Foreign Relations of the United States, 1981–1988, Volume XXXVIII, International Economic Development; International Debt; Foreign Assistance

104. Telegram From the Embassy in Algeria to the Department of State¹

Algiers, April 10, 1983, 1919Z

1577/Polto 2002. For the Secretary, the Deputy Secretary, Under Secretary Wallis and Asst. Secretary McCormack From Under Secretary Eagleburger. Subject: UNCTAD.

1. (S) Entire text.

2. I have just read (enroute from Zurich to Algiers) the EB memo to you on UNCTAD, and Allen Wallis’ commentary thereon.² Since the upcoming conference will have some impact (how much remains to be seen) on U.S. foreign policy in its broadest sense I feel constrained to comment. But, in all honesty, I find it hard to say much worthwhile on the basis of the EB paper, which is so lacking in anything specific that it was ten minutes before I realized it wasn’t one of Larry Pressler’s Senate speeches. Allen’s memo, on the other hand, hardly lacks clarity or specificity. It is good advocacy, but, I believe, [bad?] policy.

3. On the EB paper: I fail to see how you can make any enlightened decision based on the Goldilocks options (the porridge is too hot, or too cold, or just right) presented to you. Someone else may be able to determine what “minimal and selective” participation means in terms of specific initiatives or issues, and how that differs from “defensive” or “active” participation, but I cannot. Someone should, and fast, at least tell you what the issues are; without that you could be deciding to participate actively or passively in the maiden voyage of the Titanic (I take it Allen believes this to be the case) without ever knowing it. If that is so, then of course no participation is the proper choice.

4. Allen’s position is, as I said, clear. But it also suffers (sorry, Allen) from unwillingness to deal—or at least describe—what will be debated at Belgrade. But that aside, Allen and I do have a fundamental disagreement which can be described. Let me try for a paragraph or so.

5. Allen is absolutely correct to take the EB paper to task for proposing to reward bad LDC behavior, for citing dire consequences that will derive from our failure to “go along”, and for implying that others can hurt us more than we can hurt them. But to knock down wimpy arguments is not to establish the obverse: in this case, advocating something close to telling the 77 to take a flying leap at the moon. Such strong medicine needs defending in specific terms; in that sense I’d find Allen’s arguments as hard to get my teeth into as I do EB’s.

6. But I do have two philosophical arguments to make. First, there is the question of foreign policy consistency. The U.S. has, for many years, followed a different approach to UNCTAD; we have participated at a high level (Kissinger went, Andy Young went) and at least acted as if we gave a damn. What Allen seems to be proposing would be a radical departure from that pattern. Perhaps that is what should happen, but for it to happen without warning and without substantial consultation with allies before and at the OECD Ministerial and the Williamsburg Summit is hardly in keeping with the responsibilities for steadiness and consistency that must, repeat must characterize our leadership role. And I don’t believe there is time enough left before those two meetings to develop a position, explain and defend it before highly skeptical allies, adjust it (if possible) to meet some of their concerns, etc. That is, with all respect, not the way to conduct foreign policy; we have not laid the groundwork for such a major shift, and there is no way to do so in the time remaining.

7. Second, it is time we came to grips with what our North-South policy should be. Allen’s formula is clear, and I suppose in straight economic terms is the right one. But it is too one-dimensional. As events in Central America, Southern Africa, the Chad, etc., etc., must demonstrate, it is in the developing world that the chances of conflict—with substantial danger of escalation—are greatest. I am not arguing that UNCTAD, or our North-South policy, whatever it might be, will cure that condition. But I am saying that we need to be engaged, we need to talk, on occasion we need to compromise, and, always, we need to appear concerned. A goodly part of our North-South policy (particularly given the often fundamental philosophical differences Allen rightly seeks to maintain) must be theater. But the shape up or I’ll ship out approach is lousy choreography.

