311. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter 1

SUBJECT

  • North-South Issues at the Summit

1. In the attached memo (Tab A) Dick Cooper reports to you about his talks in Jamaica with Prime Minister Manley and other Jamaican officials.

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2. I agree with Dick that the two key LDC issues for the Summit are MTN and aid.

a. On MTN I concur with Dick’s recommendation that the Summit should direct the US, EC, Japanese, and Canadian negotiators to bring the developing countries into the negotiations.

b. On aid, I also agree with what Dick says about Summit pledges to provide more resources for IDA and other multilateral institutions.

3. We have late information about four likely North-South issues that other heads of government may raise at the Summit:

a. Trudeau may want to strengthen that section in the draft Declaration which calls for more aid to help LDCs increase energy production, and requests the World Bank to examine how this can be done most effectively. This is one of the more promising Summit initiatives, and we should support Trudeau.

b. Callaghan may announce forgiveness of some past LDC debts to the UK. It is not clear whether this would represent an increase in aid to LDCs; it might be offset by reductions in new aid. This idea came up at the Summit Preparatory Group; the British wanted all countries to join a multilateral statement to this effect, but others did not agree. If Callaghan announces this British decision and say that legislation now before the Congress would permit the US also to ease the terms of some past LDC debts. I attach a briefing memo on this point at Tab B.2

c. Fukuda will announce a doubling of Japanese aid from 1977 to 1980, with the comparison being made in dollars. This is a disappointing outcome to the argument between the Finance Ministry and the Foreign Ministry, which favored a doubling from 1978 to 1981 in terms of yen. The Foreign Ministry position would have meant $4 billion in aid in 1981; the Japanese decision means $2.8 billion in 1980 (or about $3 billion in 1981). Bob McNamara urges you to press Fukuda at Bonn to change his position. I agree. Aid proponents in Japan, we are told, believe that external pressure on Fukuda might cause him to alter his view. This could mean $1 billion more per year for LDCs.

d. Giscard may raise his idea of an African fund. If so, you might say that the US agrees fully with the need for more effective coordination among aid donors and between donors and recipients in Africa. We cannot, however, support certain aspects of the French proposal as it now stands: We cannot commit ourselves to multi-year financing or a high US share of financing; nor can we commit ourselves to participation in every project donors desire. But we have no objection to mentioning aid for Africa in the Summit Declaration, and will continue dis[Page 987]cussions with others to assure the most efficient and visible use of our resources.

4. You should know that Prime Minister Manley is again considering a North-South Summit. He has invited Schmidt, Callaghan, and Nordli to Kingston in late August or early September and has discussed the proposed meeting with Trudeau and Fraser. Over the long run, the idea of a North-South Summit may well warrant exploration, but it would have to be well prepared, which means that it could not happen in the near future. In the meantime, informal North-South consultations of the sort that you directed Dick to hold with Jamaican leaders will continue to be useful.

5. There is a US initiative in the aid field that you may want to mention: your intention to create a Foundation for International Technological Foundation [Cooperation], to relate US private and public science and technology more effectively to LDC needs. This is the one new idea to emerge from our aid review: you have mentioned it in several of your speeches; and planning is now going forward. I believe other countries would be interested and impressed. Talking points are at Tab C.3

Tab A

Memorandum From the Under Secretary of State for Economic Affairs (Cooper) to President Carter 4

SUBJECT

  • Report on my Discussions in Jamaica

On July 7–8 I led a small U.S. delegation to Kingston to meet with Prime Minister Manley, Foreign Minister Patterson and senior Jamaican officials to follow up your Panama discussions on North/South [Page 988]economic issues.5 In his opening remarks Manley specifically requested that I convey to you his compliments on “your superb performance in Panama,” during which you gave so many speeches to so many people, providing something different and pertinent on each occasion. The tone of our meetings with Manley, and subsequently with Patterson and his team, was cordial. Our exchanges were frank, and often revealed substantial differences of approach.

This meeting was an attempt to find ways to improve the current North/South relationship through an informal exchange of views on both the substance and procedures of the dialogue. In view of the complexity of the problems that beset the dialogue I did not expect to, nor did we, achieve a breakthrough at the Kingston meetings. But I believe that over time such informal consultations can help us reduce our political and economic differences with the LDCs. The meeting has supported most of the points made in my memo to you of July 3.6 And I believe that most of the talking points on North/South issues that were sent to you on the same date remain valid. However, many of the issues that the Jamaicans raised will come up during the Bonn Summit and some will soon require significant U.S. policy decisions.

The Jamaicans made clear that they were not speaking for the Group of 77, but would convey their best interpretation of the G–77 position, even though focusing occasionally on issues of particular concern to Jamaica. Patterson placed the highest priority on: 1. agreement on a Common Fund, 2. debt relief, 3. energy. Manley and Patterson also stressed the importance of trade, referring to Manley’s agreement with you in Panama on the need for trade liberalization.7 During the discussions they further emphasized the importance of negotiations on international commodity agreements, the institutions for conducting the North/South dialogue and cooperation for development with OPEC and the Eastern European countries—on the last point they made a specific proposal for greater East/West cooperation. They clearly favored expanded flows from developed countries. They responded in a constructive manner to subjects that we had raised in our papers, especially private investment and illicit payments.

