MONTHLY REPORT

• Document Type: CREST
• Collection: Library of Congress
• Document Number (FOIA) /ESDN (CREST): LOC-HAK-320-4-7-4
• Release Decision: RIFLIM
• Original Classification: C
• Document Page Count: 9
• Document Creation Date: January 11, 2017
• Document Release Date: June 4, 2010
• Sequence Number: 7
• Publication Date: July 15, 1976
• Content Type: MEMO

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y t DEPARTMENT''OF STATE
BRIEFING MEMORANDUM
S/S
CONFIDENTIAL
TO: The Secretary
FROM: EB -- Joseph A. Greenwald
ON FILE DOS WAIVER
INSTRUCTIONS APPLY
Monthly Report
Some Lessons of UNCTAD IV
JUL 1 E 76
The purpose of this report is not a detailed
assessment of the-results of the UNCTAD Conference.
That has already been prepared and sent to the field
(#146041 , June 14, attached). The purpose is to
examine where we may be said to have failed and why,
and what we can learn from the experience.
We achieved our basic objective at UNCTAD IV, to
maintain a constructive atmosphere in North/South
relations. The Conference was chaotic but it was not
confrontational. The LDCs wanted to do business.
They eschewed politically divisive issues: Israel,
South Africa, Chile. They berated the Socialist
countries for inadequate support. They did not
press radical NIEO positions: indexation, permanent
sovereignty over resources, producer associations.
They did not push UNCTAD into the areas of competence
of GATT, the IMF, the IBRD, or CIEC. They focussed
on practical solutions to concrete problems, as we
have urged them to do.
Not all their practical solutions commend them-
selves to us--debt moratoria, the Common Fund--but
these are not extreme positions.
In short, the atmosphere was not hostile. There
was little give in LDC positions. They remained
fixed behind programs hammered out at Manila. But
the LDCs were not radicalized in Nairobi. In the crunch,
appropriate words were found to permit resolution by
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consensus,'with~appropriate reservations, interpre-
tations, and comment. This was not. because of "dark
hints from oil-exporting countries that the collapse
of UNCTAD IV would influence oil-pricing policy",
as the London Times suggests. It was because all the
affected groups--the UNCTAD Secretariat, the LDCs, and
the industrialized countries--wanted to avoid a
breakdown in the dialogue.
We failed in two respects, however, in the
reception of our proposal to study the idea of an
International Resources Ban} and in the poor coordi-
nation, indeed disarray, among the industrialized
countries.
International Resources Bank
Preparations for UNCTAD IV began quite early. A
systematic effort was begun last fall to see how far
we could realistically and sensibly go in meeting LDC
positions and in advancing independent initiatives of
our own. The proposal for an IRB was put forward late.
in this process. It was a complex proposal with novel
features (project bonds denominated in commodities or
currencies or both). Its elements kept changing in
each of its successive versions. Thus, in the early
versions it was a bank that would lend for resource
development and for buffer stocks. In subsequent
versions it ceased to be a bank but retained the name.
It was not fully clear even in its final version what
were the essential features of the proposal and what
were peripheral elements. Thus, it was unclear whether
the commodity bond was a central, rather than an
optional, feature of the proposal; or what the obl. i -
gations would be of the host government on the one side
and the investors on the other that must be spelled
out in the trilateral agreement and presumably be
guaranteed by the IRB. (We still need clarification
on these matters.)
The proposal was not only late in being given its
final shape and interagency concurrence, but also it
was not to be discussed with other governments in
advance of its presentation at Nairobi, except in the
most general terms. Consequently, there was no advance
exposition of the idea in LDC capitals; no effort made
to explain how the IRB would be helpful to them; how it
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would meet some of their central concerns about NNE
exploitation of their subsoil resources. UNCTAD
delegations from LDC capitals had no instructions on
the issue or indication that it would be put forward.
The IRB came as a surprise. It was viewed with
suspicion and was the subject of various and conflict-
ing interpretations. Many LDCs saw it as a torpedo
aimed at the Common Fund. The US Delegation had to
explain repeatedly that the IRB was not intended as a
diversion to, or substitute for, the integrated program.
When the delegation tried to explain IRB's purpose and
merits, the LDCs did not listen. They were committed
to the Integrated Program which had been developed
over an extended period, and they resented new proposals
in the commodity area that might possibly throw doubts
on their program.
UNCTAD is not in any case the place for analysis
and assessment of new proposals, unless they are
relatively simple and unambiguously in the LDC interest.
Thus, a US initiative to support UNCTAD technology
training centers, let us say, would be well received.
Indeed, our integrated technology program to enlarge
LDC technological capabilities was a great success.
It was a one-way street filled with goodies for the
LUCs. But a new US proposal to promote investment by
multinationals in LDC oil, gas, and mineral resources
was bound to hit a sensitive nerve, even if it had
not been coupled with US opposition to the Common Fund.
