BRIEFING PACKAGE FOR DEPUTY SPECIAL TRADE REPRESENTATIVE - ROBERT HORMATS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000100120003-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: May 25, 2010
• Sequence Number: 3
• Publication Date: January 16, 1980
• Content Type: MEMO

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J
I - v ti
NATIONAL FOREIGN ASSESSMENT CENTER
16 January 1980
MEMORANDUM FOR: Doral Cooper, Staff Economist
Office of the Special Trade
Representative
Briefing Package for Deputy Special
Trade Representative - Robert
Hormats
In response to our recent conversation, attached
is some background reading for your trip with Deputy
Special Trade Representative, Robert-. Hormats to the
ASEAN countries for trade consultations and to India
for the UNIDO meeting. Included is the final version
of the UNIDO III paper which you had previously seen in
draft
25X6
25X1
C hie ,
Political/Econo is Issues Branch
Internatio,a Issues Division
Office of Political Analysis
x 16 Jan 00
MULTIPLE
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D/NFAC
NFAC Registry
Secretary of Production Board
NFAC Senior Review Panel
NFAC Coordination Staff
Presidential Briefing Coord.
D/OPA
OPA Production Staff
P&PG
CD/II
PE files
NFAC/OPA/II/PE! ~(16 Jan 80)
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CENTRAL INTELLIGENCE AGENCY
NATIONAL FOREIGN ASSESSMENT CENTER
16 January 1980
GROUP OF 77 POSITIONS AT UNIDO III
Overview
At the Third General Conference of the UN Industrial
Development Organization (UNIDO) in New Delhi, 2Z January-8
February, the developing countries (LDCs) will focus on
establishing UNIDO as a continuing forum to negotiate
solutions to wide-ranging industrial development issues.
Their strategy will be to seek international--rather than
national and regional--solutions to their industrialization
and development problems. The Group of 77, the LDCs' UN
caucus, will push hard for a broad commitment by advanced
countries to the principle of transferring industrial resources
to developing countries, including the establishment of
targets for the LDC share of world industrial production and
manufacturing trade by the year 2000. .In addition, the
LDCs have new ideas on financing the transfer of resources
to promote industrialization. The developed countries are
unwilling to make the broad commitment the LDCs are seeking,
indicating that UNIDO could turn into a major North-South
confrontation.
Background
The UN Industrial Development Organization is an organ
of the General Assembly whose primary mission is to promote
and accelerate industrialization in developing countries.
It probably will become a formal UN specialized agency
within 18 to 24 months after the UNIDO III meeting. Most
This memorandum was written byl International
Issues Division, Office of Political Analysis, and was coordinated
with the Office of Economic Research. The paper was requested by
the Office of the Deputy Special Trade Representative, Mr. Robert Hormats.
Comments and queries are welcome, and should be addressed to Chief,
Political-Economic Issues Branch, International Issues Division, Office
of Political Analysis
PAM 80-10026
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countries believe that the New Delhi conference will
determine the orientation and effectiveness of the future
specialized agency.
Procedurally, the conference agenda concentrates on a
global rather than endogenous approach to industrialization
advocated by developed countries. In large part, this
reflects Third World views that development issues should be
addressed within the global North-South context.
In addition to the general problem of making progress
on many of the ill-defined, global issues, delegates will
be faced with an increasing number of working papers and
technical reports. For example, "Industry 2000-New Per-
spectives," prepared by a UNIDO Secretariat task force,
outlines eight new proposals and nine recommendations for
institutional, financial, and legal measures to achieve
global industrial cooperation. The document has not received
widespread support among developing countries, industrialized
countries, or even the UNIDO Secretariat 'itself. Although
Executive Director Khane is actively promoting it. Other
components of the Secretariat apparently are also preparing
separate papers on various aspects of the conference agenda.
The Group of 77 will table the Havana Declaration, their
position paper resulting from the preparatory ministerial
meeting in Cuba in December. In addition the developed
countries will provide position papers of their own.
