line. So we would oppose an oil price in-
crease, and we hope that the OPEC countries
will reflect further on the impact on the
world economy of a continual increase in oil
prices.

Q. [Inaudible. In substance asks why the Secretary did not mention the U.N. Conference on Trade and Development in his IEA speech, and if he opposes an UNCTAD role in dealing with the commodity problem.]

Secretary Kissinger: With respect to commodities? These are the specific proposals that we have put forward. We are prepared to examine other forums where this might be considered.

Q. Mr. Secretary, you spoke at the outset of developing a kind of architecture to structure the world as we can see it develop. In your talks this morning with the French President, did you find him looking at the same structure, or did he have a housing plan of his own?

Secretary Kissinger: Well, I think that France prides itself on its independent foreign policy. Obviously, we have no objections to France having an independent foreign policy. On the whole my impression was of a considerable mutuality of approach. There could be occasional differences in tactics. There might be a difference in emphasis, but I thought on the overall approach that the talks were very satisfactory and were conducted in a very constructive and positive atmosphere.

Q. Mr. Secretary, I notice that there is some change in the time frame; when you spoke this morning, I believe it was "a month," and now you are speaking of "a few months."

Secretary Kissinger: It could be a question of my accent—that you did not hear the "s." Nothing has changed between what I said this morning and what I said this afternoon. We are prepared to begin discussions immediately. We are in discussions now with our IEA partners. We will be discussing in the near future after conclusions have been reached with the Government of France and will continue exploratory talks with the

producers. We have no reason to hold up
the resumption of the preparatory confer-
ence. Sometime in the next months, with an
"s" at the end; and that's what I intended
to say this morning.

Q. Following President Ford's discussion with President Sadat in Salzburg and Prime Minister Rabin in Washington, do you plan to go back to the area for a new shuttle diplomacy?

Secretary Kissinger: Well, the method of the diplomacy is not what is crucial, and it depends, of course, on what progress is made and toward what particular end. The United States has not excluded any particular approach. On the contrary, we are prepared to pursue any approach that makes progress toward peace. We have excluded a stalemate of any duration. So in principle we are prepared to be helpful in whatever direction the parties concerned believe would be most useful to them.

STATEMENT BEFORE THE MINISTERIAL
COUNCIL OF THE OECD, MAY 28

Press release 202 dated May 28

When free nations join forces for the
common good they can achieve great
things.

This organization embodies the legacy and
the hope of the Marshall plan, one of the
most creative achievements of international
collaboration. The nations represented here
have every reason to be proud of the ad-
vances which they have achieved for their
peoples during the past 30 years. Our prog-
ress has fostered global progress. Our suc-
cess has demonstrated that hope, prosperity,
and human dignity are not utopian dreams;
they can become practical possibilities for
all nations.

But the economic system which we labored
so hard to construct is now under stress.
The energy crisis of 1973 first dramatized
the forces of change which threaten to out-
run our capacity for cooperative action. A
food crisis, a global recession, and a rate of
inflation unprecedented in the postwar pe-

June 23, 1975

849

riod have further strained the structure of
international cooperation. At the same time,
the poorer nations have increasingly pressed
their demands for greater benefits and more
participation in the international system.

Economic expansion in the industrial
world and economic cooperation with the
less developed countries go hand in hand.
Only economic growth can satisfy competing
demands for more income and more oppor-
tunity within and among countries. An ex-
panding world economy is essential for de-
velopment. It stimulates trade, investment,
and technology; it supports necessary bi-
lateral and multilateral aid programs; it
assures growing markets for the raw ma-
terials, manufactures, and agricultural prod-
ucts of the developing countries; it provides
the best framework for accommodation on
the difficult, potentially divisive issues of
food, energy, raw materials, trade, and in-
vestment.

These issues go far beyond economic con-
siderations. Economic stagnation breeds
political instability. For the nations of the
industrialized world, the economic crisis has
posed a threat to much more than our na-
tional income. It has threatened the stability
of our institutions and the fabric of our
cooperation on the range of political and
security problems. Governments cannot act
with assurance while their economies stag-
nate and they confront increasing domestic
and international pressures over the distri-
bution of economic benefit. In such condi-
tions, the ability to act with purpose—to
address either our national or international
problems—will falter. If they are to con-
tribute to world security and prosperity, the
industrialized nations must be economically
strong and politically cohesive.

The Organization for Economic Coopera-
tion and Development reminds us of our
strengths. It calls attention to the wisdom
of our predecessors, who saw that we multi-
ply our effectiveness by our cooperation.
This organization was originally created to
promote cooperation among those few na-
tions which were already most advanced.
This is still a worthwhile objective, but to-
day's realities demand that we also increas-

ingly base our policies on the recognition
that growth in the industrial world is inex-
tricably linked to our relationship with the
rest of the world.

We thus face two important challenges:

- First, the challenge to the nations of the industrial world to restore sustained and stable economic growth, so essential to maintain confidence in their institutions.

- A challenge to all nations to improve the system of international economic cooperation, and thus provide greater opportunity for the less developed countries to share both the benefits and responsibilities of a growing world economy.

The industrialized nations are now experi-
encing the most serious economic crisis since
the Great Depression of the thirties. We
see it in widespread recession. We encounter
it in the inflation that has become the bane
of our societies. We note it in the increasing
difficulty of governments to manage their
economies and even to control their budgets.
We observe it in the declining incentives to
investment that many of the industrial de-
mocracies are willing to offer.

We see now how much all our social and
economic objectives depend on the general
trend of prosperity. A democratic society
thrives on a political and social consensus.
The distribution of economic benefit must be
broadly accepted as just or as offering op-
portunity for those who seek it. Otherwise
escalating wage and price demands, lagging
work performance, and labor unrest will un-
dermine productivity; and inflation, which
destroys growth and shatters hope, will be
the arbiter of social priorities. Stagnation
magnifies all our difficulties; stable growth
enhances our possibilities.

The Finance Ministers, meeting tomorrow,
will discuss specific measures to achieve our
goal. Secretary Simon will then describe in
detail the trend of American economic re-
covery. Today, let me offer some general
propositions about our long-term future.

Our first task is to rebuild confidence
through decisive, coordinated, and mutually
supportive action to promote sustained ex-
pansion. We must recognize, especially in

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Department of State Bulletin

the short- and medium-term management of
our economies, that the economic policies of
one nation can have a profound impact on
others. And the United States, because of
the size and impact of its economy, has a
particular obligation to recognize the mag-
nitude of its responsibility.

In the past we have kept each other in-
formed on short-term policy measures. In
a new departure, this past winter President
Ford consulted with Chancellor Schmidt [of
the Federal Republic of Germany], Prime
Minister Wilson [of the United Kingdom],
President Giscard d'Estaing [of France],
and former Prime Minister Tanaka [of
Japan] on our efforts to combat the reces-
sion. The major industrial countries need to
do so. It will greatly improve the chances
of avoiding the sequence of boom and bust
experienced these last three years. The
United States is prepared to cooperate fully
in such efforts.

Second, we must collaborate to sustain the
growth of international trade and invest-
ment. The great postwar effort to liberalize
trade, to lessen barriers to investment, and
to maintain free monetary exchanges has
nourished our prosperity for over a genera-
tion. Trade has consistently expanded at a
rate twice that of our domestic economy.
We must carry this momentum forward in
the OECD by renewing our pledge not to
resort to restrictive trade measures to cover
deficits resulting from current world eco-
nomic difficulties. And we must take advan-
tage of the multilateral trade negotiations
to lower tariffs and nontariff barriers and
improve the world trading system.

Third, as I outlined yesterday in the IEA,
we must collectively adopt strong national
and international policies on energy conser-
vation and the development of alternative
energy sources. This is indispensable if we
are to lower prices and inhibit the political
exploitation of a scarce resource. We must
end, or at least reduce, the vulnerability of
our economies to external economic or politi-
cal manipulation.

Finally, we must develop longer term
growth strategies by systematically address-
ing some fundamental questions:

-How can the industrial nations bring about the massive capital formation required over the next decade for an adequate rate of growth and for a new quality of life?

-What policies are needed to restore a
noninflationary environment, without which
long-term growth cannot occur?

-How can we encourage the research and
development necessary to advance the tech-
nology vital to growth and to share it with
others?

