Tuesday, September 21, 1976

SUMMARY OF DISCUSSION

SESSION I. A. QUESTION AND ANSWER PERIOD

Mr. Glinne introduced the European Parliament delegation's first question addressed to the U.S. Congress delegation. The question read:

The Conference on International Economic Cooperation (The North-South dialogue) between industrialized and less developed countries is considered by the European Community to be of fundamental importance for the future development of the world economy. The second phase of the dialogue has begun 14 September in Paris, after the first phase had ended in partial disagreement in July.

What is the opinion of the delegation from the U.S. Congress on the possibility of agreements in the four discussion areas, energy, raw materials, development and finance?

What opportunity does the American delegation see for joint policies and ventures between U.S. and EC interests in the furtherance of economic development in the Third World?

Mr. Rees replied that the United States did not yet have a definitive policy towards the Third World. In some areas, however, the United States was working towards such a policy. For instance the House of Representatives had pressed for changes in the articles of the International Monetary Fund (IMF) approving the removal of IMF resources from the gold standard, selling gold and using the proceeds. Countries with serious balance of payments problems could borrow from the fund, and also from a compensatory fund dealing with export earnings of developed countries. Greater leadership by governinents and parliaments was required to force the IMF, which often takes a banker's attitude, to develop its potential for helping the poor

countries.

CONGRESSIONAL SUPPORT MISSING

The United States was not increasing its bilateral aid partly because of waning congressional support and increasing public cynicism concerning the use of aid which had been given over such a long period by the United States. The United States was also remiss in its obligations to several international financial institutions. Aid was, regrettably, used by the United States more as an instrument of foreign policy than one of help to the countries which needed aid most.

At the most recent UNCTAD Conference, the developing countries came up with a number of good proposals to which the United States and the European Community had nothing of substance to offer in return. The speech made by Secretary of State Kissinger at UNCTAD was "an inch deep and a mile wide." Secretaries Kissinger and Simon had blamed the Communist countries for the lack of reaction to the U.S. Common Fund proposal, but the fact was that this proposal was made too late and without sufficient preparation.

PRIVATE INDEBTEDNESS A PROBLEM

He noted that much of the aid and loans for developing countries was raised privately. A different approach towards the indebtedness of less developed countries from that of public debts needed to be found.

Stabilization of commodity prices-short-term price fluctuations— could be helped by a common fund, but on a case by case review. Because some of the biggest exporters of raw materials were developed countries such as the United States, the Soviet Union, Canada and Australia, fixing high prices for raw materials exports would not necessarily help the developing countries' economic situation.

Loans and private investment could be of great help to the developing countries but under Secretary Simon the U.S. Treasury attitude to loans to the developing countries had not been helpful. The main need of the poorer countries was private capital. It would be helpful if guarantees could be worked out and provided for investors in the Third World. Some form of investment code and protection for investors was necessary.

DIRECT ELECTIONS

Mr. Gibbons introduced the U.S. Congress delegation's first question to the European Parliament delegation:

Will the beginning of direct elections to the European Parliament have immediate effects on the Parliament's responsibilities or will these changes come only gradually as direct elections affect the political life of the Community?

Mr. Stewart replied that there would be no immediate effects on Parliament's powers and responsibilities. These would come gradually. The only immediate change in law would be in the method of election of members. In fact, however, the authority of directly elected Members of Parliament would be greater and extensions of Parliament's powers would probably follow. At present, all members had a dual mandate. After direct elections many members would probably sit only in the European Parliament. They would be full-time members. This was bound to build up pressures for increases in Parliament's powers. Sir Peter Kirk was rapporteur of a report on this subject, which was at present before Parliament's Political Affairs Committee and which pointed in particular to the need for increased powers concerning the Community budget, the appointment of Members of the Commission, and in the field of external relations. As important as any formal increase in powers would be the probable increase in Parliament's political influence.

Mr. Gibbons asked whether the final documents concerning the direct elections were now ready.

Mr. Stewart said that the agreement between the governments had been signed the previous day in Brussels. The probable date for the first direct election was spring 1978. But Britain and other countries might have problems concerning parliamentary ratification and the date for elections might have to be put back. He personally believed that elections would probably be held in May or June 1978.

MONETARY DEVELOPMENT

Mr. Cousté introduced another question addressed by the European Parliament delegation to the U.S. delegation. The question read:

What proposals does the U.S. delegation suggest for the further development of the International Monetary System?

