INTERNATIONAL ISSUES REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00912A002300010020-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 20, 2016
• Document Release Date: May 19, 2006
• Sequence Number: 20
• Publication Date: August 29, 1978
• Content Type: REPORT

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Foreign
Secret
Assessment
Center
International
Issues Review
State Dept. review completed
Secret
RPIIR 78-001
29 August 1978
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INTERNATIONAL ISSUES REVIEW
29 August 1978
CONTENTS
ARMS TRANSFERS AND LEVERAGE: THE CASE OF IRAN . . . 1
Despite Iran's heavy dependence on purchases of
US weapons, the US gains little coercive lever-
age against Iran from these arms transfers.
These transfers do make possible the exercise of
subtle forms of US influence.
WHITEHALL REFLECTS ON THE SECOND NPT REVIEW
CONFERENCE . . . . . . . . . . . . . . . . . . . . 8
In a recent discussion with US officials, senior
UK disarmament officials discussed the prospects
for the 1980 NPT Second Review Conference. The
forthcoming session of the UN General Assembly
will provide a good indication of prospects for
the Review Conference.
COMBATING INTERNATIONAL TERRORISM: THE BONN
ECONOMIC SUMMIT AGREEMENT . . . . . . . . . . . . . 11
The agreement reached at the summit meeting in
Bonn calling for sanctions against countries
aiding hijackers is moving close to implementa-
tion. An additional two dozen countries have
indicated varying degrees of support for the
agreement.
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F
LATIN AMERICAN VIEWS ON THE UN CODES OF CONDUCT
FOR TRANSNATIONAL CORPORATIONS AND TRANSFER
OF TECHNOLOGY . . . . . . . . . . . . . . . . . . 17
Among developing countries, the Latin American
states have led in establishing national regula-
tions to control transnational corporations and
technology transfer. They are divided, however,
on their approaches to international control of
these activities.
This publication was formerly entitled International Issues Month-
ly Review.
This publication is prepared by the International Issues Division,
Office of Regional and Political Analysis, with occasional contri-
butions from other offices within the National Foreign Assessment
Center. The views presented are the best judgments of individual
analysts who are aware that many of the issues they discuss are
subject to alternative interpretation. Comments and queries are
welcome. They should be directed to the authors of the individual
articles.
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Arms Transfers and Leverage: The Case of Iran
An earlier article in International Issues Month-
ly Review developed a framework for analyzing the ef-
ficacy of arms transfers as a means to exert lever-
age.' The following article applies this framework to
the transfer of US arms to Iran, which is the leading
purchaser of American-made military equipment and an
emerging regional power.** It concludes that arms
transfers give the US little coercive leverage against
Iran, although they make possible the exercise of sub-
tler forms of influence.
Whether the US could influence Iran's policies by
manipulating the arms flow, or threatening to do so, de-
pends chiefly upon: (1) the extent to which each coun-
try relies on a continuation of the arms flow; (2) the
US objective in exerting influence; and (3) the other
means each side has of pressuring the other.
Each Side's Stake in the Arms Transfer
Iran has spent heavily on US arms. Of the nearly
$25 billion worth of foreign-made weapons it has pur-
chased over the last two decades, about three-fourths
has come from the US. The Shah prefers to buy US equip-
ment because he believes it is generally of better qual-
ity and more advanced than what is available elsewhere.
He also values the political tie with the US that the
military supply relationship symbolizes. If forced to
turn to other suppliers, Iran would not only lose these
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Iran and Neighboring States
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benefits but would incur costs from the switch itself.
Specifically, Iran might face long delays in receiving
substitute equipment from other manufacturers because of
their previous sales commitments. In addition, the
change would require replacement of existing training
procedures and supply lines for spare parts.
Nevertheless, although these costs would be sub-
stantial, the Shah probably views them as tolerable.
Only a few of the most advanced US weapons purchased to
date do not have possible substitutes manufactured in
other countries. (The exceptions probably include AWACS,
the F-14, and the Phoenix missile.) The Shah, therefore,
could fill most of his needs by shopping elsewhere. He
may also believe that he and his regime could survive
without the political tie symbolized by the arms supply
relationship with the US. In his view, Washington can-
not afford to "lose Iran" and consequently would come
to its aid, despite previous differences, if it were
seriously endangered. In short, the perceived costs to
Iran of a curtailment in US arms supply are probably not
as great as past sales figures suggest and are not great
enough to guarantee compliance with a US demand.
