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

63. Paper Prepared in the National Security Council¹

Washington, undated

U.S. POLICY RE “GLOBAL NEGOTIATIONS” AND DEVELOPMENT

This formulation is in two parts:

(I) a question and answer re the procedural issues raised by the phrase “Global Negotiations”; and

(II) a summary of substantive themes and initiatives that comprise the Reagan administration’s approach to development.

(I) Q. & A. RE “GLOBAL NEGOTIATIONS”

Q. The Ottawa Summit Declaration committed the summit members to “participate in preparations for a mutually acceptable process of global negotiations in circumstances offering the prospect of meaningful progress.”² The co-chairmen’s press statement following the Cancun Ministerial Preparatory Meeting (in which the U.S. participated) stated that a purpose of the Cancun Summit is to “facilitate global negotiations.”³ Is the U.S. now willing to return to the U.N. preparatory discussions on global negotiations?

A. (1) The United States strongly favors the development of a cooperative strategy for global growth. We believe that experience—including our own development experience—confirms the importance of:

(a) opening up markets, both within individual countries and among countries;

(b) improving the climate for private investment, and the transfer of technology that comes with such investment;

(c) orienting assistance toward the development of self-sustaining productive capacities;

(d) tailoring particular development strategies to the specific needs and potential of individual countries and regions; and

(e) creating a political climate in which practical solutions can move forward—rather than founder on naive or contentious rhetorical debate.

(2) With this general framework as our guide, we are prepared to examine the specific needs and potential of particular countries and regions—while at the same time we examine how a common effort might best overcome identified obstacles and promote desired development.

(3) We have said that we would be willing to “participate in preparations for a mutually acceptable process of global negotiations in circumstances offering the prospect of meaningful progress. (Note emphasis.) We do not believe that Global Negotiations as contemplated and defined in U.N. Res. 34/138 (December 1979) would offer the prospect of meaningful progress.” The agenda is at once too general and too far-reaching to provide a practical basis for proceeding. And references to the “New International Economic Order” and the “restructuring of international economic relations” are undesirable reminders of the type of contentious ideological environment in which cooperative solutions are unlikely to be found. We therefore would not return to preparatory talks if they were to be conducted on the basis of U.N. Res. 34/138. We would ask the Cancun countries to agree to instruct their delegations and encourage others to put aside the substance and agenda of U.N. Res. 34/138 and begin afresh to work out a procedural basis and agenda that would offer the prospect of meaningful progress.

(4) We are now, and would continue to be, willing to participate in talks with individual countries, with regional groups, with other interested parties—and even with all countries simultaneously—provided that:

(a) the talks must have a practical orientation toward identifying, case-by-case, the specific potential for and obstacles to development—obstacles which a cooperative effort might remove;

(b) the talks must proceed on a basis that would respect and preserve the competence, functions, powers, voting arrangements, and charters of the specialized international institutions—and not seek to create new international institutions;

(c) the general objective of such talks must be the identification of conditions necessary to increase economic development (rather than a restructuring of the international economic system); and

(d) such talks must be entered into in a cooperative spirit rather than one in which views become polarized and chances for agreement are needlessly sacrificed.

(5) We believe these conditions provide the only basis on which practical progress can be made. Preparatory talks conducted on the basis of U.N. Res. 34/138 have not and could not meet these conditions. But if talks at the U.N. could, on a new basis, meet these conditions, we would be willing to participate in them.

(II) SUBSTANTIVE ELEMENTS OF U.S. DEVELOPMENT POLICY FOR CANCUN

Long-term, non-inflationary growth depends upon:

(a) adoption of appropriate domestic policies by developed and developing countries,

(b) mobilization of internal (private sector) resources,

(c) recognition that external resources generated by trade and investment are more important than development assistance.

Emphasis must shift from “resource transfer” proposals which have characterized the dialogue with developing countries to “resource generation” measures. Our approach requires an integrated policy approach across economic sectors, specifically, investment, trade, agriculture, and energy.