To begin the search for answers to such
questions, I propose that we constitute a
special group of distinguished economists
both in and out of government. Their pur-
pose should be to identify measures that
OECD nations can adopt to assure long-
term growth. This group should draw on
the projections now being developed within
the Economic Policy Committee and turn
them into policy recommendations for the
next ministerial meeting.

The importance of our economic coopera-
tion transcends immediate economic utility;
it also fosters our sense of community and
common interest. If we are to cooperate in
times of political and military crisis, we
cannot, in calmer periods, afford to be eco-
nomically weak, or disunited, or preoccupied
with clashing economic interests. The inter-
relationship of our political, economic, and
security interests which the United States
suggested two years ago is a fact, not a
theory.

Moreover, eased relations with the Com-
munist world presuppose the political unity
and economic vitality of the industrialized
countries. The East's incentive to play a re-
sponsible role in the world economy and to
improve political relationships with the in-
dustrialized nations will be enhanced as its
stake in our economic success grows. This
has been one of the more hopeful trends of
recent years and it is up to us to assure its
continuation.

Cooperation With the Developing Nations

Let me now turn to another crucial issue:
the relationship between the industrialized
nations and the developing world.

June 23, 1975

851

The world's prosperity will depend pri-
marily on the industrialized nations since we
account for 65 percent of the world's output
and 70 percent of its trade. But our eco-
nomic well-being depends on a structure of
international cooperation in which the de-
veloping countries are, and perceive them-
selves to be, participants. The new prob-
lems of our era—insuring adequate supplies
of food, energy, and raw materials—require
a world economy that accommodates the in-
terests of developing as well as developed
countries.

We in this organization all face the same
challenge, and we must face it together.
The political evolution and economic growth
of the last 30 years have brought about a
new diffusion of power. No nation or bloc
can dominate any longer. Economic issues
are turning into central political issues. Thus
it has become a central test of statesman-
ship to insure the orderly reconciliation of
conflicting interests and to prevent a slide
into political and economic warfare. Mis-
used economic power—as the past two years
have borne stark witness—can reverse the
trend of worldwide growth and retard prog-
ress for everyone. An international system
will be stable only so long as its economic
benefits are widely shared and its arrange-
ments are perceived as just. The United
States, and I am sure all of us in this room,
are ready to seek solutions to the problems
of international cooperation with imagina-
tion and compassion.

But it is evident that others must be ready
to follow a similar course. Confrontation
and cooperation cannot be carried on simul-
taneously. International meetings that ex-
haust themselves in self-indulgent rhetoric
or self-righteous propaganda help no one
and no cause. We do not consider it construc-
tive to participate in such exercises; we have
a clear interest in resisting bloc pressure tac-
tics or attempts to impose solutions through
hostility. Such methods are futile and counter-
productive. If the terribly complex issues
before us are to be resolved through tests
of strength, it is not the advanced industrial
powers who will pay the highest price. In-
stead, it will be the poorest and most dis-

advantaged—those in whose name and for
whose benefit these tactics are purportedly
used.

It is time to end the theoretical debate
over whether we are seeking a new order or
improving the existing one. Let us deal in
reality, not rhetoric. Let us address the prac-
tical common concerns of all the world's
peoples with realism, maturity, mutual un-
derstanding, and common sense. The United
States welcomes a dialogue in that spirit.
We will do all we can to make it succeed.

Simple labels falsify the many real com-
munities of interest which exist—some over-
lapping, some competitive, some comple-
mentary. One of the striking features of
the modern world economy is the diversity
of its participants. Among the countries
formerly classed as "developing," there have
emerged in the last decade new economic
powers with a growing capacity to export
manufactures and raw materials. The most
successful have fostered investment and
growth at home. To these emerging powers
have now been added the oil-rich countries.
Any nation with a moral claim to world
leadership—we as well as the newly wealthy
—must contribute to easing the plight of
the poorest countries. For who can deny
that every economic problem—stagnation,
inflation, high energy prices, food shortages
—hits them hardest?

The United States recognizes the responsi-
bility that accompanies its economic power.
We are prepared to do our part, in a spirit
of equality, mutual respect, and cooperation.
Yesterday I discussed our proposals for
achieving a successful multilateral energy
dialogue. Today let me turn to food, raw
materials, and trade and finance. A break-
down of the system in these areas would
foster economic chaos and instability. Suc-
cessful collaboration could usher in a new era
of economic advance and human progress.

Food—A Moral and Political Challenge

The global problems in food are a central
moral and political challenge. A world order
in which tens of millions starve and millions
more are undernourished will never be ac-

852

Department of State Bulletin

cepted as just. The good harvests expected
this year should not make us complacent,
for the world's total food requirements con-
tinue to grow dramatically. The gap between
what developing countries can produce and
what they need currently amounts to about
25 million tons. At current rates of produc-
tion and population growth, that gap is ex-
pected to double or triple in 10 years. Un-
less we act now, the world may face a series
of increasingly unmanageable food crises
over the next quarter century.

For the short term, food aid will continue
to be vital to feed the victims of poverty
and natural disaster. It is an international
responsibility—to be shared by all finan-
cially able countries. The United States has
pledged that it will make every effort to
provide at least 4 million tons of food aid
annually.

But this will not be enough. A long-term
solution to the food problem requires that
world food production capacity be greatly
increased, especially in the developing coun-
tries, and an international system of grain
reserves be created.

Let me turn to the U.S. proposals in these
areas.

Fortunately, the less developed nations
which are in greatest need also have the
greatest potential for increased production.
They possess large quantities of unused
water and cultivatable land and the greatest
possibility for improvement in crop yields.
Their success, however, requires vast
amounts of capital, new methods of planning
and funding, and more effective agricultural
policies and practices.

To these ends, the United States supports
two new international mechanisms:

First, the International Fund for Agricul-
tural Development—this Fund, proposed by
the oil-producing nations, is designed to
bring together all nations who are prepared
to contribute additional resources, over some
agreed base year, to agricultural develop-
ment. President Ford has asked me to an-
nounce that the United States will partici-
pate in the creation of such a fund. We
believe its resources should total at least
$1,000 million a year.

The link between funding and effective
agricultural development strategies should
be provided by a second organization, the
Consultative Group on Food Production and
Investment, which has already been orga-
nized as a result of the World Food Confer-
ence. This Group, sponsored by the World
Bank [International Bank for Reconstruc-
tion and Development (IBRD)], the U.N.
Development Program, and the Food and Ag-
riculture Organization, plans its first meeting
in July. It should be the central mechanism
for cooperation among traditional donors,
new donors, and the developing countries.

A crucial element in a long-term food
strategy is grain reserves. Short-term fluc-
tuations in food production, due to weather
or natural or other catastrophes, cause sharp
swings in price and availability of precious
grains and cause plagues of starvation. A
system of grain reserves would make it pos-
sible to alleviate famine in bad years as
well as reduce pressures on supply and
markets.

At the Rome Food Conference we agreed
to negotiate a new international system of
nationally held grain reserves. I recently
outlined the suggested principles for such
a system which the United States is prepared
to begin negotiating immediately:

- First, total world reserves must be large enough to meet potential shortfalls in food-grains production.

- Second, grain exporters and importers should agree on a fair allocation of reserve holdings, taking into account wealth, productive capacity, and volume of trade.

- Third, there should be agreed international rules or guidelines to encourage members to build up reserves in times of good harvest.

- Fourth, each participating country should be free to determine how its reserves will be maintained and what incentives will be provided for their buildup and maintenance.

- Fifth, rules or guidelines should be agreed for the drawdown of reserves, triggered by shortfalls in world production. There must be a clear presumption that all members will make reserves available when

June 23, 1975

853

needed and, conversely, that reserves will not be released prematurely or excessively, thereby depressing market prices.

—Sixth, in times of shortage the system must assure access to supplies for participating countries.

—Seventh, there must be special provisions to meet the needs of the poorer countries.

—Finally, the system must encourage expanded and liberalized trade in grains.

The United States is prepared to hold an important part of an agreed level of world reserves. If others join us, agreement on the outlines of a reserve system can be achieved before the end of the year.