Equally important in the US-Iranian relationship is
the US stake in a continuation of arms transfers to :Iran.
Because of the economic and strategic concerns involved,
the military security and political stability of Iran
are important to the US as well as Iran. Any action
that weakened Iran's defenses would thus be a risk to
Washington as well as to Tehran. To the extent that a
manipulation of the US arms supply carried this risk,
the US would have an incentive not to manipulate it.
The Shah would certainly take this into consideration in
assessing the credibility of US threats to do so.
The Objective
The success of an attempt to exert leverage would
also depend on the US objective in bringing pressure to
bear--specifically, how important the issue at hand is
to Iran and what direct relationship it may have to the
use of arms.
The more important an issue is to the Shah, the less
likely it is that a threatened reduction of the arms flow
would be sufficient to induce him to defer to US wishes.
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Thus, on a major issue, he might perceive the costs of
having to switch to a different arms supplier as being
less than the costs of abandoning his preferred policy.
A possible example of such an issue is human rights.
The Shah would probably resist any effort to coerce him
into faster liberalization than he considers acceptable
because he would view it as an infringement on his right
to safeguard the regime against terrorists and other
internal threats.
If the policy difference between the Shah and the
US related directly to using arms or armed force, US
leverage might either increase or decrease. One such
case would be Iran's use of armed force in a way that
the US found objectionable. If his forces were engaged
in an invasion or military intervention, the Shah would
have to consider an American arms embargo not just as
one more cost to weigh in making his decision, but as a
constraint on the ability of his troops to complete
their mission. Recognizing that the US could cripple
his armed forces in this way, the Shah has emphasized
the stockpiling of spare parts and supplies, preferring
to take early delivery even when this creates problems
of absorption. Despite these efforts, Iran's short-
term vulnerability to a US arms embargo is considerable,
especially since an embargo presumably would also in-
volve a withdrawal of the day-to-day technical support
from US personnel on which the Iranian armed forces
heavily rely. This is particularly true of the Air
Force, most of which would quickly be grounded if that
support were withdrawn.
It is not likely, however, that Iranian armed forces
would be involved in combat under circumstances in which
US interests conflicted so sharply with those of Iran
that an arms embargo appeared probable. In most sce-
narios involving Iran at war, US and Iranian interests
would tend to converge rather than conflict (for example,
border warfare with Iraq or the USSR). The interests of
the two countries would sharply conflict only in the
unlikely event that Iran were to wage war against a pro-
Western state like Saudi Arabia or the United Arab Emir-
ates or engage in military adventurism that the US saw
as carrying the risk of wider war (for example, interven-
tion in Afghanistan).
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SECRET
A more probable cause of future friction between
Tehran and Washington is the US policy of arms transfer
restraint itself. The Shah remains unpersuaded by the
arguments advanced in support of this policy, seeing it
as discriminating in favor of industrialized countries
and against developing nations like his own. Of course,
a reduction in US arms transfers to Iran is the one for-
eign policy objective that the US could achieve unilat-
erally. There might be trade-offs, however, between a
near-term reduction in US arms sales and the longer
term possibilities of nurturing Iran's friendship or
quietly influencing its policies. The more requests for
arms the US turned down, the more likely it would be
that :[ran would turn to other suppliers, making it less
susceptible to US influence in the future.
Another possible arms-related objective would be
the retardation of nuclear proliferation. Given Iran's
renunciation of nuclear weapons, this is not currently
an issue in US-Iranian relations. Nevertheless, the
development of nuclear weapons by another Middle East or
South Asian state could change the Shah's attitude.
Furthermore, as difficulties in recent negotiations on
a bilateral nuclear cooperation agreement suggest, seri-
ous frictions with the US may arise over Iranian devel-
opment of sensitive aspects of the civilian nuclear fuel
cycle, particularly the reprocessing of spent fuel.*
Arms transfers are closely related to the proliferation
issue because the more militarily vulnerable Iran feels,
the greater will be the risk that it will elect to ac-
quire nuclear weapons. An increase in that risk is one
potential result of restricting arms sales to Iran.
