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

328. Briefing Memorandum From the Director of the Policy Planning Staff (Lake), the Deputy Assistant Secretary of State for Economic and Business Affairs (Hormats), and the Assistant Secretary of State for International Organization Affairs (Maynes) to Secretary of State Vance¹

Washington, March 2, 1979

SUBJECT

• North-South Strategy—Progress to Date

Summary:

We have now gained general interagency concurrence on a set of basic themes on North-South issues which the Administration might stress over the next year and a half, reached accord on a general scenario as to how those themes could be related to the key North-South events over the same time frame, and have agreed on several initiatives we might take. We are preparing your Seattle speech for March 30² and conducting final staffing on those initiatives on which there is some interagency disagreement. We may want to consult with you on how to finally resolve those differences.

Background:

At a March 1 meeting which included AID, NSC, OMB, OSTP, and the relevant domestic agencies, we reviewed the themes, initiatives, and the scenario for an Administration approach to North-South issues.³ Other than minor caveats, agreement was reached on the major themes of:

—encouraging the evolution of an international economic and political system which provides increasing decision-making power and responsibility for the developing countries;

—shifting the dialogue away from an emphasis on resource transfer mechanisms and toward specific development problems, stressing four areas—energy, food, health, and LDC capacity to use technology—which can be cooperatively tackled by developed and developing countries (see Tab A for details).

In addition, agreement was reached on a scenario for linking these themes and a number of initiatives to the major North-South events of the coming months, beginning with your Seattle speech and including UNCTAD V, the World Health Assembly,⁴ the Tokyo Summit, the UNCSTD, UNIDO III, and the special session of the UNGA scheduled for next spring⁵ (see Tab B for calendar, Tab C for scenario).⁶ We should have a draft of your speech in a week or ten days.

There was also general agreement on several potential initiatives, including:

—GATT special assistance unit to help LDCs gain maximum benefit from the agreement during the post-MTN period when new codes are implemented;

—greater emphasis on US assistance to LDCs in assessing their energy requirements, and to energy research (particularly in renewable energy technology) in LDCs.

—a proposal by the US to explore the desirability of increased international support for regional energy research and training centers modeled after the successful international agricultural centers;

—heightened attention to US support for the concept of primary health care delivery systems;

—stepped up programs in immunization and research on tropical diseases;

—increased support for research on new food crops and post harvest loss problems;

—a greater US stress on assisting LDCs to design public policies which promote food production and distribution, and better land management.

We have asked for preparation of final detailed staffing papers on these generally agreed initiatives within two weeks.

We have not yet reached agreement on whether the USG will be in a position before UNCTAD V to indicate general support for further liberalization for the Compensatory Finance Facility of the IMF, increased public financing for LDC energy development, particularly for unconventional renewable sources, or on whether to make a specific public commitment of $2.5 billion over the 1980’s to support the UN Water Decade. We are also still grappling with what positive action we could take to improve the functioning of existing mechanisms (mainly the IMF and IBRD) with respect to how they deal with developing countries having both short term financial and longer term structural economic problems.

We have asked that additional papers on these latter issues also be prepared within the next two weeks, and we will consult with Henry Owen on how these matters might finally be decided. After talking with Owen, we may request a few minutes with you to discuss this.

Overall, we are making steady progress. The OMB representative commented that this effort by State to put together an overall strategy for North-South would be very useful from their perspective. He urged us to continue the exercise, and to integrate it into next year’s overall budget cycle. The major problem we still face is a lack of concrete initiatives addressing international institutional reform, particularly regarding the complex of issues involving debt, balance of payments financing and structural economic problems, which will be a key issue at UNCTAD V. We believe there is a legitimate problem in this area; we will continue to work with Treasury on this issue.

Tab A

Paper⁷

Washington, undated

US THEMES FOR THE NORTH-SOUTH DIALOGUE

The US should stress two broad themes in addressing North-South issues:

—The System: Both national and international institutions must be flexible enough to respond to change. A major change in the world over the post World War II era is the increasing importance, politically and economically, of the developing countries. US security and economic prosperity are increasingly affected by the domestic and international policies pursued by developing nations, and by the rate and nature of their economic growth.