## Commodity Issues, Trade, and Finance

A second area of increasing concern is commodities. The time is ripe for a detailed look at problems of commodity trade—for solutions that will benefit producers and consumers alike. The current system is marked by volatile prices, disruption of supplies, investment disputes, and increasing hostility to the private capital investment which remains indispensable for the transfer of resources and management skills.

Thus consumers as well as producers have an interest in effective arrangements. The consuming nations seek reliable supplies and prices. The producing countries seek reliable and growing export earnings to finance development and an adequate return on investments. All nations share an interest in ending the friction which characterizes the issue of raw materials. The debate is becoming more polarized and has already damaged other efforts for international cooperation. The failure of the preparatory energy conference last month is but a symptom of the larger problem we now confront. The longer we delay, the more difficult and painful it will be to find solutions.

The United States offers the following suggestions:

—First, we propose that new rules and procedures for access to markets and supplies be negotiated in the multilateral trade nego-

tiations now taking place in Geneva.

—Second, we do not believe that exclusive producers organizations are the best way to solve the commodity problem. In our view consumers and producers should jointly discuss their problems and possible remedial actions. We are prepared to do so. Specifically we are ready to discuss new arrangements for individual commodities on a case-by-case basis. We have already made proposals for a new International Coffee Agreement. We are ready to discuss other commodities as circumstances warrant.

—Third, I have recently suggested that the World Bank increase its financing of resource investments and explore new ways of combining its financing with private management, skills, technology, and capital.

—Finally, for most less developed countries, the key issue is the need for reliable long-term stability and growth in export earnings. Proposals have been made to review mechanisms for the stabilization of earnings, notably that of the IMF [International Monetary Fund] to protect the developing countries against excessive fluctuations in their export income. We are prepared to join others in this effort.

Others here will have their own views on how to proceed and on new ways of addressing the concerns of the developing nations. Cooperative action among the industrialized nations will multiply the effectiveness of our individual efforts and will insure that we have a clear understanding of common needs. The United States therefore strongly supports the OECD recommendation of a high-level group to study proposals on commodities.

The traditional areas of international economic cooperation, trade and finance, remain central elements of the economic structure. We cannot adequately provide for new areas of cooperation unless we first assure that the trading and monetary system is functioning effectively. While the present system has come through the last few years quite well, two problems stand out:

—First, developing countries with large and growing industrial sectors, particularly in East Asia and Latin America, require

854

Department of State Bulletin

expanding markets for their manufactured goods. The Tokyo Declaration's pledge to provide improved access to industrial world markets for developing countries must be implemented urgently for these countries.² And they should be given an opportunity to participate in the negotiations.

—Second, the poorest countries are badly in need of additional financial help. They now bear a double burden of higher prices for imported energy, food, fertilizer, and industrial goods and of reduced export earnings due to worldwide recession. We therefore support the creation by 1976 of a special trust fund of up to $2,000 million under the IMF. We have proposed that gold now held by the IMF be supplemented by other contributions, especially from oil producers, and be used to provide resources for half of this total. I hope that the countries of the OECD could put this proposal forward for action at the meetings of the IMF Interim Committee and IMF-IBRD Development Committee two weeks from now.

In short, we propose to base the relationship between developed and developing nations on a spirit of cooperation and good will. We urge the developing countries to approach the issue with the same attitude. We must all realize that the actual diversity of parties and interests demands a variety of responses, that no single solution can be adequate, and that cooperation among the parties most concerned is the most effective means of addressing common problems.

The United States welcomes the Secretary General's proposal for a comprehensive review of our economic relationships with developing countries. We also support the proposal of the Government of Japan for a major study within the OECD of the longer run development of the advanced industrial societies in harmony with the less developed countries.

It is not often in history that a fundamental challenge is so clearly visible and

presents such an opportunity to shape our future. We are summoned to seize the possibilities inherent in the new era which the whole world is now entering. We should be confident and not timid; others are seeking to join in what we have built. Our challenge is to encourage progress and not abstract ideological confrontation. With this attitude we can look forward with optimism to the major international deliberations before us such as the seventh special session of the U.N. General Assembly this fall.

Politically as well as economically, our era has been shaped by the Industrial Revolution and the progressive economic growth that it brought. Its impact has been rapid, its results prodigious, its effects remarkable. It has created a new age of well-being and helped rapid economic growth, which was confined to Western Europe and the United States a century ago, expand into many parts of the globe.

At home, this economic progress has been an essential underpinning of our democracies. It is the basis of a stable, progressive, and just political and social environment.

The new nations now striving to industrialize have, with our help, a similar opportunity. We have every reason to expect similar success in working together with them on the new challenges of food, raw materials, and energy. But, progress will not happen automatically.

So a great deal depends on our determination and vision. There are no plateaus in the affairs of mankind. What is not a step forward is at best stagnation; more often, it is a pause before retreat. There is no need to be dismayed by the problems we face, for progress implies problems. Circumstances have already provided the nations of the world with a unique perception of their interdependence. The opportunity to write a new and enduring chapter in the story of international cooperation is up to us.

We are prepared to respond to the imperatives we face. We have the awareness, the tools, and the determination. Let us now resolve to build the new era that our times demand.

²For text of the declaration, approved at Tokyo on Sept. 14, 1973, by a ministerial meeting of the Contracting Parties to the General Agreement on Tariffs and Trade (GATT), see BULLETIN of Oct. 8, 1973, p. 450.

June 23, 1975

855

UNGA Seventh Special Session
Sept. 1, 1975

Mr. President, Mr. Secretary-General, distinguished colleagues, ladies and gentlemen:

We assemble here this week with an opportunity to improve the condition of mankind. We can let this opportunity slip away, or we can respond to it with vision and common sense.

The United States has made its choice. There are no panaceas available -- only challenges. The proposals that I shall announce today on behalf of President Ford are a program of practical steps, responding to the expressed concerns of developing countries. We have made a major effort to develop an agenda for effective international action: we are prepared in turn to consider the proposals of others. But the United States is committed to a constructive effort.

For some time the technical capacity has existed to provide a tolerable standard of life for the world's four billion people. But we -- the world community -- must shape the political will to do so. For man stands not simply at a plateau of technical ability; he stands at a point of moral choice. When the ancient dream of mankind -- a world without poverty -- becomes a possibility, our profound moral conviction make it also our duty. And the convening of this special session bears witness that economic progress has become a central and urgent concern of international relations.

The global order of colonial power, that lasted through centuries, has now disappeared; the cold war division of the world into two rigid blocs has now also broken down and major changes have taken place in the international economy. We now live in a world of some 150 nations. We live in an environment of continuing conflicts, proliferating weapons, new ideological divisions and economic rivalry. The developing nations have stated their claim for a greater role, for more control over their economic destiny, and for a just share in global prosperity. The economically advanced nations have stated their claim for reliable supplies of energy, raw materials, and other products, at a fair price; they seek stable economic relationships and expanding world trade, for these are important to the well-being of their own societies.

These economic issues have already become the subject of mounting confrontations -- embargoes, cartels, seizures, countermeasures, and bitter rhetoric. Over the remainder of this century, should this trend continue, the division of the planet between north and south, between rich and poor, could become as grim as the darkest days of the cold war. We would enter an age of festering resentment, of increased resort to economic warfare, a hardening of new blocs, the undermining of cooperation, the erosion of international institutions -- and failed development.

Can we reconcile our competing goals? Can we build a better world, by conscious purpose, out of the equality and cooperation of states? Can we turn the energies of all nations to the tasks of human progress? These are the challenges of our time.

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PR #450

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We profoundly believe that neither the poor nor the rich nations can achieve their purposes in isolation. Neither can extort them from the other -- the developing countries least of all, for they would pay the greater cost of division of the planet, which would cut them off needlessly from sources of capital and markets essential to their own progress.

The reality is that ample incentives exist for cooperation on the basis of mutual respect. It is not necessarily the case that if some grow worse off, others will be worse off. But there is an opposite proposition, which we believe is true: that an economic system thrives if all who take part in it thrive. This is no theory; it is our own experience. And it is an experience that we, a people uniquely drawn from all the other peoples of the world, truely desire and hope to share with others.

Therefore it is time to go beyond the doctrines left over from a previous century that are made obsolete by modern reality.

History has left us the legacy of strident nationalism -- discredited in this century by its brutal excesses a generation ago, and by its patent inadequacy for the economic needs of our time. The economy is global. Recessions, inflation, trade relations, monetary stability, gluts and scarcities of products and materials, the growth of trans-national enterprises -- these are international phenomena and call for international responses.