Consequently, any curtailment of the arms flow intended
to pressure the Shah into pursuing nuclear energy poli-
cies that are less proliferation-prone would probably be
counterproductive.
*Iran may some day elect to reprocess abroad the fuel from its am-
bitious civilian nuclear program or even to construct its own re-
processing plant, although it apparently now has no plans for
such a facility.
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The Overall Bilateral Relationship
Any attempt to exert influence through a manipula-
tion of arms transfers would not take place in a vacuum;
rather, the outcome of the attempt would depend on all
of the threats, promises, favors, and pressures that
each state could direct at the other. When the entire
US-Iranian relationship is thus taken into account, the
US bargaining position against Iran appears no stronger,
and possibly weaker, than when arms transfers alone are
considered. The US could restrict Iranian opportunities
for trade and investment, but this possibility would be
offset by Tehran's ability to curtail similar US oppor-
tunities in Iran and to manipulate the pricing and sup-
ply of oil. Tehran also has additional levers to use
if relations with the US were to deteriorate, including
res ric ing the ac f
the 30,000 US citizens resident in Iran.
Coercion Versus Other Forms of Influence
The foregoing suggests that despite Iran's con-
siderable reliance on US arms, the role of supplier pro-
vides the US with little coercive leverage. In addition
to the reasons already mentioned, coercive leverage
would be limited by the Shah's desire not to be seen
buckling to pressure. Avoiding the appearance of being
coerced is particularly important for Iran because
decisionmaking is so highly concentrated in the hands of
the Shah. His personal prestige is thus on the line in
every major issue--particularly in foreign affairs, his
special preserve--making him especially resistant to
external pressure.
A promise to furnish arms, unlike a threat to deny
them, does not have this drawback. Neither the promise
itself nor its linkage to a specific US policy objective
need be made explicit to enable the US to exercise some
influence on the Shah. There would still be limits to
what the Shah would be willing to do, but he might well
respond to the implicit promise of a continuing flow of
arms by being more sensitive to US interests on a variety
of matters, particularly minor issues where adjustments
to Iran's policy would not be easily perceived by
outsiders.
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Arms transfers also provide the US with some poten-
tial to exert longer term influence on Iran by providing
a direct entry into its military establishment. Close
and amicable working relationships with US personnel
have left many Iranian officers with a favorable im-
pression of the United States. These same relationships
constitute a channel through which American values and
perceptions can be quietly transmitted. This channel
now serves only to create a reservoir of goodwill, but
it could be much more important in determining the di-
rection Iran takes after the present Shah's departure.
In the event that radical forces opposed to both the
Shah and the military someday come to power in Tehran,
the memory of Washington's ties with the former regime
might increase the new government's dislike for the US.
It is far more likely, however, that the military itself
will be the principal pillar of a successor regime. The
attitudes nurtured now through the arms sales relation-
ship make it more probable that such a re ime will re-
main friendly to the US.
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WHITEHALL REFLECTS ON THE SECOND NPT REVIEW CONFERENCE
The Nuclear Non-Proliferation Treaty provides for
conferences to review its operation at five-year in-
tervals. The second of these conferences will be held
in 1980. Measures taken by the United States and
other nuclear supplier countries to slow the process
of nuclear weapons proliferation have sharpened dif-
ferences among adherents to the treaty and between
them and nonsignatories.* Preparations for the re-
view conference are now beginning, and the United
Kingdom recently discussed with US officials its ap-
proach to the conference.
A senior UK disarmament official believes that ac-
tions at this September's UN General Assembly session
will probably set the tone for the 1980 Nuclear Non-
Proliferation Treaty (NPT) review conference. 25X6
Irecently indicated that his
government hopes a short, noncontroversial General
Assembly resolution will establish a preparatory com-
mittee made up of NPT parties serving on the Inter-
national Atomic Energy Agency Board of Governors and
the newly established Committee on Disarmament. He
also expressed concern that some nonaligned states
that have not signed the NPT may seek to amend it.
Although he believes the NPT could be improved, he
said the United Kingdom should resist amendments
rather than risk opening the treaty to potentially
harmful changes.
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Whitehall has only begun its planning for the NPT
review conference, but it already expects that there
will be significant challenges to the treaty from key
nonnuclear weapons states, such as India and Pakistan,
even though they are not NPT parties. They cite evi-
dence for this from the debate at the recently con-
cluded UN Special Session on Disarmament.