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Common Fund. The Jamaicans put considerable emphasis on the early negotiation of a Common Fund with its own resources to support the buffer stocks of international commodity agreements and a “second window” based on voluntary contributions by participating countries. They see the Common Fund as an important instrument to restructure markets so as to stabilize export earnings from commodities. The Common Fund has considerable political significance and our ultimate approach to it will have to weigh the importance of this issue to our North/South relations, its probably modest economic impact, and the considerable political efforts that will be necessary to gain Congressional approval of a Common Fund. Tactically, I recommend that we not go beyond the present brief reference to the Common Fund in the Summit Declaration. Any movement toward the LDCs on this point at the Summit would reduce our flexibility when negotiations resume.

Debt. The Jamaicans’ main point is that LDC commercial indebtedness is bound to pose serious problems over time. Accordingly they would like to establish a facility for rescheduling private as well as the official debt. We indicated the difficulties with this, and they probably could not get G–77 support for their view, particularly for advanced developing countries who must borrow in private capital markets.

Energy. The Jamaicans stressed the links between energy and achievement of a New International Economic Order. However, apart from Venezuela, they do not have OPEC support for their views that trade-offs exist between energy and other North/South issues. The Jamaicans did support the types of energy cooperation between developed and developing countries that will be considered at the Summit.

Trade. The Jamaicans are disappointed with progress in the MTN on matters of interest to them and other developing countries. They are particularly concerned about the liberalization of trade in agricultural products and the negotiation of a safeguards code, where acceptance of the proposal of the European Community for selective safeguards would be quite detrimental to LDC interests. Jamaica also stressed a bilateral trade issue: their request for a U.S. offer of a tariff concession on rum, an item of great interest to many Caribbean countries and on which a final U.S. decision is still pending.

North/South Dialogue. The Jamaicans strongly supported the U.N. Committee of the Whole,8 which in their view should follow up the CIEC with high level negotiations on key North/South issues. Our approach to this U.N. Committee is different—we favor frank ex[Page 990]changes, but not negotiations. Other Summit participants are skeptical as to the value of this Committee.

East/West Issues. The Jamaicans proposed that the Summit countries call upon the Soviet Union and other Eastern European nations to collaborate with industrialized democracies in support of Third World development. This was the main Jamaican initiative during the meeting and it reflects Jamaica’s hope that the Socialist countries will play a larger role in world development. Manley may have supported this initiative because he believes the Socialist countries have something to contribute but also because he feels the West would do more if the Socialist nations were more forthcoming.

The Bonn Summit

Jamaica would like to see several results from the Summit:

  • —recognition that economic development in the LDCs will strengthen prospects for growth in developed countries, thus there is a mutuality of interest in economic progress in developing countries.
  • —agreement on the importance of providing increased assistance to LDCs for development purposes, and to provide special support to LDCs in balance-of-payments difficulty.
  • —a commitment to provide substantial benefits to the developing countries in the MTN.
  • —discussion of, but not necessarily public statements about, the desirability of joint East/West collaboration for development.

Recommendations

What to say at the Summit: I recommend that at the Bonn Summit you stress:

—The importance of developing country growth to developed country prosperity.

—The need for a common commitment to substantial increases in development assistance, including the need for large World Bank and Inter-American Development Bank capital increases and a large IDA replenishment (along the lines you already approved), stressing your personal commitment to work with the Congress to make good on our commitments.

—The importance of a common effort by developed countries to insure that the developing countries both contribute to and benefit from the overall results of the MTN, namely through greater developed country tariff concessions on specific products of concern to LDCs, and avoidance of a closing off of offers and final agreements on tariffs and codes—especially the safeguard code—until adequate negotiations have taken place with LDCs. In this connection the Summit should ask negotiators to integrate the LDCs more in the MTN.

  1. Source: Carter Library, National Security Affairs, Brzezinski Material, Trip File, Box 14, President, Germany, 7/13–17/78: Cables and Memos, 7/7–24/78. Confidential. Sent for information. A handwritten notation indicates that Hunter and Erb had copies.
  2. Tab B, attached but not printed, is a July 10 paper prepared in EB/IFD/OMA entitled “Retroactive Terms Adjustment.”
  3. Tab C, not attached, is a July 12 memorandum from Press to Carter on “Talking Points for Economic Summit on Foundation for International Technological Cooperation.” Tab C is attached to a copy of this memorandum in the Carter Library, National Security Affairs, Staff Material, International Economics, Subject File, Box 5, Summit: 7–11/78.
  4. Confidential.
  5. A memorandum of conversation of a July 7 meeting among Cooper, Manley, and U.S. and Jamaican officials is in the Carter Library, National Security Affairs, Staff Material, International Economics, Guy Erb File, Box 37, Manley (Prime Minister Michael) Summit: 7/78–1/79. A draft memorandum of conversation of a July 7 discussion among Cooper, Manley, Hormats, and Erb is 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, Memorandum of Conversation, Jul–Dec, 1978.
  6. See Document 310.
  7. See Document 306.
  8. See footnote 13, Document 299.