History has also left us discredited doctrines of economic determinism and struggle. One of the ironies of our time is that systems based on the doctrine of materialism, that promised economic justice, have lagged in raising economic welfare.

And contrary to the ideologies of despair, many developing countries have been increasing their per capita incomes at far faster rates than obtained historically in Europe and North America in comparable stages of their growth.

It is also ironic that a philosophy of nonalignment, designed to allow new nations to make their national choices free from the pressure of competing blocs, now has produced a bloc of its own. Nations with radically different economic interests and with entirely different political concerns are combined in a kind of solidarity that often clearly sacrifices practical interests. And it is ironic also that the most devastating blow to economic development in this decade came not from "imperialist rapacity" but from an arbitrary, monopolistic price increase by the cartel of oil exporters.

The reality is that the world economy is a single global system of trade and monetary relations on which hinges the development of all our economies. The advanced nations have an interest in the growth of markets and production in the developing world; with equal conviction we state that the developing countries have a stake in the

X

PR #450

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markets, technological innovation and capital investment of the in-
dustrial countries.

Therefore, the nations assembled here have a choice: we can offer our
people slogans, or we can offer them solutions. We can deal in rhetoric,
or we can deal in reality. My government has made its choice.

The United States firmly believes that the economic challenges of
our time must unite us, and not divide us.

So let us get down to business. Let us put aside the sterile debate
over whether a new economic order is required or whether the cld
economic order is adequate. Let us look forward and shape the world
before us. Change is inherent in what we do, and what we seek. But
one fact does not change: that without a consensus on the realities
and principles of the development effort, we will achieve nothing.

-- There must be consensus, first and foremost, on the principle
that our common development goals can be achieved only by cooperation,
not by the politics of confrontation.

-- There must be consensus that acknowledges our respective concerns and our mutual responsibilities. All of us have rights and all of us have duties.

-- The consensus must embrace the broadest possible participation
in international decisions. The developing countries must have a
role and voice in the international system, especially in decisions
that affect them. But those nations who are asked to provide resources
and effort to carry out the decisions must be accorded a commensurate
voice.

We have learned from experience that the methods of development assis-
tance of the 1950s and 60s are no longer adequate. Not only did
the technical accomplishments of many programs fall short of expecta-
tions, the traditional approaches are less acceptable to the industrial-
ized world because they have seemed to become an endless and one-sided
financial burden. And they are less acceptable to the developing
world because they have seemed to create a relationship of charity
and dependency, inconsistent with equality and self-respect.

Therefore, we must find new means. The United States offers today
concrete proposals for international actions to promote economic
development. We believe that an effective development strategy should
concentrate on five fundamental areas:

-- First, we must apply international cooperation to the problem
of ensuring basic economic security. The United States proposes steps
to safeguard against the economic shocks to which developing countries

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are particulary vulnerable: sharp declines in their export earnings
from the cycle of world supply and demand, food shortages and natural
disasters.

-- Second, we must lay the foundations for accelerated growth.
The United States proposes steps to improve developing countries'
access to capital markets, to focus and adapt new technology to
specific development needs, and to reach consensus on the conditions
for foreign investment.

-- Third, we must improve the basic opportunities of the developing countries in the world trading system so they can make their way by earnings instead of aid.

-- Fourth, we must improve the conditions of trade and investment in key commodities on which the economies of many developing countries are dependent, and we must set an example in improving the production and availability of food.

-- Fifth, let us address the special needs of the poorest countries, who are the most devastated by current economic conditions, sharing the responsibility among old and newly wealthy donors.

The determination of the developing nations to mobilize their own effort is indispensable. Without it, no outside effort will have effect. Government policies to call forth savings, to institute land reform, to use external aid and capital productively, to manage and allocate national resources wisely, to promote family planning -- for these there are no substitutes.

But there must be international as well as national commitment.
The United States is prepared to do its part. The senior economic
officials of our Government have joined with me in developing our
approach. Treasury Secretary Simon, with whom I have worked closely
on our program, will discuss it tomorrow in relation to the world
economy. The large Congressional delegation that will attend the
session, and the seriousness with which they and the Executive
branch have collaborated in preparing these proposals, are evidence
of my country's commitment.

We ask in return for a serious international dialogue on the respon-
sibilities which confront us all.

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ENSURING ECONOMIC SECURITY

Our first task is to ensure basic economic security.

The swings and shocks of economic adversity are a global concern, tearing
at the fabric of developed and developing nations alike. The cycle of
good times and bad, abundance and famine, does vast damage to lives and
economies. Unemployment, falling standards of living, and the ravages of
inflations, fuel social and political discontent. We have recently seen
the corrosive effects in many countries.

Developing economies are by far the most vulnerable to natural and man-made disasters, the vagaries of weather and of the business cycle, sharp increases in the prices of oil and food have a devastating effect on their livelihood. Recessions in the industrial countries depress their export earnings.

Thus economic security is the minimum requirement of an effective strategy for development. Without this foundation, sound development programs cannot proceed and the great efforts that development requires from poor and rich alike cannot be sustained.

And because economic security is a global problem, it is a global
challenge:

-- the industrial nations must work together more effectively to restore and maintain their non-inflationary expansion.

-- Nations which supply vital products must avoid actions which disrupt that expansion, and

-- the international community must undertake a new approach to reduce drastic fluctuations in the export earnings of the developing countries.

Since the economic health of the industrial countries is central to the health of the global economy, their efforts to avoid the extremes of recession and inflation become an international, as well as a national, responsibility.

In a new departure this past year, the leaders of the United States and its major trading partners have begun closer coordination of their nation economic policies. A shared sense of urgency, and the exchange of information about trends and intentions, have already influenced important policy decisions. President Ford intends to continue and intensity consultations of this kind. The successful recovery of the industrial economies will be the engine of international stability and growth.

Global economic security depends, secondly, on the actions of suppliers of vital products.

Thus the United States has believed that the future of the world economy requires discussions on energy and other key issues among oil consuming and producing nations. The Government of France is inviting industrialized oil producing, and developing nations to re-launch a dialogue this fall

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on the problems of energy, development, raw materials, and related financial issues. The United States has supported this proposal and worked hard to establish the basis for successful meetings.

But this dialogue is based on an approach of negotiation and consensus, not the exercise of brute economic power to gain unilateral advantage. The enormous, arbitrary increases in the price of oil of 1973 and 1974 have already exacerbated both inflation and recession worldwide. They have shattered the economic planning and progress of many countries. Another increase would slow down or reverse the recovery and the development of nearly every nation represented in this Assembly. It would erode both the will and the capacity in the industrial world for assistance to developing countries. It would, in short, strike a serious blow at the hopes of hundreds of millions around the world.

The forthcoming dialogue among consumers and producers is a test. For its part, the United States is prepared for cooperation. We will work to make it succeed, in our own self-interest and in the interest of all nations. We hope to be met in that same spirit.

The third basic factor in economic security is the stability of export earnings. The development programs -- indeed the basic survival -- of many countries rest heavily on earnings from exports of primary products which are highly vulnerable to fluctuations in worldwide demand. Countries which depend on one product can find their revenues reduced drastically if its price drops or if exports fall precipitously. Most have insufficient reserves to cushion against sharp declines in earnings, and they cannot quickly increase the exports of other products. Facing such economic problems, most cannot borrow to offset the loss, or can only do so at extremely high interest rates. In such situations countries are frequently forced to cut back on the imports on which their growth and survival depend. Thus the unpredictability of export earnings can make a mockery of development planning.

The question of stabilization of income from primary products has become central in the dialogue on international economic concerns. Price stabilization is not generally a promising approach. For many commodities it would be difficult to achieve without severe restrictions on production or exports, extremely expensive buffer stocks, or price levels which could stimulate substitutes and thereby work to the long range disadvantage of producers. Even the most ambitious agenda for addressing individual commodities would not result in stabilization arrangements for all of them in the near term. And focusing exclusively on stabilizing commodity prices would not provide sufficient protection to the many developing countries whose earning also depend on the exports of manufactured goods.

The United States Government has recently completed a review of these issues. We have concluded that, because of the wide diversity among countries, commodities, and markets, a new, much more comprehensive approach is required -- one which will be helpful to exporters of all commodities and manufactured goods as well.

