely-known domestic political difficulties with it.

In addition to these two areas, we should continue to push along with price-stabilizing commodity agreements where there is some promise of success. We have agreed to negotiate on rubber and there is perhaps some prospect for a copper agreement. Beyond price-stabilizing agreements, we may want to indicate a willingness to support applied research for product improvement in other commodities (e.g., jute, sisal).

In the category of things we might do if necessary to mollify the developing countries are our positions on the Common Fund and on providing debt relief before acute debt crises arise:

—The Common Fund is a major plank in the G–77 platform of demands. The substantive value to the economic welfare of developing countries is considerably less than the political significance that they have given to it. A major move toward the G–77 position on the Common Fund would be well received by them, but because it would provide only marginal benefits to the world economy, a major investment of your political capital would be required to secure Congressional support for U.S. participation and a U.S. contribution of perhaps $100 to $250 million.

—Authority to ease the terms on outstanding debt of the poorest countries is now before the Congress. In addition to pressing for that authority and using it when we get it, we would please some of the leading moderates in the G–77 (e.g., India, Pakistan, Jamaica) if we would agree to a procedure whereby official debts could be rescheduled in anticipation of a balance-of-payments crisis rather than, as now, trying to provide additional aid in such situations and relying on debt rescheduling only when default appears imminent. However, this approach could involve very substantial amounts of money and there will be major Congressional difficulties with getting authority and appropriations for this purpose because it would be inconsistent with the Congressional desire to control the uses of aid funds.

On most matters now involved in the North/South dialogue, the G–77 have set the agenda. True, by its nature it covers most of the topics of interest to both sides, but we can and should seize the initiative in certain respects. Illicit payments is one area where we have done so. The emphasis on basic human needs in foreign aid is another. We could reinforce this latter initiative by setting concrete objectives—e.g., in the areas of disease eradication, clean water, food production—for the year 2000. Moreover, we could be much more aggressive than we have been concerning the trade barriers imposed by advanced developing countries, in comparison with which all the industrial countries are paragons of free trade.

Henry Owen’s counterparts in the other Summit countries have been told that you will raise North/South issues at the Summit. Most of those countries have positions roughly similar to ours, although there are often important differences in detail. They also have problems on their home front, and one thing we all need to do is to improve domestic consciousness of the importance of North/South relations.

If you have the time, I would recommend that you meet with your senior advisers concerned with North/South issues sometime before the Summit, perhaps on July 10, to discuss these issues and for you to provide guidance to us on where you would like to lay the most emphasis.

1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 13, President, Germany, 7/13–17/78: Economic Summit (II). Confidential. Brzezinski initialed at the top of the page.
2. Tab C, not attached, includes the June 23 memorandum from Watson to Cooper and the eight papers on North-South issues discussed in Document 307. Tabs A–C are attached to a copy of this memorandum in the National Archives, RG 59, Office of the Secretariat Staff, Records of the Under Secretary of State for Economic Affairs, Richard N. Cooper, 1977–1980, Lot 81D134, Box 3, North-South Dialogue—1978.
3. Tab A, not attached, is an undated paper entitled “Summary of Issues.”
4. Tab B, not attached, is an undated paper entitled “North/South Activities of the Carter Administration.”