We therefore wish to work with the developing countries to encourage the continuing evolution of an international economic and political system which is supportive of development and provides increased roles for the developing countries, both as regards decision-making and responsibilities. We must see that the system both encourages the efficient use of scarce resources, and equitably distributes the benefits of the system. As a country develops, and the benefits it derives from the international system increase, both its ability to influence the system and its responsibilities for maintaining it should increase accordingly.

We have already made many reforms in the international political and economic system to accommodate developing country interests. When after World War II the UN, Bretton Woods institutions, and the GATT were established, their primary role was to facilitate political and economic relations among the industrial countries. Over the past three decades, these institutions have increasingly become preoccupied with development concerns and the relations between industrialized and developing countries. Many of the specific changes which were part of this evolution resulted from US proposals. The US will continue to entertain and propose additional reforms which are economically sound and mutually beneficial. Likewise, we will continue to support domestic measures which allow our economy to adjust smoothly to changing international conditions. Adjustment assistance and export promotion programs, for example, help us to deal positively with shifting trade patterns.

—Specific Development Problems: While we should and must continue to address reforms of the international system, debate on North-South forums has too often focused exclusively on such systemic reform with little reference to actual development problems. This approach has often led to confrontational rhetoric and sterile debate, which in turn has undercut US domestic support for development assistance and other positive policies toward the LDC’s. We want to increase the attention of the North-South dialogue to specific development problems. We want to find specific means by which such problems can be tackled through cooperative action by developed and developing countries in ways which will contribute to the welfare of all people, but particularly the most disadvantaged. Over the next year, we would concentrate attention and suggest initiatives in the fields of energy, food, health, and the institutional and human capacity of LDCs to link technology to their development needs.

• Energy: The energy technologies selected by developing countries, the rate by which they increase their energy consumption, and their success in meeting their own energy needs from indigenous sources (and in having exportable surpluses), will have a direct impact on US citizens. If we are faced with an increasingly tight energy market this year, both developing countries and the Congress should be responsive to proposals in this area.

• Food: Good weather in grain producing countries over the past three years has reduced worldwide concern with ensuring adequate food supplies and stocks. However, long-range projections, particularly for Africa and Asia, point to large growing food deficits over coming decades. US economic and humanitarian interests are directly involved in the functioning of international food markets, food assistance, and the domestic food policies pursued by developing countries.

• Health: Diseases and malnutrition in LDCs result in high infant mortality, adult disability and lower productivity. Both for economic and humanitarian reasons, the US and other developed countries should be willing to continue working with the developing countries to improve health conditions in the developing world.

• LDC Capacity To Use Technology: LDCs have taken a renewed interest in the availability of technology appropriate to their development needs, and in their institutional capacity to apply it. We want to de-emphasize unproductive exercises on international codes on technology transfer and concentrate on building their capacity to obtain, generate, adapt, and apply technology to development needs.

1. Source: National Archives, RG 59, Office of the Secretariat Staff, Official Working Papers of S/P Director Anthony Lake, 1977–January 1981, Lot 82D298, Box 5, S/P-Lake Papers—3/1–15/79. Confidential. Drafted by Johnson.
2. Vance spoke in Seattle on March 30 before the Northwest Regional Conference on the Emerging International Order; for the text of his remarks, see the Department of State Bulletin, May 1979, pp. 33–37.
3. No memorandum of conversation of this meeting was found.
4. The World Health Assembly took place in Geneva May 7–25.
5. Reference is to the Eleventh Special Session of the UN General Assembly, which actually took place August 25–September 15, 1980.
6. Tab B, attached but not printed, is an undated paper entitled “Calendar of Major North-South and Other Meetings.” Tab C, attached but not printed, is an undated paper entitled “Possible North-South Scenario.”
7. Confidential.