Let me set forth our proposal: The United States proposes creation -- in the International Monetary Fund -- of a new development security

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facility to stabilize overall export earnings.

-- The facility would give loans to sustain development programs in the face of export fluctuations -- up to $2.5 billion, and possibly more, in a single year, and a potential total of $10 billion in outstanding loans.

-- Assistance would be available to all developing countries which need to finance shortfalls in export earnings, unless the shortfalls are caused by their own acts of policy.

-- The poorest countries would be permitted to convert their loans into grants under prescribed conditions. These grants would be financed by the proceeds of sales of IMF gold channeled through the proposed $2 billion trust fund now under negotiation.

-- Eligible countries could draw most, or under certain conditions all of their IMF quotas, in addition to their normal drawing rights. Much of that could be drawn in a single year, if necessary -- part automatically, part subject to balance of payments conditions, and part reserved for cases of particularly violent swings in commodity earnings.

-- Shortfalls would be calculated according to a formula geared to future growth as well as current and past exports. In this way the facility helps countries protect their development plans.

-- This facility would replace the IMF's compensatory finance facility; it would not be available for industrial countries.

The United States will present its detailed proposals to the Board of Directors of the International Monetary Fund this month.

This development security facility would provide unprecedented protection against disruptions caused by reductions in earnings -- both for countries whose exports consist of a few commodities and for those with diversified and manufactured exports whose earnings also fluctuate with business cycles. In the great majority of countries, this new facility will cover nearly all the earnings shortfall.

This new source of funds also reinforces our more traditional types of assistance -- without the stabilization of earnings, the benefits of concessional aid for developing countries is vitiated. For industrialized countries, it means a more steady export market. For developing countries, it helps assure that development can be pursued without disruption and makes them more desirable prospects in international capital markets. For consumers and producers, rich and poor alike, it buttresses economic security.

Thus the success of our efforts in this area will demonstrate that our interdependence can strengthen the foundations of prosperity for all while promoting progress in the developing countries.

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ACCELERATING ECONOMIC GROWTH

It is not enough to ensure the minimal economic security of the developing countries. Development is a process of growth, of acceleration, of greater productivity, higher living standards, and social change. This is a process requiring the infusion of capital, technology, and managerial skills on a massive scale.

Developing countries themselves will have to provide most of the effort, but international support is indispensable. Even a moderate acceleration of recent growth rates will require some $40 billion a year in outside capital by 1980. The requirement for technological innovation, though impossible to quantify, is similarly great.

How can these needs for capital, technology, and skills be met?

Bilateral concessional assistance from the industrialized countries has been one important source. Last year it amounted to some $7.2 billion. This must continue to grow. But realistically, we cannot expect the level to increase significantly over the coming years. To put it frankly, the political climate for bilateral aid has deteriorated. In the industrial countries, support for aid has been eroded by domestic economic slowdown, compounded by energy problems in the developing countries. There is resentment at forms of assistance which imply dependence.

The oil exporters have only begun to meet their responsibility for assistance to the poorer countries. Last year their concessionary aid disbursements were roughly $2 billion; it could -- and must -- rise substantially this year.

But the industrial nations and the oil exporters cannot, even together, supply all the new resources needed to accelerate development. It follows inescapably that the remaining needs for capital and technology can only be met, directly or indirectly, from the vast pool of private sources. This investment will take place only if the conditions exist to attract or permit it. The United States therefore believes it is time for the world community to address the basic requirements for accelerating growth in developing countries:

- First, developing countries must have better access to capital markets;

- second, we must promote the transfer of technology;

- third, it is time to reach an international consensus on the principles to guide the beneficial operation of transnational enterprises.

First, access to capital markets. The private capital markets are already a major source of development funds, either directly or through intermediaries. The World Bank a

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the regional development banks borrow extensively to lend to developing nations. The United States urges the expansion of these programs. We are gratified that advanced countries outside of the Western Hemisphere are joining us shortly in a $6 billion expansion of the Inter-American Development Bank. We will participate in negotiations for replenishment of the Asian Development Bank; and we are seeking Congressional authority to join the African Development Fund.

But the developing countries that have been most successful and that no longer require concessional aid, especially in Asia and Latin America, have relied heavily on borrowing in the capital market. Their future access must be assured.

We must now find new ways to enhance the opportunities of developing countries in the competition for capital. And we need to match in new ways potential sources of capital with the investment needs of developing countries.

Several courses of action offer promise. First, the United States will support a major expansion of the resources of the World Bank's International Finance Corporation -- the investment banker with the broadest experience in supporting private enterprise in developing countries. We propose a large increase in the IFC's capital, from the present $100 million to at least $400 million.

Secondly, the United States proposes creation of an International Investment Trust, to mobilize portfolio capital for investment in local enterprises. The trust would attract new capital by offering investors a unique opportunity -- participation in a managed broad selection of investments in developing country firms, public, private and mixed. The International Finance Corporation would manage it and perhaps provide seed capital, but most of its funds would come from government and private investors. Investors would have their exposure to major losses limited by a $200 million loss-reserve, provided by governments of industrialized, oil-producing, and developing nations. This institution could be a powerful link between the capital market and the developing world, and could provide billions of dollars of essential resources.

Thirdly, the United States will contribute actively to the work of the IMF/World Bank Development Committee to find ways to assist developing countries in their direct borrowing in the capital market. It is encouraging that the Latin American countries are considering a regional financial safety net to underpin their access to capital markets by mutual commitments of financial backing.

Finally, we believe that all industrial countries should systematically review the conditions for developing-country access to their national markets, to assure that they offer fair and open opportunity. The United States is prepared to provide technical assistance and expertise to developing countries ready to enter long-term capital markets, and we ask others to join us.

Developing countries need not only new funds but also new technology. Yet the mechanisms for the transfer of technology and for its local

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development are limited, and are seldom at the sole command of national governments, and the technologies of industrial countries must often be adapted to local economic and social conditions. New institutions and new approaches are therefore required.

For technology to spur development, it must spur growth in priority areas: energy, food, other resources strategic to their economies, and industrialization itself.

First, energy is critical for both agricultural and industrial development. The enormous rise in the cost of oil in the last two years has more than wiped out the total of the foreign aid that developing countries have received. It has undermined their balance of payments and has mortgaged their future by forcing them into larger borrowing at higher interest rates. There is no easy short-term solution, but if energy dependence is to be reduced, efforts to exploit new and diversified sources must be intensified now.

- The United States invites other nations to join us in an increase of bilateral support for training and technical assistance to help developing countries find and exploit new sources of fossil fuel and other forms of energy.

- Methods of discovering and using less accessible or low-grade resources must be fully utilized. So must technology to produce solar and geothermal power. And these techniques must be suited to the conditions of the developing countries.

- The United States believes the topic of energy cooperation should be high on the agenda for the forthcoming dialogue between consumers and producers. We will propose, in this dialogue, creation of an International Energy Institute bringing together developed and developing, consumer and producer, on the particular problem of energy development. The International Energy Agency and the International Atomic Energy Agency should both find ways to give technical assistance and support to this Institute.

A second critical area for technological innovation is food production and improvement of nutrition.

- During the past decade, a number of international agricultural research centers have been established to adapt techniques to local needs and conditions. In 1971 the Consultative Group for International Agricultural Research was formed to coordinate these efforts. The United States is prepared to expand the capacity of these institutes. In collaboration with national research organizations with more skilled manpower and funds, they could grow into a worldwide research network for development of agricultural technology.

- We are also supporting legislation in the Congress to enable our universities to expand their technical assistance and research in the agricultural field.

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Non-food agricultural and forestry products are a third strategic area for technological assistance. The export earnings of many of the poorest countries -- and the livelihood of many millions of their people -- depend on such products as timber, jute, cotton, and natural rubber, some of which have encountered serious problems in the face of synthetics. They urgently need assistance to improve the productivity and competitiveness of these products and to diversify their economies.

-- The United States therefore proposes creation of an organization to coordinate and finance such assistance. Its task will be to attract manpower and capital for research. The financing of this effort should be a priority task for the new International Fund for Agricultural Development.

But developing countries' need for technology is not only for development of strategic sectors, but for the broad promotion of industrialization itself. This requires the broadest application of skills, resources, and information.