The British are of the opinion, however, that
further accessions to the NPT, even if not by the most
important nonadherents, would demonstrate the value of
the NPT and might increase pressure on the holdouts to
sign. They point to Turkey, Indonesia, Sri Lanka, Oman,
the United Arab Emirates, and Bahrain as countries that
might be usefully approached. The British also believe
that the issue of peaceful nuclear explosions (PNEs) will
play a less important role than it did at the 1975 re-
view conference, especially if a comprehensive test ban is
concluded by 1980.
The NPT second review conference is likely to con-
sider issues wider than the treaty itself, according to
British Foreign Office officials working on it, and
will probably examine general nonproliferation and
nuclear transfer problems. As examples, these officials
note that the United Kingdom will probably:
-- Insist on the continued importance of the NPT and
improved safeguards.
-- Advocate nontreaty measures for controlling pro-
liferation such as full scope safeguards and
nuclear-weapon-free zones.
-- Insist on progress toward nuclear disarmament
as required by Article VI of the treaty.
-- Promote discussion of alternate nuclear fuel
cycle concepts developed at the International
Nuclear Fuel Cycle Evaluation, nuclear fuel
assurance schemes, and nuclear technology
transfer proposals for peaceful purposes.
London is evidently looking forward to cooperating
closely with the United States, as it did at the first
NPT review conference. The British have not supported all
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aspects of recent US nonproliferation policy, but they
continue to strongly support the NPT. Other US allies
have complained that the treaty has not been working
properly because of contravening actions by some nuclear
supplier countries. They specifically point to Article
IV, which guarantees treaty adherents access to nuclear
materials for peaceful purposes under international safe-
guards. They complain that certain export restrictions
imposed by the United States and Canada, such as embargoes
on the sale of uranium and sensitive nuclear technologies,
have undermined this portion of the treaty.
The British are probably right that the General
Assembly session this fall will provide a venue for
attacks on the NPT. It will also provide an opportunity
for criticism of US nonproliferation policy in general,
not only by nonaligned states but also by the West
Europeans and Japanese, who resent restrictive export
controls. If UN debate cannot be kept within. moderate
bounds, the prospects for an acrimonious and possibly
counterproductive NPT review conference will be signi-
wN
I
ficantly increased
FIDENT
. ( CO
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COMBATING INTERNATIONAL TERRORISM: THE BONN ECONOMIC
SUMMIT AGREEMENT
At the conclusion of the recent summit meeting in
Bonn of seven major industrial countries, an addendum
to the communique called for economic and other meas-
ures to be taken against states aiding hijackers.
"The heads of state and government, concerned
about terrorism and the taking of hostages,
declare that their governments will intensify
their joint efforts to combat international
terrorism. To this end, in cases where a
country refuses extradition or prosecution of
those who have hijacked an aircraft and/or do
not return such aircraft, the heads of state
and government are jointly resolved that
their governments should take immediate ac-
tion to cease all flights to that country.
At the same time, their governments will ini-
tiate action to halt all incoming flights
from that country or from any country by the
airlines of the country concerned. The heads
of state and government urge other govern-
ments to join them in this commitment."
Although the agreement represents progress in ob-
taining international cooperation against hijacking,
it does not deal with other forms of terrorism.
The agreement has been widely hailed in the Western
press as the first multilateral proposal that establishes
effective sanctions and, although skepticism regarding
implementation has also been aired, it has been viewed
as a turning point in global antiterrorist efforts. Its
potential effectiveness lies in the fact that the air-
lines of the seven participants (US, UK, Canada, France,
Italy, Japan, and West Germany) together account for 69
percent of the total airline passengers carried in the
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non-Communist world. Other Western agreements on extra-
dition or prosecution of terrorists, such as the Council
of Europe treaty, have been criticized for their lack of
sanctions.*
The measures agreed to in Bonn were first suggested
in a surprise proposal by Japanese Prime Minister Fukuda
and then seconded by Canadian Prime Minister Trudeau.
Legal reservations that had barred common action on prev-
ious British, French, and West German initiatives on com-
bating terrorism in Europe were overcome or passed over
at the summit.