8. There is also more than theater involved. The Soviets are in growing disrepute among the 77, who have yet to see a penny in other than military assistance. They are coming to realize where their futures lie, as the economic portion of the recent New Delhi NAM communique demonstrated.³ We are making progress, albeit slowly, and the way to further market forces in the Third World over the long term is to remain engaged: arguing, debating, never giving on principle, reacting with firmness when we are attacked, but keeping that in perspective, too.

9. Enough preaching. What follows is hardly well thought out, but I put it forward as at least a framework for thinking about UNCTAD VI. It is illustrative only, and may have holes I don’t see. But it is at least something of a strategy (relax, I have not suddenly become an economist; most of the ideas come from a paper Meissner did on UNCTAD).⁴

10. Rather than turning away from the conference, we should make a strong statement on the type of economic world we would like to build and the systemic responsibilities we and others must accept if interdependence is to work. The U.S. should enter into UNCTAD VI preparations with a four pronged strategy. First, we should select those agenda areas in which we intend to be positive.

(A) The U.S. should go to UNCTAD VI and push the relevant elements of our own objectives—specifically we should lead with the issue of open trade, anti-protectionism and structural adjustment through market forces. (The Europeans and the Japanese will have a difficult time with this issue).

(B) We should stress the necessity for governments to be responsible for their own development policies, specifically in the area of food sufficiency. We might initiate a major new development thrust in this area tied initially to U.S. exports; the proceeds of the sales could be used for agricultural development programs as envisioned in PL 480, Title III. The key is high domestic food prices in the recipient country to stimulate local production.

(C) We can push private investment for interested developing countries but the “capitalist, post colonial overtones” always make success in the UNCTAD difficult. (S/P is developing some ideas on this, I understand.)

(D) We should advocate fiscal responsibility and budgetary control within UNCTAD itself. I gather we already have tabled some proposals.

11. The second prong is to assure that we are not isolated from our allies on key issues in the fields of commodities and money and finance. (There may well be a trade-off between our stridency on trade and the European and Japanese view on commodities.)

(A) Work with the FRG (President of the EC) to assure that their idea of a global STABEX stays within reasonable bounds and is discussed as a facility to be used after compensatory financing at the IMF is exhausted. Possibly it could be tied to conditionality on structural adjustment.

(B) Work out a position on debt issues through the Finance Ministries prior to the conference so that it is agreed that debt will not be treated as an aid issue. Some potential revision of debt features may be possible.

(C) Assure that the NAM conference idea of an international monetary conference is receiving a sympathetic hearing within the Bretton Woods institutions.

(D) Attempt to defuse the concessionary aid issue by making progress on IDA VII discussions prior to UNCTAD VI. (Progress doesn’t mean completion but it also doesn’t mean stonewalling.)

12. The third prong of our strategy should be an attempt subtly to split the G–77 by offering at the conference a little to each interest group that comprises the LDC caucus. They are:

(A) The LLDC’s and micro-states (interest: concessional transfers);

(B) The commodity exporters (interest: stabilization of export earnings);

(C) The NIC’s (interest: trade, investment, technology); and

(D) The balance of payments surplus countries (interest: real interest rates, financial stability).

13. Furthermore, we can use the conference to announce other efforts in the Caribbean Basin and in Black Africa if these are agreed within the administration by June.

14. The fourth prong of the U.S. strategy should concentrate on our relationship with the Yugoslavs (this is not special pleading). As host they will be the President of the conference. They will not have high expectations but they will hope for something. We can anticipate that they will, as they have done in the past, link our multilateral performance with the importance of our bilateral relationship. Close stroking of the Yugoslavs will be necessary.

15. As to tactics, they should be developed for each prong of the general strategy. In general, we need to work in the OECD to assure our group B caucus partners that we are taking the conference seriously. We will need their assistance throughout; first to back us in the areas we push, and second, to stick with us on difficult issues. Key in this effort will be close working relationships with the FRG, the EC President until June 30.