-- This is not an easy task. The storehouse of technology is already huge and is growing geometrically. Developing practical devices to transfer technology beyond those which already exist will require careful thought. We are prepared to join with other nations in examining new initiatives.

-- To this end the United States supports creation of an International Industrialization Institute, to sponsor and conduct research on industrial technology together with the governments, industries, and research facilities of developing countries.

-- We support creation of an International Center for the Exchange of Technological Information, as a clearing house for the sharing of ongoing research and new findings relevant to development.

-- We will expand our bilateral support of industrial technology appropriate to developing country needs.

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-- We will work with others in this organization in preparing guidelines for the transfer of technology and in the planning of a conference on science and technology for development.

Access to capital markets, and special programs to transfer new technology, are but two factors of accelerated growth. There is a third -- which may well be one of the most effective engines of development -- the transnational enterprise.

Transnational enterprises have been powerful instruments of modernization both in the industrial nations -- where they conduct most of their operations -- and in the developing countries, where there is often no substitute for their ability to marshall capital, management, skills, technology and initiative. Thus the controversy over their role and conduct is itself an obstacle to economic development.

It is time for the world community to deal with the problems, real and perceived, that have arisen. If the nations assembled here cannot reach consensus on the proper role of these enterprises, the developing countries could lose an invaluable asset. Let us make this issue a test of our capacity to accommodate mutual concerns in practical agreement.

For our part, the United States is prepared to meet the proper concerns of governments in whose territories transnational enterprises operate. We affirm that enterprises must act in full accordance with the sovereignty of host governments and take full account of their public policy. Countries are entitled to regulate the operations of transnational enterprises within their borders. But countries wishing the benefits of these enterprises should foster the conditions that attract and maintain their productive operation.

The United States therefore believes that the time has come for the international community to articulate standards of conduct for both enterprises and governments. The United Nations Commission on Transnational Corporations, and other international bodies, have begun such an effort. We must reach agreement on balanced principles. These should apply to transnational enterprises in their relations with governments, and to governments in their relations with enterprises and with other governments. They must be fair principles, for failure to reflect the interests of all parties concerned would exacerbate rather than moderate the frictions which have damaged the environment for international investment.

Specifically, the United States believes that:

-- Transnational enterprises are obliged to obey local law and refrain from unlawful intervention in the domestic affairs of host countries. Their activities should take account of public policy and national development priorities. They should respect local customs. They should employ qualified local personnel, or qualify local people through training.

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-- Host governments in turn must treat transnational enterprises equitably, without discrimination among them, and in accordance with international law. Host governments should make explicit their development priorities and the standards which transnational enterprises are expected to meet, and maintain them with reasonable consistency.

-- Governments and enterprises must both respect the contractual obligations that they freely undertake. Contracts should be negotiated openly, fairly, and with full knowledge of their implications. Greater assurance that contracts will be honored will improve the international commercial environment, increase the flow of investment, and expand economic transactions. Destructive and politically explosive investment disputes, which spoil the climate for large commitments and investment, will occur less frequently.

-- Principles established for transnational enterprises should apply equally to domestic enterprises, where relevant. Standards should be addressed not only to privately owned corporations, but also to state owned and mixed transnational enterprises, which are increasingly important in the world economy.

A statement of principles is not the only or necessarily a sufficient way of resolving many of the problems affecting transnational enterprises. We must develop others:

-- Governments must harmonize their tax treatment of these enterprises. Without coordination, host-country and home-country policies may inhibit productive investment.

-- Fact-finding and arbitral procedures must be promoted as means for settling investment disputes. The World Bank's International Center for the Settlement of Investment Disputes, and other third-party facilities, should be employed to settle the important disputes which inevitably arise.

-- Laws against restrictive business practices must be developed, better coordinated among countries, and enforced. The United States has long been vigilant against such abuses in domestic trade, mergers, or licensing of technology. We stand by the same principles internationally. We condemn restrictive practices in setting prices or restraining supplies, whether by private or state-owned transnational enterprise or by the collusion of national governments.

-- Insurance for foreign private investors should to the extent possible be multilateralized, and should include financial participation by developing countries to reflect our mutual stake in encouraging foreign investment in the service of development.

-- And there must be more effective bilateral consultation among governments to identify and resolve investment disputes before they become irritants in political relations.

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TRADE AND DEVELOPMENT

The third basic area for our attention is trade. Improving the world trading system will magnify our success in every other sphere of the development effort.

Trade has been a driving force in the unprecedented expansion of the world economy over the last thirty years. Comparative advantage and specialization, the exchange of technology and the movement of capital, the spur to productivity that competition provides -- these are central elements of efficiency and progress. Open trade promotes growth and combats inflation in all countries.

For developing nations, trade is perhaps the most important engine of development. Increased earnings from exports help pay for both the imports that are essential to expand production and the food for growing populations. These earnings reduce dependence on aid, limit the accumulation of debt, and help finance essential borrowing. Growing export industries can provide jobs and increase the government revenues necessary for development programs. It is no accident, therefore, that the success stories in development of the past three decades have been those very countries that have taken full advantage of the opportunities in world trade.

But today the global trading system is threatened by the most serious recession since the Second World War. We face the danger of proliferating artificial barriers, and unfair competition reminiscent of the 1930's which contributed to economic and political disaster. Every day that economic recovery is delayed, the temptation grows to restrict imports, subsidize exports, and control scarce commodities. Concerted action is necessary now to safeguard and improve the open trading system on which the future well-being of all our countries depends.

The multilateral trade negotiations now taking place in Geneva are central to this effort. They will have a profound impact on the future of the world economy and the prospects for development. If these negotiations fail, all countries risk a slide into an increasingly fragmented, closed world of nationalism, blocs, and mounting frictions. If they succeed, all countries will benefit and there will be major progress toward a cooperative and prosperous world.

Many of the less-developed nations are emerging as important commercial powers. But developing countries need assistance to take better advantage of trading opportunities, especially to help them open up new markets. In revising rules to govern trade we must take account of their particular needs. In this connection, regional trading associations can help many small countries by providing the economies of scale which result from larger markets.

Thus success in the negotiations depends critically on promoting the interests of the developing countries. For if they do not help to make the rules, assume part of the responsibility to maintain a stable trade system and share in the benefits of trade, the rules will be subject to increasing challenge, the stability of the system undermined and the benefits for all nations jeopardized.

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The United States therefore believes that a major goal of the multi-lateral trade negotiations should be to make the trading system better serve development goals. Let me briefly outline our policy.

First, there must be fundamental structural improvement in the relationship of the developing countries to the world trading system. In the earlier stages of their development, they should receive special treatment through a variety of means -- such as preferences, favorable concessions and exceptions which reflect their economic status. But as they progress to a higher level of development, they must gradually accept the same obligations of reciprocity and stable arrangements that other countries undertake. At some point they must be prepared to compete on more equal terms, even as they derive growing benefits.

Second, we must improve opportunities for the manufacturing sectors of developing countries. These provide the most promising new areas for exports at the critical stage in development, but the tariffs of industrial countries are a substantial obstacle. To ease this problem the United States has agreed to join other industrial countries in instituting generalized tariff preferences to permit developing countries enhanced access to the markets of industrialized nations.

I am pleased to announce today that the United States program will be put into effect on January 1, 1976. And before that date, we will begin consultations and practical assistance to enable exporting countries to benefit from the new trade opportunities in the American market -- the largest single market for the manufactured goods of developing countries.

Third, in keeping with the Tokyo Declaration, we should adapt rules of non-tariff barriers to the particular situation of developing countries. In setting international standards for government procurement practices, for example, the United States will negotiate special consideration for the developing countries. We will also negotiate on the basis that under prescribed conditions, certain subsidies may be permitted without triggering countervailing duties for a period geared to achieving particular development objectives.

Fourth, we will work for early agreement on tariffs for tropical products which are a major source of earnings for the developing world. Moreover, the United States will implement its tariff cuts on these products as soon as possible.

Finally, we are ready to join with other participants in Geneva to negotiate changes in the system of protection in the industrialized countries that favors the import of raw materials over other goods. Many countries impose low or no duties on raw materials and high duties on manufactured or processed goods; the tariff protection increases or "escalates" with the degree of processing. Nothing could be better calculated to discourage and limit the growth of processing industries in developing countries. The United States will give high priority in the Geneva negotiations to reducing these barriers.