Most LDCs view the UNIDO conference as a platform to
pursue their general goals of a New International Economic
Order. This was certainly the case at the Second UNIDO
General Conference in March 1975 in Lima, which resulted in
the controversial Lima Declaration and Program of Action--a
broad-ranging document that restated LDC demands for the new
order. The Declaration called for a link between the prices
of finished products and raw materials, national sovereignty
over natural resources, advocated producer cartels, and
established a goal for LDCs of at least 25 percent of world
industrial production by 2000. The United States was
isolated in its vote against the final declaration; a number
of European Community (EC) states and Japan abstained.
Even though 1975 was a period of intense confrontation
in the North-South dialogue, circumstances surrounding the
meetings then and now are similar. The 1973-74 Arab oil
embargo had made oil price and supply issues a focus of
international concern, as they are today. The LDCs are
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concerned over their rapidly increasingly debt and deterio-
rating balance of payments situations--in large part due
to higher energy costs. Now, as then, they,are frustrated
over the slow pace and disappointing results of negotiations
with developed countries.
Many LDCs believe that the most recent UN General
Assembly resolution on industrial development produced
little substantive gain for the Group of 77, even after
difficult negotiations. However, they did not put their
full efforts into the General Assembly debate, believing
instead that they could be more successful in actively
pursuing their goals in New Delhi, where they certainly
will expect a more positive response from developed
countries.
LDC Preparations for UNIDO III
The Group of 77 position for UNIDO ICI is outlined
in the Havana Declaration, adopted by consensus at their
December 1979 ministerial meeting in Cuba. The document
is a composite of a draft prepared by Group of 77 delegates
in Vienna, and a paper prepared by the Cubans, as hosts
of the meeting. In fact, several days of the meeting were
lost to procedural debates--sometimes heated--over which document
to use as the basis for discussions. The formation of a
subgroup to draft an agreed text failed to ease the
problem. Although the subgroup was supposed to have nine
members--three representatives from each region--the
Group of 77 custom of open meetings resulted in most of the
delegations vying to have a say in the drafting of the
text.
The delays left the Group of 77 only limited time to
draft the final document, which reportedly draws heavily
from the Vienna text. It includes some of the stronger
language of the Cuban draft, as well as political references
to Zionism, Nicaragua and the Western Sahara issue. The
document reportedly does not adequately address the perceptions
of many LDCs on the future role and authority of UNIDO. In
addition, the group did not review the results of the three
regional preparatory meetings that took place last fall.
Reflecting the more technical, pragmatic discussions at the
regional meetings--as opposed to the political orientation
of the Group of 77 as a whole--Asian, African, and Latin
American meetings emphasized that industrialization problems
could be attacked at the national and regional levels. In
addition regional meetings criticized the "Industry 2000"
report by the UNIDO Secretariat for advocating unnecessary
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new UN bureaucracies. Both positions are more palatable to
the developed countries than the stances taken in the final
Group of 77 document.
Priority Issues to the Group of 77
The Group of 77 supports the Lima Declaration and Plan
of Action, but believes there has been little progress in
achieving its objectives. In addition to some debate over
the commitment of developed countries to the goals listed in
the Lima Declaration, the G-77 will table specific plans de-
signed to further promote LDC industrial development.
Targets
The Group of 77 will continue to press the industrialized
countries to agree to the Lima goal of a 25 percent share
for LDCs in world industrial production by 2000. However,
they now want to disaggregate this global target into mid-
term, regional and industrial sector targets.
The LDCs also want to increase their share of world
trade in manufactures by setting interim and long-range
targets for balancing the manufacturing trade between
developing and industrialized countries. By 2000 they want
the value of LDC exports of manufactures to developed
countries to equal imports of manufactures from those
countries.
Financing
The Group of-77 believes an increased and assured
flow of financial resources from developed countries is
essential to accelerate their industrialization and achieve
the Lima goals. The Havana document places a great deal of
emphasis on financial resource transfers. The Group of 77
endorsed Cuban President Castro's proposal for a transfer
by the developed countries to LDCs of at least an additional
$300 billion over the 1980-1990 decade, which would take the
form of financial and material resources and technical
assistance.
The Group of 77 has endorsed the proposal in "Industry
2000" for a Global Fund for the Stimulation of Industry.
