Foreign Relations of the United States, 1969–1976, Volume XXXI, Foreign Economic Policy, 1973–1976

301. Briefing Memorandum From the Director of the Policy Planning Staff (Lord) to Secretary of State Kissinger ¹

Washington, January 14, 1976.

Strategy for UNCTAD IV

With the CIEC Ministerial and the Jamaica IMF meeting completed² and planning for the commissions well under way, we are beginning to focus on another event of major significance to North/South relations—the fourth United Nations Conference for Trade and Development (UNCTAD IV), to be held in Nairobi from May 3–28, 1976, with Chuck Robinson leading the US Delegation.

While the entire array of global economic issues will arise, the conference will focus heavily on commodities, technology, LDC debt and finance problems, and the institutional role of UNCTAD itself. As we explain below, we can expect tough sledding on each of these issues both on substantive grounds and because of the UNCTAD organization itself, which has historically been the most confrontational of the UN economic bodies.

It is important that the overall UNCTAD issue is presented to you at this early date for several reasons. First, our strategy for the conference should be a factor in your future decisions relating to the scope and importance to be accorded the CIEC commissions, whose work in many cases will parallel the UNCTAD program. Second, UNCTAD will certainly arise in your conversations with LDC leaders between now and May. Third, since the coordination of general UNCTAD IV strategy among the developed countries will formally begin with special OECD meetings in February, UNCTAD may emerge in your meetings with industrialized country leaders, many of whom view the Nairobi meeting with some apprehension. In addition, if the OECD ministerial is held before May, we can expect a good part of it to deal with UNCTAD IV. Finally, making this conference even a mild US diplomatic success will require substantial executive branch effort. Since we can expect major interagency difficulties, we may be seeking your assistance at a relatively early date.

In this memorandum, prepared in close cooperation with E, EB, and IO, we discuss the politically significant issues which will arise in Nairobi, and we suggest a preliminary USG strategy.

Chuck Robinson has already taken a personal hand in planning for UNCTAD IV. He has asked the State–AID Task Force chaired by EB to develop a paper elaborating on the substantive issues which he plans to send to you early next month prior to interagency clearance.

The Significance of UNCTAD IV

UNCTAD IV will be highly significant politically for several reasons:

First, the conference has the potential to set back North-South relations, as it could degenerate into the kind of confrontational exercise that characterized its predecessors. We are concerned about this possibility not only because the G–77 will be making its usual array of demands, but because we have several major constraints on our flexibility: an uncertain domestic economic climate, the domestic political and congressional atmosphere, and the fact that we have implemented most of your Seventh Special Session initiatives which are cost free in terms of money or US domestic impact. Thus, from here on implementation of most other North-South economic proposals, old or new, will be very difficult for us. The ultimate consequences of an unsuccessful UNCTAD IV cannot be known, but it is possible to envision growing LDC frustration manifested in further radicalization of the “non-aligned”, strengthening of the now weakening OPEC–LDC alliance, more irresponsible bloc voting in international institutions, and possibly some adverse economic actions such as international defaults on debts to the West.

Second, the conference will be of extreme importance to LDC’s, who will undoubtedly play it as one phase of an intensified North-South negotiation, extending from the Seventh Special Session through the CIEC, UNCTAD IV, the next UNGA and the MTN. Moreover, UNCTAD as an organization has special meaning for the developing world, having prepared the intellectual foundations of much of the New International Economic Order and frequently being the LDCs’ preferred vehicle for carrying out policies ranging from commodities to technology.

Third, UNCTAD could be a problem for our relations with developed countries (DCs). We must combat the temptation of some of our allies to press proposals which divide the OECD countries. Two major possibilities concern debt moratoria and the SDR/aid link. We are almost isolated on the latter.