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(c)

The developing countries have obligations in return. The world needs a system in which no nation, developed or developing, arbitrarily withholds or interferes with normal exports of materials. This practice -- by depriving other countries of needed goods -- can trigger unemployment, cut production, and fuel inflation. It is therefore as disruptive as any of the other trade barriers I have discussed. We urge negotiations on rules to limit and govern the use of export restraints, a logic extension of existing rules on imports. The United States will join others in negotiating supply access commitments as part of the reciprocal exchange of concessions.

But commodities can be addressed only in part in the context of the trade negotiations. For some serious commodity problems, special arrangements and different institutional structures are required. Let me now turn to that subject.

## COMMODITY TRADE AND PRODUCTION

Exports of primary products -- raw materials and other commodities -- are crucial to the incomes of developing countries. These earnings can lift living standards above bare subsistence; generate profits to support the first steps of industrialization; and provide tax revenues for education, health, and other social programs for development. The history of the United States -- and many other countries -- confirms the importance of commodities.

But this path can be precarious in an uncertain global environment. Those developing countries which are not oil exporters rely on primary commodities for nearly two-thirds of their export earnings. Yet their sales of raw materials and agricultural products have not grown as fast as those of industrial countries. Agricultural commodities, particularly are vulnerable to the whims of weather and swings of worldwide demand. The market in minerals is especially sensitive to the pendulum of boom and bust in the industrial countries. The result is a cycle of scarcity and glut, of under-investment and over-capacity.

Developing countries are hit hard by commodity cycles also as consumers; higher prices for energy imports, swings in the price and supply of food and greater costs for other essential raw materials have been devastating blows, soaking up aid funds and the earnings by which they hoped to finance imports. All this can make a mockery of development plans.

But the problems of commodities are not the problems only of developing countries. The industrialized countries are in fact the largest exporters of food and most minerals. Gyrating prices complicate economic decision in industrial countries. And consumers in industrial countries have painfully learned that high commodity prices leave their inflationary impact long after the commodity market has turned around.

Therefore, both industrial and developing countries would benefit from more stable conditions of trade and an expansion of productive capacity in commodities.

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(to)

Many solutions have been put forward to benefit producers of particular products -- cartelization, price indexing, commodity agreements and other methods. But reality demonstrates the interdependence of all our economies, and therefore the necessity for approaches that serve global rather than narrow interests.

The most vital commodity in the world is food. The United States is its largest producer and exporter. We recognize our responsibility. We have also sought to make international collaboration in food a model for realistic and cooperative approaches to other international economic issues.

The United States policy is now one of maximum production. At home, we want a thriving farm economy and moderate prices for consumers. Internationally, we wish cooperative relations with nations that purchase from us, an open and growing market, and abundant supplies to meet the needs of the hungry through both good times and bad.

For hundreds of millions of people, food security is the single most critical need in their lives; for many it is a question of life itself. But food security means more than emergency relief to deal with crop failures, natural disasters and pockets of famine. It means reasonable stability in the availability of food in commercial markets, so that harvest failures in some parts of the world will not make food impossibly expensive elsewhere. We have seen with dramatic frequency in recent years how the international food market, strained to capacity, can shake the international economy. Its fluctuations have accelerated inflation, devastated development plans, and wreaked havoc with human lives. Yet in good times, the world community has not summoned the will to take obvious corrective steps to stabilize the market structure.

The United States believes that a global approach to food security -- which contains elements that can apply to other commodities -- should follow these basic principles:

- The problem must be approached globally, comprehensively, and cooperatively, by consultation and negotiation among all significant producers and consumers;

- producers should recognize the global interest in stability of supply; and consumers should recognize the interest of producers in stability of markets and earnings;

- special consideration should be given to the needs of developing countries; and

- where volatile demand is combined with limited ability to make short-term increases in production, buffer stocks may be the best approach to achieving greater security for both consumers and producers.

At the World Food Conference last November, which was convened at our initiative, the United States proposed a comprehensive international cooperative approach to providing food security. We proposed an

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international system of nationally-held grain reserves, to meet emergenci and improve the market. The United States has since then offered specific proposals and begun negotiations. But the international effort lagged when improved harvests seemed to diminish the immediate danger of world-wide shortage. My government today declares that it is time to create this reserve system. If we do not, future crises are inevitable.

Specifically, we propose:

- to meet virtually all potential shortfalls in food grains production, total world reserves must reach at least 30 million tons of wheat and rice. We should consider whether a similar reserve is needed in coarse grains.

- Responsibility for holding reserves should be allocated fairly, taking into account wealth, production and trade. The United States is prepared to hold a major share.

- Acquisition and release of reserves should be governed by quantitative standards such as anticipated surpluses and shortfalls in production.

- Full participants in the system should receive assured access to supplies. Among major producers, full participation should require complete exchange of information and forecasts.

- Special assistance should be extended to developing countries that participate, to enable them to meet their obligation to hold a portion of global reserves.

The United States is ready to negotiate the creation of such a system. Let us move ahead rapidly.

And let us apply the same approach of cooperation to other primary commodities that are similarly beset by swings of price and supply -- and that are similarly essential to the global economy.

There is no simple formula that will apply equally to all commodities. The United States therefore proposes to discuss new arrangements in individual commodities on a case-by-case basis.

Buffer stocks can be an effective technique to moderate instability in supplies and earnings. On the other hand, price-fixing arrangements distort the market, restrict production, and waste resources for everyone. It is developing countries that can least afford this waste. Restricted production idles the costly equipment and economic infrastructure that takes years to build. Artificially high prices lead consumers to make costly investment in domestic substitutes, ultimately eroding the market power of the traditional producers.

Accordingly, the United States proposes the following approach to commodity arrangements:

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-- We recommend that a consumer-producer forum be established for every key commodity to discuss how to promote the efficiency, growth, and stability of its market. This is particularly important in the case of grains, as I have outlined. It is also important in copper, where priority should be given to creating a forum for consumer-producer consultation.

-- The first new formal international agreement being concluded is the tin agreement. We have participated actively in its negotiation. President Ford has authorized me to announce that the United States intends to sign the tin agreement, subject to Congressional consultations and ratifications. We welcome its emphasis on buffer stocks, its avoidance of direct price-fixing, and its balanced voting system. We will retain our right to sell from our strategic stockpiles, and we recognize the right of others to maintain a similar program.

-- We are participating actively in negotiations on coffee. We hope they will result in a satisfactory new agreement that reduces the large fluctuations in prices and supplies entering the market.

-- We will also join in the forthcoming cocoa and sugar negotiations. Their objective will be to reduce the risks of investment and moderate the swings in prices and supplies.

-- We will support liberalization of the International Monetary Fund's financing of buffer stocks, to assure that this facility is available without reducing other drawing rights.

I have already announced my government's broad proposal of a development security facility -- a more fundamental approach to stabilizing the overall earnings of countries dependent on commodities trade. My government also believes that an effective approach to the commodities problem requires a comprehensive program of investment to expand worldwide capacity in minerals and other critical raw materials. This is basic to the health of both industrial and developing economies.

There are presently no shortages in most basic raw materials; nor are there likely in the next two or three years. But the adequacy of supplies in years to come will be determined by investment decisions taken now. Because the technology for processing lower-grade ores is extremely complex, and the financing requirements for major raw material investments are massive, new projects take several years to complete. In some countries, the traditional source of funds -- private foreign investment -- is no longer as welcome, nor are investors as interested, as in the past.

The United States therefore proposes a major new international effort to expand raw material resources in developing countries.

The World Bank and its affiliates, in concert with private sources, should play a fundamental role. They can supply limited amounts of capital directly; more importantly, they can use their technical, managerial and financial expertise to bring together funds from private and public sources. They can act as intermediary between private investors.

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and host governments, and link private and public effort by providing cross guarantees on performance. World Bank loans could fund government projects, particularly for needed infrastructure, while the International Finance Corporation could join private enterprise in providing loans and equity capital. The World Bank group should aim to mobilize $2 billion in private and public capital annually.

In addition, the United States will contribute to and actively support the new United Nations revolving fund for natural resources. This Fund will encourage the worldwide exploration and exploitation of minerals, and thus promote one of the most promising endeavors of economic development.