No conference document was issued to explain the
IRB and its benefits for the developing countries. All
that was available was the extensive text of the
Secretary's speech and a more extensive press conference
explanation by the working head of the US Delegation.
One reason surely was the difficulty the delegation
had in spelling out the proposal beyond the official
text because it is obscure on many points. All the
regional group spokesmen were briefed on the IRB but
they were not receptive. UNCTAD is an ideological
forum, the wrong forum in which to make investment by
the multinational corporation the central initiative.
To make the proposal attractive it would have been
useful to say quite explicitly that the investors would
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supply capital, technology, and management on a
contractual basis with no "ownership" of the subsoil
resources, if that is indeed what is intended.
For most LDC delegations, lacking instructions
from their capitals and desiring not to offend the US,
the easiest course was to be absent or abstain when the
issue was put to a vote. This is what ninety countries
did. Indeed, it was unclear why we needed UNCTAD
endorsement of further consideration of IRB, since
no UNCTAD role was foreseen, unless there was some
link between the IRB and Common Fund--exactly what the
LDCs feared. 4
The lesson is clear. We incur great risk if we
seek endorsement in a massive, unwieldy forum like
UNCTAD IV of a complex new proposal that has not been
explained in advance. The opportunities for explain-
ing on the spot and being heard are few. Our choices
in such situations are (1) to discuss complex or
inherently controversial proposals in advance in order
to win understanding and support in the capitals;
(2) to unveil proposals without advance notice in order
to achieve the dramatic impact of new initiatives but
then to lobby unremittingly to secure support. This
involves obvious costs; or (3) to gain the benefits
of surprise but not to seek immediate endorsement of
the proposals if they are not part of a general
consensus. There will be ample opportunity to put the
proposals forward again.
With the benefit of hindsight, it is clear that
we were left with very poor choices once the IRB got
separated from the main consensus resolution. At
.that point, we should have dropped a separate reso-
lution on IRB as too vulnerable to defeat when we
did not need the victory at UNCTAD.
The second and obvious lesson is the need for
earlier planning, on an interagency basis where
.possible, so that we are in a better position for
advance lobbying in capitals as well as for full
discussion in the OECD.
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Coordination of DC Positions
Notwithstanding our efforts in advance of UNCTAD
to develop a common approach on LDC issues, Group B
(OECD countries) fell apart.
The problem of reaching an agreed developed country
position, difficult enough because of the wide di-
vergence of view within the Group, with the Nordics at
one end of the spectrum and the Germans at the other,
was made immeasurably more difficult by the desire of
the EC' to reach a common Community position first.
Thus, the developed countries not in the Community sat
around from Sunday to Thursday of the last UNCTAD week
waiting for the EC-9 to agree on a position on commodi-
ties. The agreement that emerged from the EC's labors
was a minimum position which we and the other developed
countries found inadequate and the EC could not alter.
Their only concession was to add one sentence on the
IRB to their position. The problem of a time-consuming
EC caucus within the larger DC caucus is a familiar
one. We have had to contend with it in the past in
international monetary negotiations. And the rigidity
of the EC position once it is hammered out makes,
further DC negotiation virtually impossible.
In the event, we submitted two Group B texts: the
EC version and the version agreed by the US and other
developed countries. In the interval the LDC position
escalated and the ministers of Group B went their
separate ways.
The delegation was under instruction to coordinate
with the Germans, which we did. The Germans wcrc even
less forthcoming than we in the endeavor. Then they
were caught up in the EC effort to develop a common
line and left us behind.
The problem of coordination was further compounded
by the mischief of the Dutch. Pronk distributed the
four power statement on commodities of the US, UK,
Japan and Germany to the non-governmental organizations
who leaked it. That raised the temperature several
degrees. Then Pronk called a formal press conference
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on the four power statement and condemned it.
There is a general disposition not to concert DC
views unless there are compelling reasons of I
self-interest to do so. An agreement that is pitched
to the lowest common denominator, distasteful to those
who wish to be more forthcoming, will necessarily fall
apart under pressure from the developing countries.
There is, moreover, the belief that diversity of
views by the developed countries is in fact desirable
in the North/South context. With the LDCs fixed in
their position, having learned from long experience
that their strength is in their numbers if they can
stay together, a fixed DC position, especially if it
is fixed at a minimal level, will polarize the
dialogue and radicalize the developing countries. In
this view it is the LDC job to exert pressure and the
DC job to respond constructively with each developed
country responding at a pace that its own circumstances
may require.