Fukuda may well have some second thoughts about his
proposal, since he probably advanced the idea at least
in part to offset criticism aimed at Japan for bowing
to demands of Japanese Red Army hijackers last fall. The
Prime Minister could now be concerned that future hijack-
ings involving Japan might expose him to strong domestic
pressure to save passengers' lives by yielding to hijacker
demands and thereby violate the agreement that he origi-
nated.
Bonn II
In early August, at Italian and French suggestion,
representatives of the seven signatories met in Bonn to
work out technicalities of the process for informing
other states of possible sanctions and for having other
states participate in the scheme. The meeting established
that the agreement will cover all hijackings, not merely
those involving planes and/or passengers of any of the
seven countries. Consultation and coordination of re-
sponses will be triggered by the government of the plane's
operator or by any of the seven if the operator is from
*The European Convention for Combating Terrorism entered into
force this month. The signatory states undertake either to extra-
dite or prosecute any terrorist. The convention so far has been
ratified by five of the 20 member states of the Council of Europe.
The treaty is now binding on Austria, Sweden, and West Germany and
will enter into force in Denmark on 28 September and in the UK on
25 October.
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a third country. Establishing responsibility, verifying
compliance, and imposing sanctions where necessary will
require unanimous approval, although individual govern-
ments are not forbidden to take other actions on their
own. Other interested governments could be called into
the consultations depending on the circumstances of the
incident.
The conferees agreed that efforts would be spear-
headed by the West German Ambassador in each relevant
capital, who would either speak for the seven or coordi-
nate joint demarches, depending upon local government
relations with the seven. The West Germans, however,
were not to notify other states of the declaration until
31 August so that the seven could prepare a concerted
diplomatic approach. Several of the participants ex-
pressed hope that the ad referendum process can be speeded
up, allowing action to begin sooner.
There may be yet another meeting to review the re-
sults of these diplomatic initiatives and to consider
other matters involved in carrying out the agreement, in-
cluding timing, scope, and legal implications.
Reactions
Although the agreement applies only to the seven
countries represented at the conference, several of the
participants quickly began canvassing other governments
about extending its applicability. Most reactions have
been tentative and along generally predictable lines.
The governments of 23 countries (Austria, Denmark, Nor-
way, Honduras, Guyana, Nicaragua, Venezuela, Trinidad
and Tobago, Mexico, Barbados, Grenada, Paraguay, Bahamas,
El Salvador, Iran, South Korea, Nepal, the Philippines,
Chad, South Africa, Congo, Spain, and the Netherlands)
have all expressed varying degrees of support for
the agreement. The Dutch, however, have expressed fear
that if states denied landing privileges to hijackers
during incidents, this would increase the pressures on
the hijacked aircraft's government to capitulate to the
hijackers' demands. The Dutch also have pointed out that
the declaration may adversely affect the attitudes of some
countries now being approached by a "contact group" rep-
resenting several governments seeking wider ratification
of existing UN and ICAO conventions on aerial hijacking.
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Worldwide Aerial Hijacking Attempts
40
30
20
01
1965
1975
Note: These figures include all hijacking attempts or apparent attempts, whatever
their degree of success.
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Finally, the Dutch, and probably others, have misgivings
about the background of the summit action and may believe
that they were left out of discussions of direct impor-
tance to them. Sympathetic, albeit noncommittal, reactions
have been received from 13 other governments (Luxembourg,
Haiti, Jordan, Afghanistan, Morocco, Qatar, Bahrain, the
United Arab Emirates, Egypt, Sri Lanka, Cameroon, Mauritius,
and Bangladesh).
An ambivalent response was made by Cuba. Although
Havana has denounced its bilateral antihijacking agree-
ment with the US, it has continued its separate accords
with Canada, Mexico, Colombia, and Venezuela that call
for return or prosecution of hijackers. It is doubtful
that Havana will publicly support the Bonn accord, but
it will probably continue to indicate that hijackers are
unwelcome on Cuban soil. Iraq's response was comparable--
hijackers are to be turned away, but a public expression
of support for the treaty is unlikely.
There have been strong negative reactions. A Libyan
spokesman rejected the agreement, noting that it does
not exclude hijackings committed in the name of national
liberation. The Soviets publicly
questioned Washington's sincerity in adhering to a Bonn
agreement, arguing that the US is sheltering two individ-
uals who participated in a 1970 hijacking of a Soviet plane.