This fund would be designed to make quick-disbursing program
(rather than project)-loans to LDCs. The fund would borrow
in capital markets against its paid-in and callable capital,
much like the World Bank. To aid the least developed., the
fund would make low interest loans with the difference
between the loan and market interest rate funded by in-
dustrial country contributions. The LDCs would like at
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least one-third of the fund to be earmarked for the least
developed, landlocked, island and most seriously affected
categories of countries. Unlike the developed countries,
the Group of 77 believes that UNIDO III is an appropriate
forum to pursue this proposal. Moreover, at least some
members of the UNIDO Secretariat will also be pushing hard
The Group of 77 apparently only endorsed further
consideration of the UNIDO Secretariat's proposal for an
International Industrial Finance Agency, designed to promote
long-term investment in LDCs. Since the Secretariat envisages
this agency as one to promote cooperation among LDCs that
is funded essentially by OPEC surpluses, the proposal
probably met some resistance from OPEC members.
The developing countries will probably demand that
developed nations make a binding commitment at UNIDO III to
achieve the $50 million per annum funding level for the UN
Industrial Development Fund. They will also call on countries
that have not contributed--including the United States--
to do so.
Redeployment and Restructuring of Industry
The concept of redeployment of industries from developed
to developing countries to achieve industrial restructuring
has been a contentious issue in previous discussions. While
developed countries are not opposed to restructuring of
industry, they see it as an evolutionary process responding
to market forces. Many LDCs argue that governmental inter-
vention is required, and they would like UNIDO to develop
guidelines for developed countries to hasten structural
adjustments.
UNIDO sponsors continuing--albeit ad hoc--consultations
on industrial redeployment and restructuring among technical
experts. The developing countries, however, are demanding
that a consultative system be made permanent and that it
include government representatives. The Group of 77 also
wants to use the consultations to monitor progress on the
targets established for their share of global industrial
production and trade. The developed countries want to prevent
these consultations from evolving into government-to-government
negotiations; but would like the consultations to continue
as at present, but with an increased emphasis on energy
issues. The EC (except the UK) and Nordic countries may
exhibit some flexibility in discussions with the Group of 77
on the consultation process. The East Europeans will
probably side with the Group of 77 in arguments for a
greater government role in redeployment and restructuring.
n r C' n n m
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Energy. Energy issues will undoubtedly come up at the
conference, because LDCs feel that energy costs and supply
are major constraints to their industrialization plans.
The Group of 77, however, has not outlined any specific
proposals in this area. There is no evidence that energy
arose as a contentious issue between oil-importers and
exporters at the Group of 77 ministerial.
Transfer of Technology
The Group of 77 will make familiar demands to increase
the flow of technology to LDCs, endorse the results of the
UN Conference on Science & Technology for Development, and
call for conclusion of the international code of conduct on
technology transfer. In addition, they may seek the creation
of an international industrial technology center to promote
the flow of technology information and cooperation, a varia-
tion of UNIDO Secretariat proposals for three new technology-
related institutions.
Outlook
The developing countries are going into UNIDO III
frustrated with the lack of progress in the North-South
dialogue, concerned over global economic uncertainty, and
prepared to demand a more positive response from developed
countries than they feel they received at UNCTAD V. Because
the response by developed countries will fall short of the
Group of 77's ambitious demands and proposals, the meeting
could self-destruct. OECD governments are generally united
in opposition a) to any new financial funds; b) to targets
for LDC industrial production and manufactures trade; c)
to the LDC concept of redeployment; and d) to turning UNIDO
consultations into negotiations. Although some discussion
of massive resource transfers will probably take place, it
is unlikely there will be any progress in establishing new
transfer schemes.
The tone of the meeting may depend to a large degree
on the ability of more moderate members of the Group of 77
to contain the rhetoric and confrontational tactics of some
countries. Working against Group of 77 militancy is the
threat that some countries--the United States in particular--
would not ratify UNIDO's specialized agency constitution.
LDCs are also preoccupied with preparations for the new
round of global negotiations--talks that were originally
designed to add new impetus to the stalled North-South
dialogue--and the General Assembly Special Session on
Development this fall. A confrontational UNIDO conference
will exacerbate already strained tensions between developed
and developing countries and risks hardening the industrialized
nations' response to LDC political and economic demands
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PA M 80-10026
Group of && 77 Positions at UNIDO III
16 January 1980
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