INVESTMENT

It is essential to create an overall economic and political environment conducive to both domestic and foreign investment.

Proposals

(1) Increase co-financing and other private financing with the multilateral development banks.

(2) Enhance the International Finance Corporation activities—the IFC fosters private sector debt and equity financing of investments in the developing countries. Its program is increasing in both size and diversity. The bulk of the IFC projects (about $3.3 billion) are privately financed in the LDCs from domestic and external sources.

(3) Explore the further development of multilateral investment insurance guarantees, arranged through an “International Investment Insurance Agency” (within the framework of the IBRD), and building on the successful bilateral experience with OPIC.

(4) Attempt to promote a general agreement on investment allowing countries to harmonize investment policies and to negotiate mutually beneficial improvements in the climate for investment.

(5) Tax measures—an effort will be made to identify developed and developing country tax measures which might increase market-oriented investment from both external and domestic sources in the LDCs.

TRADE

The U.S. is committed to an open world trading system which will provide all countries an opportunity to strengthen and diversify their economies.

Proposals

(1) The U.S. will join with LDCs in working out an effective safeguards code that reflects mutual concerns and interests.

(2) Encourage further trade liberalization, especially with the advanced developing countries—use GATT.

(3) Launch extensive rounds of consultations with all countries, including developing countries, in preparation for the GATT ministerial.

(4) Announce that the U.S. will continue to support the generalized system of preferences and will take the lead in urging other developed countries to match us in expanding developing nations’ access to markets.

AGRICULTURE

Emphasis will be on the importance of market-oriented policies, fostering greater reliance on markets and entrepreneurship. It is expected that this approach will create rising agricultural productivity, self-sustaining capacity for research and innovation, and stimulation of employment-creating entrepreneurship in rural areas.

Proposals

(1) Encourage LDC economic policies which: (a) reduce or eliminate subsidies to food consumers; and (b) provide adequate and stable price incentives to their agricultural sector to increase production.

(2) Emphasize innovative joint research and development activities undertaken through U.S. and LDC institutions.

(3) Encourage rural credit, improved storage and distribution facilities, and roads to facilitate marketing and education.

(4) Urge that recipient countries move toward market-oriented agriculture policy, which permits prices to find their own levels without production or consumption subsidies.

ENERGY

The U.S. will increase funding for energy-related activities in the years ahead, with emphasis on a mix of public and private efforts and the mobilization of LDC resources.

Proposals

(1) U.S. bilateral assistance program in energy must stress technical assistance rather than resources transfers. The U.S. will support energy lending by multilateral institutions provided projects are economically viable. Such lending should accelerate LDC energy development by encouraging private investment in energy development. (Note: U.S. opposed to new Energy Affiliate.)

(2) Greater private sector support will be sought in the energy area.

(3) The U.S. will support selected elements of the program of action of the U.N. Conference on New and Renewable Resources of Energy.

(4) Intensified energy training programs for technicians from developing countries will be considered, along with increased emphasis on helping LDCs assess and more efficiently utilize their resources.

NOTE: The foregoing proposals are elaborated upon in a set of papers developed through the Cabinet Council on Economic Affairs. In addition to detailed papers on the above, there are also papers which elaborate upon contributions already made by the U.S.—to be interwoven as appropriate.

1. Source: Reagan Library, Executive Secretariat, NSC Trip File, President Reagan’s Participation in the International Meeting on Cooperation and Development Cancun, Mexico 10/21/1981–10/23/1981 Bilateral Meetings—The President (Binder); NLR–755–2–33–31–1. No classification marking. Sent under an October 13 covering memorandum from Darman and Fuller to multiple recipients which reads: “Attached is a revision of the ‘Cancun/Development Policy’ memo previously circulated on October 9. It reflects modifications made through discussion at today’s meeting of the Cabinet Council on Economic Affairs, and previously approved Presidential guidance. It is our understanding that this now represents fully agreed guidance for internal use within the Administration.”
2. See footnote 2, Document 32.
3. See footnote 5, Document 33.