During the past year the Czechs have chided the West Ger-
mans for granting asylum to hijackers in similar circum-
stances. Moreover, the Soviet press has asserted that
the seven states intend to become an international police
force and court and that they will apply sanctions in a
one-sided fashion against countries "objectionable" to the
West. Several East European governments, however, have
recently demonstrated a willingness to cooperate against
West European terrorists. The Soviets appear to believe
that these individuals are uncontrollable and agreed to
allow Bulgaria to cooperate with the West Germans by
arresting four West German terrorists in June. The Yugo-
slavs in May arrested four other West German anarchists,
although their extradition is pending West German com-
pliance with a Yugoslav request for the turning over of
several Croatian terrorists. Finally, travelers have re-
ported seeing photos of fugitive West German terrorists
on the desks of East European border police.
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Public statements notwithstanding, implementation
of the agreement in specific cases will entail hard
choices among conflicting policy objectives. Many
countries may not be able to withstand the threat of
economic retaliation by oil-producing states that extend
aid to hijackers.
A comprehensive antihijacking system, if it becomes
effective, still leaves much of the terrorist problem
unsolved. Attempts to hijack aircraft have been declin-
ing since the peak incidence at the beginning of the
decade (figure 1). This is due to increased security
precautions at major airports; to the growing reluctance
of radical governments to grant safe haven to terrorist
hijackers who profess vaguely defined "revolutionary"
goals; and, not least of all, to a shift in terrorist
tactics from hijacking to the more common assassinations
d
b
an
ombings. These traditional forms of terrorism are
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Latin American Views on the UN Codes of Conduct for
Transnational Corporations and Transfer of Technology
As with almost all of the issues raised by the
developing countries under the rubric of the New In-
ternational Economic Order, efforts by developing
countries (LDCs) to control transnational corporations
and to improve the terms of technology transfer enjoy
varying degrees of support among individual developing
countries. The Latin American states, in large part
because their relatively more industrialized level of
development has made technology transfer and the role
of multinationals major national issues, have led the
way in establishing national regulations and in trying
to establish international agreements to deal with
these issues. This article discusses the factors af-
fecting the different approaches of the Latin American
states to these issues. Its principal conclusions are
that:
Differences among the major Latin American
countries are becoming evident as they try to
formalize a regional position on interna-
tional codes of conduct for transnationals
and for technology transfer. There are con-
flicts between those countries pressing for
mandatory international controls and those
that prefer to remain flexible in negotia-
tions with the developed countries.
Several other Latin American states have ap-
parently reached the conclusion that neither
code of conduct can be written in a meaning-
ful way, but for political reasons most are
likely to continue to support efforts to ne-
gotiate both codes. Nevertheless, any re-
gional position will probably reflect the
moderate leadership of Brazil, Argentina, and
Mexico rather than the stricter demands of
the Andean countries.
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-- The Andean countries strongly favor strict in-
ternational codes of conduct in both areas
because their joint effort at regulation has
not provided them sufficient control over
foreign investment and technology. Even if
their demands receive only limited support
from other LDCs, this strategy may still gain
the Andean Pact attention as a voice in Latin
American and international affairs.
-- The issue of technology transfer to LDCs will
continue to be raised in several UN forums,
regardless of whether an international code
of conduct is agreed on. Results of the Oc-
tober negotiating conference on this code
will provide a strong basis for forecasting
further development of this issue at both
UNCTAD V and UNCSTD.
Proposals to establish codes of conduct governing
the behavior of transnational corporations abroad and
the transfer of technology from industrialized to de-
veloping countries are within the purview of two dif-
ferent UN organizations. The UN Economic and social
Council's commission on Transnational Corporations is
charged with drafting a code of conduct for transnation-
als. A working group of the UN Conference on Trade and
Development (UNCTAD) is responsible for drafting a code
of conduct for the transfer of technology.
The difference between the two proposed codes lies
in their specificity. The code of conduct for trans-
nationals is intended to define overall norms of behavior
for all corporate overseas activities, including non-
technical issues such as bribery, interference in the
internal affairs of host countries, profit repatriation,
and reinvestment of profits in host countries. The pro-
posed code of conduct for technology transfer has a
narrower focus. Sections deal with national regulation
of technology transfers, applicable law, and restrictive
business practices regarding patents and licensing. Work
on a draft of this code is proceeding rapidly--the nego-
tiating conference will be held in October in Geneva.