Mr. Stanton replied that the United States had been trying to legitimize parities which existed already. The United States has tried to help realine currencies. It had decreased the value of gold and also increased SDR's. The primary concern of the United States in the immediate future was to strengthen the role of the IMF. The present deficit problems had to be ended or reduced. Three possibilities exist: One approach would be to declare a debt moratorium, but this would be unwise and could lead to the collapse of the banking system. Another would be for the IMF to print money, but this would cause inflation and would also lead to the collapse of the banking system. Third is a search for ways to bolster the IMF in covering deficits.

MULTILATERAL TRADE NEGOTIATIONS

Mr. Martin introduced question No. 2 addressed by the U.S. delegation. The question read:

During the coming GATT negotiations, what does the European delegation foresee as the major agricultural issues confronting the United States and the European Community. For example, are equitable solutions possible on dairy products, vegetable oils, and feedgrains?

Mr. Houdet, in reply, said that the United States and the Community had discussed agricultural questions together in the past and had agreed on some issues. Both sides had to agree on medium-term and long-term agricultural policies which would insure stability and supplies. It should be remembered that U.S. agricultural exports to the Community were very much greater than those in the reverse sense. Milk products posed special problems but the problem here was not just an agricultural one but also social in nature in view of the comparatively high number of Europeans still engaged in agriculture. The Community had always respected GATT rules on agricultural trade. It should be remembered that the Community had, in the past, urged world agreements concerning certain products and also urged the creation of world stocks of certain products.

Mr. Fraser invited participants to broaden the discussion of issues covered in the four questions.

TOO MANY MEETINGS

Sir Peter Kirk commented that there seemed to be unnecessary duplication in the dialog between industrial and developing countries. There had been four UNCTAD meetings, the North-South dialog, and others. "We are over-talking" and not getting results on these problems. Could not the dialog be concentrated in one forum, and could not the OECD countries find a common position?

Mr. Stanton said that in his view the main problem was that the West had not done its homework properly in preparing proposals

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aimed at the developing world-notably at the recent UNCTAD Conference. On this front nothing could be done until January 1977 when the new administration would take office.

Mr. Bordu said that "complementarity" was a big problem for the developing countries. New technology was needed in these countries. The question should be raised of whether the "rich" countries could be considered absolute masters of "their own wealth". Were not the enormous debts of some of the developing countries only indications that the industrialized countries had found new ways of putting pressure on the poorer countries? The question of redeploying industry to the developing countries was an urgent one.

SIGNIFICANCE OF LOMÉ CONVENTION

Mr. Cousté wondered what was the role and interest of the U.S.S.R. and Eastern European countries in relations with the developing countries. It was important to recall that the Lomé Convention had stabilized receipts of the developing countries concerned for 12 products. The United States and Canada seemed to have reservations concerning this, but these receipts had a social as well as economic significance for the Lomé countries.

Mr. Glinne wondered whether the emphasis that had been placed on private investment, as opposed to state aid, reflected an ideological or political preference. Were the development plans favoured by the United States linked with reforms of the internal political structures of the developing countries concerned?

Mrs. Fenwick asked whether the methods which had been used in organizing the world tin market-which seemed to have been very successful could be applied to other products. She also asked whether it was wise to give loans to the developing countries in a way which only seemed to cripple the recipients by leading them into enormous debt problems. Mr. Stanton said that the questions raised in the general discussion had been most intriguing though he suspected that at some times questioners had themselves attempted to answer their own questions. The point made by Mr. Cousté about Soviet involvement was of course an important political question. Mr. Rees had probably been right in stressing the significance of the involvement of the private sector.

FORD, CARTER FOREIGN POLICIES

Mr. Jahn asked what differences were there likely to be between the foreign policies of President Ford and those of Governor Carter were he to become President.

Congressman Archer considered that if Governor Carter became President there would not be serious changes in foreign policy, though he would almost certainly carry out a review of U.S. foreign policy. Such a review could make Europeans nervous, particularly on troop levels, but he did not think that there would be any significant changes, though minor cuts might perhaps be made to U.S. forces in Europe and in Korea. Middle East policy would remain the same.

Mr. Fraser agreed that no major changes would occur in foreign policy if Governor Carter became President though there could be shifts of emphasis. In particular, Mr. Carter might wish to step up the consultation with Europe and Japan concerning relations with the Soviet Union, etc. He thought that Mr. Carter would be interested in increasing aid and would also place more emphasis on the importance of human rights in foreign policy.

Mr. Martin said that he thought Mr. Carter would be concerned in the United States playing a more important role in international conferences.