There are surely a number of issues on which a
,DC consensus is not necessary. The developing
countries have urged, for example, that official
development aid should be at a minimum .7% of each
developed country's GNP. Some DCs give more aid,
some less. The US gives less and does not accept the
target. The failure to concert on this issue does not
injure the international economic system although it
may embarrass the US. Similarly, we do not need a
developed country consensus on the use of debt
rescheduling as a form of aid. Some developed countries
are prepared to reschedule official debt as a form of
aid; some are not. The US is constrained by Congress
not to do so. A
Given the difficulty of concerting positions among
the developed countries and the merit of retaining
some fluidity in the North/South dialogue, we should
seek agreement on some rules of the road. One such
rule might be that however diverse the positions
expressed by the developed countries may be, they
should not seek to undercut each other--as the Dutch
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did--in the North/South dialogue but let their positions
stand on their merits. Secondly, we should agree that
where LAC proposals would be injurious to the winter--
national economic system and therefore to our common
interest, we must concert to frustrate the'proposals.
Indexation is an example. Producer cartels is another.
It is not clear whether the Common Fund is yet another.
Some developed countries support the Common Fund
because they believe it may be useful, others because
they believe it will do noharm, and yet others
cynically because they do not expect it to come into
being, given US and German opposition. We can secure
a common developed country position on this issue only
if we can demonstrate that the Common Fund as proposed
by theUNCTAD Secretariat would indeed be injurious
to our common interests or seriously wasteful of our
resources, We would, of course, need a fall back
position on which most'DCs could agree, essentially
a variant of the Fourcade proposal.
In the Puerto Rico Declaration, participants
agreed that they should collaborate on "sound
solutions to (LDC) problems which enhance the efficient.
operation of the international economy". This is the
ideal formulation. We may have to settle for second
best and agree to concert in opposition to positions
that impair the operation of the international economy.
The Puerto Rico Declaration also calls on us to make
our efforts "mutually supportive, not competitive".
The second best formulation might be agreement not to
undercut each other in the North/South dialogue by overt
disparagement of less "forthcoming" positions or in
other ways.
Level and Naturc of US Representation
A candid assessment of our UNCTAD experience
should address the question of our representation at
UNCTAD. In the previous three ministerial meetings
of UNCTAD, our opening statement was made by an
Under Secretary of State who then departed, and the
final resolution of the disputed issues was made by
the delegation on the scene, not by ministers from
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capitals. This reflected our desire not to give
undue visibility or weight to the meetings.
UNCTAD is not our preferred forum for discussion
and negotiation of North/South issues. It is'an LDC
pressure cooker. And it is essentially a political
conference with an agenda of economic subjects. Its
size, bloc procedures, and extensive agenda--taken
together with the rigidity of LDC positions, pre-
negotiated at Manila--make genuine negotiation impossi-
ble except at the edges of the issues, and put a pre-
mium on political lobbying skills. Our preferred forums
for negotiations are functionally specific institutions
like the IMF, GATT, IBRD in which LDCs are full partici-
pants and are informed on the issues, where their voices,
are heard and their needs can be accommodated, and the
Secretariat prepares sober and balanced analyses. Or
perhaps CIEC which has the merits of small size, closed
sessions, and focus on specific issues, but the final
balance sheet on CIEC is not yet in. The IMF has
developed a number of new facilities to deal with
special LDC balance of payments needs. The MTN is
committed to give special attention to the trade needs'
of the developing countries. .The World Bank and the
regional banks are expanding their capitalization to
meet the needs of LDCs for development loans. r, {
Representation at UNCTAD at the highest level
calls world-wide attention to the forum and gives it
prominence and prestige. It also heightens expecta-
tions. The heightened expectations influence the
behavior of the LDC participants. They assume we are
more prepared to accommodate their proposals than we
intend, and they are more than ever inclined to stone-
wall as a result. Furthermore, the opening statement
of our representative must be bold and broad in scope,
with many new initiatives. We do not have an unlimited
supply of these.
At the Seventh Special Session-it was necessary
to turn the North/South dialogue around, to change
the tone of discourse and to shift the debate from
rhetoric to practical action. We set the agenda with
a broad range of forthcoming proposals which we are
pursuing in appropriate bodies. The Special Session was
an ad hoc event. UNCTAD is a continuing body. Its
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plenary is not a forum for reasoned debate. It is
weighted against us. Its Secretariat will continue
to develop new proposals to redress LDC "just grievances".
At UNCTAD as elsewhere it is necessary for us to make
the most effective case we can for our positions and
philosophy. But we should not give UNCTAD added weight
and influence. A more modest representation at its
ministerial meetings--with a larger proportion of officers
on the delegation who have multilateral experience in
political bodies like the UN General Assembly---would
accord better with our assessment of its usefulness.
In order to safely keep our representation at the
sub-ministerial level, we have to convince some other
major industrial countries to do the same.
UNCTAD will not go away, of course, or in the
unlikely event that it should, Special Sessions of
the GeneralAssembly in New York would replace it.
The essential lesson of our experience at UNCTAD IV
is the importance of preparing our positions and
initiatives with sufficient clarity and sufficiently
far in advance to allow full prior consultation as
necessary, so that we can make the most effective case
at future sessions... without needlessly enhancing the
prestige of this ideological body.
EB : RGol:d./I0: % Woodbury
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