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In contrast, a preliminary draft of a code for trans
nationals is probably at least a year away. No UN forum
has been chosen for formalizing such a code.
LDCs, who have operated as a bloc in UN forums as
the Group of 77 (G-77), exhibit varying degrees of interest
in these proposed international codes of conduct. In
general, the Latin American countries have taken the lead
in formulating LDC demands in these areas. They have
been especially vocal in expressing their desire for
easier access to imported technology.
The Latin Americans have tried to develop a common
strategy for controlling technology transfer and trans-
nationals. A growing divergence of opinion is becoming
evident within the group, however, as the major countries
try to formalize a regional position on these subjects.
Brazil, Argentina, and Mexico are ambivalent toward, or
even opposed to, some demands made by the Andean coun-
tries regarding the proposed codes. The Brazilians
particularly are trying to use their influence in the
region to protect their freedom to apply their own laws
to transnational corporations doing business in Brazil
without sacrificing the idea of an international code of
conduct. Since the Latin Americans have constituted the
most active regional group in negotiating technology
issues, disagreement among them could be a setback for
the G-77 as a whole, since divergencies among other LDCs
on these issues may now also appear.
Code of Conduct for the Transfer of Technology
The issues arising over the ways, means, and costs
of transferring technology have become highly politicized
in the past few years. They are now part of the general
LDC demand for rapid and preferential transfers of re-
sources from the developed countries. Several UN forums
provide opportunities for LDCs to press for global action
on technology issues, specifically regarding the flow of
technology through existing market channels.
Work on the draft code of conduct for the transfer
of technology will continue to progress rapidly if, as
is likely, a US effort to postpone the scheduled October
negotiating conference in Geneva is not successful. The
Latin American countries are most interested in those
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sections of the code that deal with the cost of tech-
nology transfer. According to an UNCTAD study, annual
payments made by seven major Latin American countries
for imported technology have been growing faster than
output in manufacturing, where the bulk of the technology
is utilized. In 1975, payments to US corporations by
their Latin American affiliates for patent, license, and
other fees totaled $389 million compared to $174 million
paid in 1965.
The Latin Americans hope that an international code
of conduct for the transfer of technology will legitimize
their own approach to regulation, both with the developed
countries and with other LDCs. There is some difference
of opinion among Latin American countries, however, re-
garding how this should be spelled out in the code.
Mexico and Brazil, both of which have developed relatively
workable legal frameworks for regulating technology
transfers, will try to ensure that any prospective code
does not restrict their sovereignty or freedom of action.
Members of the Andean Pact--Bolivia, Colombia, Ecuador,
Peru, and Venezuela--have been less successful in apply-
ing Pact regulations to technology transfer by foreign
suppliers. Their capital and technology often seem to
go to countries where conditions are not so strict.
Since a subregional approach has not provided sufficient
control over the terms of transfer, the Andean countries
are likely to press for a strong international code that
would commit all LDCs to uniform, mandatory controls.
The Andean countries have insisted that their gov-
ernments could not ratify a code that did not explicitly
condemn specific restrictive business practices that
have already been banned in their domestic legislation.
Demands such as these, which the industrialized countries
have rejected, have slowed the negotiating process.
Brazil and other moderate Latin American countries are
concerned that such stalling will reinforce US efforts
to postpone the October conference, with the result that
no international code for technology transfer will be
negotiated in the near future.
To forestall delay of the conference, Brazil has
decided to remain flexible on contentious points that
have led to an impasse between the more confrontation-
minded LDCs and the developed countries. As a result,
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some members of the G-77 are questioning Brazil's com-
mitment to LDC solidarity. At a recent working meeting
on the draft code, a serious dispute erupted when the
African group accused the Brazilian coordinator of being
too moderate. The Brazilian has resigned temporarily,
and it is unclear whether Brazil will lead the G-77 at
the October negotiating conference.
Code of Conduct for Transnationals
Latin American countries led the movement that es-
tablished the UN Center on Transnationals two years ago
for the purpose of drawing up an international code to
regulate the foreign investment practices of trans-
national corporations. There are 10 Latin American -?
Caribbean members of the working group responsible for
drafting the code. Many seem, however, to have lost
their original enthusiasm for the task as difficulties
arose in developing legal frameworks that would meet
their individual needs.