16. Our objectives: we must lead in trade; I gather USTR has yet to decide how to play the trade issue in UNCTAD VI in relation to gatt and the post Ministerial work program we have launched. USTR should be pushed to get this in place. Our strength in trade, and the threat to the EC of discussing agriculture in UNCTAD, may give us some leverage to control the Europeans and keep the Japanese from going overboard on commodities.

17. Peter McPherson and Agriculture need to be pulled in on food issues. With low agricultural prices, we have the opportunity to marry domestic interest with foreign policy concerns. The real issue is that per capita food production has dropped in Latin America and Africa. These countries are eating the foreign exchange they need for economic development.

18. Finally, on the institutional issue of how the UNCTAD Secretariat is run, we should draw up a resolution that lays out what we want. We should sign up the Europeans early. Interestingly this is an issue in which we have USSR support. They don’t like runaway expenses either.

19. Avoiding isolation: the best tactic is to develop, through the Williamsburg Summit process, agreed positions on how these issues will be treated. We cannot avoid discussing N/S issues at Williamsburg; the Europeans will push it on us. We may be able to use this desire to get a somewhat broader consensus on East-West trade issues. Binding the Japanese and European UNCTAD delegations by Chief of State decisions could strengthen our delegation’s position. Certainly, what we desire is a process that deals with these [garble—trade?] issues in institutions outside UNCTAD and UNGA.

20. Splitting the G–77: seek to give each broad interest group in the G–77 something so there is a reduced incentive to stall the entire conference on a given regional issue (the G–77 caucuses by regional groups and any region can prevent a consensus). At UNCTAD V there were only five substantive resolutions passed—each affected a different constituency in the G–77, none involved an increase in N/S expenditures.⁵

21. How to develop tactics to carry out this strategy will depend on how the G–77 decides to play the conference. They are, I think, meeting now in Buenos Aires to develop their negotiating platform and approve it at Ministerial level.⁶ A charter of B.A. or a declaration of B.A. will be forthcoming with a broad range of unilateral demands. Once these are public, we will have to analyze them, decide where the G–77 political focus will be and develop a conference floor strategy to achieve our objectives.

22. Stroking the Yugoslavs: the Yugoslavs want a good conference in an optical sense—high level attention and some substance. Since we will be tight on substance, a high political profile is called for. What about Ken Dam as official head of the U.S. delegation, with Allen Wallis and someone from STR as deputies? I gather Bill Brock is going; if so he, I suppose, would have to be chairman (or co-chairman?). But the problem with Brock is that we do not wish to bless UNCTAD as a trade negotiating forum. Brock’s presence would be a heavy laying on of hands.

23. Ministerial representation at the Dam-Wallis or Brock level will do a lot for relationships with the Yugoslavs. UNCTAD IV in Kenya⁷ was graced by Henry Kissinger and UNCTAD V in Manila by Andy Young. Dam or Brock would not be out of place in terms of precedent.

24. I recognize that we cannot make North-South policy by last minute efforts to come to grips with UNCTAD. But at the same time, we should not do so by throwing the baby out with the bath water, particularly given the administration’s position at Cancun. I have two recommendations: that in the short term we make a modest effort with UNCTAD and that in the longer term we undertake a major inter-departmental effort to define just what our North-South policy should be.

Newlin

1. Source: Department of State, Central Foreign Policy File, Electronic Telegrams, D830198–0696. Secret; Immediate; Exdis; Stadis.
2. See Document 102 and footnote 2 thereto.
3. The NAM New Delhi Declaration was adopted by the Non-Aligned Heads of State on March 12.
4. Not found.
5. The fifth session of UNCTAD took place May 7–June 3, 1979, in Manila.
6. The G–77 Ministerial meeting to define its negotiating strategy and position for UNCTAD VI took place April 5–9 in Buenos Aires.
7. The fourth session of UNCTAD took place May 5–31, 1976, in Nairobi.