Fourth, UNCTAD represents some political opportunities. It is possible that a creditable effort on our part to reach compromises on one or two key issues—particularly commodities—could continue the Seventh Special Session/CIEC/Jamaica momentum. It is also possible that we can take advantage of the confluence of UNCTAD and CIEC and of the desires of several of the more moderate G–77 to make the CIEC work, and thus use the UNCTAD Conference to build up an agenda for CIEC as well as other specialized non-UN bodies. If we can squelch divisive proposals among DCs, UNCTAD IV gives us the chance to further harmonize DC policies toward the Third World, including concerted pressure on OPEC for moderate pricing policies and greater aid contributions. There may also be a chance of embarrassing the communist countries, particularly the USSR, who have increasingly been regarded with suspicion in UNCTAD because of the disparity between their political rhetoric and their meagre financial contributions to the developing world. In exploiting any of these opportunities the style of our negotiation will be as important as the substance of our positions, given that we already have a relatively forward position on many North-South issues.

Our Objectives for UNCTAD IV

Our UNCTAD objectives, which are part of our overall North-South goals, are as follows:

• —To encourage LDC behavior conducive to our interests in such areas as investment, supply access, voting in international forums and pressure on OPEC to follow reasonable pricing policies as well as carry its rightful share of the aid burden.
• —To foster economic development and to prevent LDC economic frustrations from spilling over into political and security affairs by making steady progress in meeting the legitimate economic needs of LDCs.
• —To maintain a leadership role in offering and shaping pragmatic and constructive solutions to real problems.
• —To strengthen the hand of the more moderate LDCs at the expense of G–77 cohesion.
• —To direct as much as possible of future North-South action away from the UNCTAD forum to others; and to instill in LDCs more confidence in non-UN forums.

Major Issues of UNCTAD IV

To attain these objectives, we will be searching for forthcoming but realistic positions on at least four issues, all of which will be further detailed in the paper Chuck Robinson is having prepared.

Foremost on the LDC list of priorities will be commodities (other than oil and grains). The UNCTAD secretariat has cooked up a broad commodity proposal—“The Integrated Commodity Program”—which centers on a series of ten buffer stocks financed by a “common fund” to which all producers and consumers would contribute according to a formula not yet clearly specified. The program does contain several ideas which we ourselves have advocated, such as removal of obstacles to market access and reliance on buffer stocks where feasible and appropriate.

However, we have several fundamental differences with the proposed Integrated Program. First, we do not accept the common fund idea; in fact, the USG does not believe in consumer financing of stocks, which is a prerequisite to any type of common financing. Even if we could accept the idea of consumer financing in some form we would hold fast to a case-by-case approach in which we (1) first determine where buffer stocks would be appropriate, (2) discuss relevant financial issues among producers and consumers of each specific commodity for which there is stocking, and (3) only then see if a common financing arrangement would have advantages over separate unrelated financing arrangements. Our second objection to the Integrated Program relates to general provisions for access to supplies, important to us not only because we are a major importer of raw materials but because domestic political support for our commodity policy rests in great part on the notion that supplies will be more reliable because of our new policies. At the most recent UNCTAD commodity meeting LDCs did not accept the principle of supply access. Equally significant, both Canada and Australia found major difficulties in accepting it as well. A third problem arises with indexing, which the UNCTAD commodity scheme implicitly includes. We are not certain, however, that most LDCs will insist on keeping this provision alive if they feel some progress is made in other areas of the Integrated Program.

The UNCTAD code for technology transfer is the second major issue. The developed country objective has been to negotiate voluntary guidelines for the international transfer of technology with special consideration for LDC development. However, the G–77 is insisting on a legally binding code (e.g., a treaty), which we cannot accept. The LDC position also differs from ours in its emphasis on governmental control over the terms of technology transfer, its negative view of patent laws, and its failure to recognize a standard of international law for arbitration and settlement of disputes.

A third issue is LDC debt problems, although the results of the Jamaica IMF meeting may quiet certain LDCs somewhat on this issue. Many LDCs have been calling for a variety of measures to avoid repaying debts, including more automatic rescheduling. At the Seventh Special Session the G–77 called for a world conference on debt, but it is not clear how attached they are to this totally unworkable proposal. At Nairobi there is bound to be substantial discussion of the SDR–aid link as well. On these issues our position is as follows: While we may offer more financing, the subject of debt-rescheduling is non-negotiable at this or any other forum. We currently do not support the SDR–aid link, although nearly all European countries are giving the idea public support.