Members of the Andean Pact are now the only Latin
American countries continuing to press for a strict
international code on transnationals. A growing lack of
cohesion within the Pact, however, may undercut its in-
fluence in regional debates on this subject. Several
members originally adopted very rigorous laws regarding
foreign investment with counterproductive results--for-
eign firms simply chose to do business elsewhere. Bo-
livia and Ecuador are now pressing fellow members to
ease restrictions on foreign investment. Venezuela has
already adopted a more conciliatory attitude by reducing
the number of companies that must be locally controlled.
Chile's decision to withdraw from Pact membership last
year was based in part on the view that Pact regulations
hinder Chile's economic recovery. Despite these devel-
opments, the Andean Pact remains active within the Latin
American regional group that deals with treatment of for-
eign investors. This probably represents an effort by
the Pact to retain some voice in Latin American and :in-
ternational affairs at low cost.
Despite their concern over the business practices
of transnationals, some Latin American countries have in
practice found it necessary to encourage foreign invest-
ment, specifically in industrial sectors where their
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need for capital and technical expertise is greatest.
The Andean Pact's activist rhetoric is meeting serious
opposition from other Latin American powers, particularly
Argentina and Brazil. Argentina has gone so far as to
reject the idea of harmonizing national laws to regulate
foreign investment even though such freedom of action
may permit corporations to play off one country against
another. This directly contravenes the Andean Pact
agreement. Brazil, whose support as the largest Latin
American economy is critical to the success of any
regional movement, is more concerned with nurturing the
growth of Latin American, and particularly Brazilian,
transnational corporations. Thus, Brazil's primary
interest is in making certain that the Latin American
draft resolution on transnationals does not conflict
with its national interests. As a result, the Latin
American members of the UN working group on the trans-
national code of conduct have ceased to operate as a
homogeneous group and lack a common strategy.
Outlook
Latin American countries are likely to continue
support for international codes of conduct for both
transnationals and technology transfer, even though sev-
eral governments have apparently reached the conclusion
that such codes probably will not result in meaningful
changes. Given their needs, they will be most active
in seeking innovative ways to obtain easier, lower cost
access to foreign know-how. Discussions now under way
serve the purpose of politicizing this issue and sensi-
tizing foreign corporations and policymakers to the con-
cerns of Latin America. Nonetheless, the developed
countries are not likely to comply with all LDC demands
aired in these multilateral discussions; most real prog-
ress in gaining access to needed technology is being
made on a bilateral basis. Any agreement that can be
said to represent a regional position on either of the
two codes will most likely reflect the moderate views
and leadership of the largest Latin American economies--
Brazil, Argentina, and Mexico--rather than the more
inflexible stance taken by the Andean Pact.
Technology transfer--the issue of greatest interest
to Latin American governments--will be raised in other
UN forums, regardless of whether an international code
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of conduct can be agreed on in October. For example,
the director of the UNCTAD Technology Transfer Division
is making a determined effort to make UNCTAD a leading
forum in this field. He has proposed including a review
of progress made on code of conduct negotiations in the
agenda of the fifth session of UNCTAD next May. Con-
sequently, if significant problems are encountered iii
October, the subject could cause difficulties at UNCTAD
V.
There has also been some spillover to preparations
for the UN Conference on Science and Technology for
Development (UNCSTD), scheduled for August 1979. This
conference is to discuss the policy considerations con-
cerned with the accelerated application of science and
technology at the national level and with increased
international cooperation. At the second Preparatory
Committee meeting, the G-77 submitted a draft resolution
listing obstacles to the application of science and tech-
nology to their development, including restrictive prac-
tices in the transfer of technology and unequal and un-
just licensing arrangements. Conflicting views also
exist among G-77 members on this draft resolution, sim-
ilar to divergencies observable in the code of conduct
negotiations.
Results of the negotiating conference on the inter-
national code of conduct for technology transfer this
fall will provide a strong basis for forecasting further
developments in technology issues at the UNCTAD V and
UNCSTD. It is unlikely that a final version of the code
will be adopted in October, given the basic conflicts
about the legal nature of the code. Few significant
concessions have been made by any of the regional groups.
Thus, conflicts over the scope and method of application
of international technology transfer controls may become
stumbling blocks for more than one UN conference.
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