Finally, the question of UNCTAD’s future institutional role will continually arise in Nairobi. Many LDCs are concerned that the CIEC commissions, with limited membership and more DC leverage than in most UN organizations, not supplant UNCTAD, where the cards are obviously stacked in the G–77 favor. They will therefore seek to feed issues into UNCTAD and to enlarge its scope and authority.

Preliminary Strategy

Given the traditionally defensive attitude of the USG and many other DCs towards UNCTAD, we need to plan early and from the top down in order to change our posture, both as a matter of style and substance—i.e., we need high-level political attention at the beginning of the planning process if we are to avoid ending up in a series of the lowest common denominators resulting from the interagency or the OECD consultation process. This is our best damage-limiting measure, and our only chance to seize what political opportunities exist.

We have learned that Congressional involvement in this type of activity is essential and helpful. We will want some members of Congress on the delegation.

Concerning the substantive aspects of our strategy, we see the following important elements:

• First, we will want to avoid raising LDC expectations for UNCTAD IV. This can be done in bilateral talks, in the CIEC, and in the March UNCTAD prepcon.
• Second, we will want to position ourselves to resolve several outstanding issues before or during the four-week conference. This will require the same kind of effort we gave CIEC in the planning stage.
• Third, we must find a way to deal with the Integrated Commodity Program, which will be the most politically significant issue of the Conference. Two major issues loom unresolved (assuming we can avoid dealing with indexation): the common fund and the need for all countries to accept general supply access obligations. We will be doing more analysis of the common fund in the US and in the OECD, and we might be able to propose an alternative idea, perhaps centering on an expanded IMF buffer stock facility or some IBRD financing. Difficulties in accepting supply access obligations are an issue for the OECD high-level group on commodities as well as the MTNs. As a first step we need a more detailed analysis in the USG as to what we really want, and are prepared to give, on the access question. (At this point, our import interests want us to press for supply access assurances; our exporters want us to resist giving them.) Finally, as regards international buffer stocks, we will be analyzing an alternative concept: coordinated national stocks. In some cases, particularly copper, the latter arrangement would be more acceptable to our domestic industry than an international scheme. There might also be an opportunity in selected cases to transfer the excess of national strategic stocks to national economic stocks as a way of establishing a new US economic stocking arrangement.
• Fourth, as opposed to following the Seventh Special Session format in which we attempt to dominate the Conference with a large number of initiatives, at UNCTAD IV we should attempt to stress implementation of UNGA initiatives and make at most a few new concrete action proposals, indicating that we are ready to initiate action almost immediately. We would, wherever possible, attempt to direct such action towards non-UNCTAD forums (e.g., CIEC, MTN, IMF, IBRD). One such possibility would be a new study of the SDR–aid link, perhaps as a long-term source of funding for the World Bank/IDA, to be conducted by the CIEC Development Commission in conjunction with the World Bank Group. Another would be to call for specific actions to implement your proposals for producer-consumer forums for key commodities where forums have not yet been established.
• Fifth, we should strive to broaden the agenda of the conference to take the heat off the tougher issues as much as possible. For example, we might wish to highlight general trade issues at the Conference. We believe that with GSP, the tropical products package which should by then be in the negotiating phase in Geneva, and with our efforts to develop special treatment for LDCs in the MTN, we will have a positive balance sheet. This should help to show the LDC’s that the MTNs, unlike UNCTAD, offer them the possibility of concrete gains.

Conclusion

UNCTAD IV is a politically significant event deserving your early attention. While we perceive some opportunities, the major stakes concern what we stand to lose in case of failure. It is thus imperative that we exert a maximum effort in the planning and execution of this conference. In addition to the issues paper you will be receiving in the coming weeks, we will return to you with an updated analysis of the situation and a more refined strategy at the time of the UNCTAD IV preparatory meeting in March. There may then be a need for more policy direction from you.

1. Source: National Archives, RG 59, Records of Secretary of State Henry Kissinger, Entry 5403, Box 19, Nodis Memcons, December 1976. Confidential. Sent through Robinson. Drafted by Jeffrey Garten and Michael Ely of the Policy Planning Staff. Neither Lord nor Robinson initialed the memorandum.
2. The IMF Interim Committee met on January 7 and 8; the IMF Development Committee met on January 9. Both meetings took place in Kingston, Jamaica. See Document 128.