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(a)

THE POOREST NATIONS

Any strategy for development must devote special attention to the needs of the poorest countries.

The fate of one billion people -- half the developing world and a quarter of mankind -- will be affected by what we do or fail to do.

For the last four years, per capita income in the poorest countries -- already below minimal standards for development -- has declined. Their exports are most concentrated in the least dynamic sectors of world demand. It is they who have been most cruelly affected by the rise in the costs of oil, food and other essential imports.

Whatever adversity the rest of mankind endures, it is these peoples who endure the most. Whatever problems we have, theirs are monumental. Whatever economic consequences flow from the decisions that we all make, the consequences are greatest for them. If global progress in economic development falters, they will be submerged.

This challenge transcends ideology and bloc politics. No international order can be considered just unless one of its fundamental principles is cooperation to raise the poorest of the world to a decent standard of life.

This challenge has two dimensions. We must look to elemental economic security and the immediate relief of suffering. And we must give preference to these countries' needs for future economic growth.

First, security means balance of payments support for the poorest country during periods of adversity. For them global recessions and wide swings in prices of key commodities have a particularly disastrous impact. Yet these countries have very little access to short and medium-term capital to help them weather bad times. The little finance to which they have access often involves interest rates that are too high considering their chronic debt repayment problems.

To provide greater balance of payments support at more acceptable rates of interest for the poor nations, the United States last November propose a trust in the International Monetary Fund of up to $2 billion for emergency relief. Although this proposal met with wide support, it has been stalled by a dispute over an unrelated issue -- the role of gold in the international monetary system. We cannot let this delay continue. The United States is making a determined effort to move forward the monetary negotiations at the IMF meetings now underway. If others meet us in this same spirit, we could reach a consensus on the Trust Fund by the next meeting in January.

Secondly, security requires stable export earnings. The new approach that we are proposing today for earnings stabilization can provide major new economic insurance in the form of loans and grants for the poorest countries.

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PR 450

Thirdly, security means having enough to eat. There must be determined
international cooperation on food.

-- The World Food Conference set a target of 10 million tons of food aid annually. This fiscal year the United States food aid budget provides for almost 6 million tons of food-grains -- sixty percent of the world target, and a twenty percent increase over last year. Other producers must also provide their share.

-- Another priority in the poorest countries must be to reduce the tragic waste of losses after harvest from inadequate storage, transport, and pest control. There are often simple and inexpensive techniques to resolve these problems. Investment in such areas as better storage and pesticides could have a rapid and substantial impact on the world's food supply -- indeed the saving could match the total of all the food aid being given around the world. Therefore, we urge that the Food and Agricultural Organization, in conjunction with the UN Development Program and the World Bank, set a goal of cutting in half these post-harvest losses by 1985, and develop a comprehensive program to this end.

Finally, security means good health and easing the strains of population growth. Disease ravages the poorest countries most of all and exacts a devastating economic as well as human cost. At the same time we face the stark reality that there will be twice as many people to feed by the end of this century as there are today. One of the most promising approaches to these problems is the integrated delivery of basic health services at the community level, combining medical treatment, family planning, and nutritional information and using locally trained paramedical personnel. The United States will support a major expansion of the efforts already underway, including those in cooperation with the World Health Organization, to develop and apply these methods. We strongly urge the help of all concerned nations.

Programs to achieve minimum economic security, however essential, solve only part of the problem. We must help the poorest nations break out of their present stagnation and move toward economic growth.

This means first of all that they should have preferential access to official, concessionary financial aid. They have the least dynamic exports, but they lack the capital to develop new ones. They have the direct need for financing, but they have no access to capital markets and little ability to carry greater debt.

If these countries themselves can summon the effort required, outside assistance can be productive. All nations with the financial capacity must share the responsibility. We will do our part. More than seventy percent of our development assistance goes to low-income countries. More than sixty percent of this year's proposed programs is devoted to food and nutrition, which are of particular importance to the poorest.

The special financial needs of the poorest countries can be met, particularly by expanded, low-interest loans of the international financial institutions. The International Development Association of the World

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PR 450

Bank group is a principal instrument whose great potential has not been fully realized. After Congressional consultations, the United States will join others in a substantial fifth replenishment of the resources of the International Development Association; provided that the oil exporting countries also make a significant contribution.

An effective strategy for sustained growth in the poorest countries must expand their agricultural production. For external food aid cannot possibly fill their needs. The current gap between what the developing countries need and what they can produce themselves is 15 million tons; at present rates of growth, the gap is expected to double or triple within the next decade. Failure to meet this challenge will doom much of the world to hunger and malnutrition and all of the world to periodic shortages and higher prices.

Traditional bilateral aid programs to boost agricultural production remain indispensable. President Ford is asking Congress for authorization to double our bilateral agricultural assistance this year to $582 million. We urge the other affluent nations to increase their contributions as well.

Clearly a massive program of international cooperation is also required. More research is needed to improve agricultural yields, make more efficient use of fertilizer, and find better farm management techniques. Technical assistance and information exchange are needed for training and for technological advance. Better systems of water control, transportation and land management are needed to tap the developing countries' vast reserves of land, water and manpower.

To mobilize massive new concessional resources for these purposes, the United States proposes the early establishment of the new International Fund for Agricultural Development. President Ford has asked me to announce that he will seek authorization of a direct contribution of $200 million to the fund -- provided that others will add their support for a combined goal of at least one billion dollars.

The International Fund for Agricultural Development can be the major source of new capital to attack the most critical problems of the poorest developing countries. The United States urges the world community to give it prompt and major support.

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PL #450

[cc]

## THE POLITICAL DIMENSION

In every area of endeavor that I have described -- economic security, growth, trade, commodities and the needs of the poorest -- the developing countries themselves want greater influence over the decisions that will affect their future. They are pressing for a greater role in the institutions and negotiations by which the world economic system is evolving.

The United States believes that participation in international decisions must be widely shared, in the name of both justice and effectiveness. We believe the following principles should apply:

**The process of decision should be fair.** No country or group of countries should have exclusive power in the areas basic to the welfare of others. This principle is valid for oil. It also applies to trade and finance.

**The methods of participation must be realistic.** We must encourage the emergence of real communities of interest between nations, whether they are developed or developing, producer or consumer, rich or poor. The genuine diversity of interests that exists among states must not be submerged by bloc discipline or in artificial, unrepresentative majorities. For only genuine consensus can generate effective action.

The process of decision should be responsive to change. On many issues developing countries have not had a voice that reflects their role. This is now changing. It is already the guiding principle of two of the most successful international bodies, the IMF and the World Bank, where the quotas of oil producing states will soon be at least doubled -- on the basis of objective criteria. Basic economic realities, such as the size of economies, participation in world trade and financial contributions, must carry great weight.

**Finally, participation should be tailored to the issues at hand.** We can usefully employ many different institutions and procedures: sometimes we should seek broad consensus in universal bodies, as we are doing this week in this Assembly; sometimes negotiations can more usefully be focused in more limited forums, such as the forthcoming consumer-producer dialogue; sometimes decisions are best handled in large, specialized bodies such as the IMF and World Bank, where voting power is related to responsibility; and sometimes most effective action can be taken in regional bodies.

Most relevant to our discussion here is the improvement of the United Nations system, so that it can fulfill its charter mandate "to employ international machinery for the promotion of the economic and social advancement of all peoples." We welcome the thoughtful report by the Secretary-General's group of 25 experts on structural reform in the UN system. We will seriously consider its recommendations. In our view, an improved UN organization must include:

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PR #450

-- rationalization of the UN's fragmented assistance programs;

-- strengthened leadership within the central Secretariat and
the entire UN system for development and economic cooperation;

-- streamlining of the Economic and Social Council;

-- better consultative procedures to ensure effective agreement
among members with a particular interest in a subject under consideration; and

-- a mechanism for independent evaluation of the implementation
of programs.

The United States proposes that 1976 be dedicated as a year of review and reform of the entire UN development system. An intergovernmental committee should be formed at this session, to begin work immediately on recommendations that can be implemented by the General Assembly in its 1976 session. We consider this a priority in any strategy for development.

## CONCLUSION

Mr. President, Mr. Secretary-General, colleagues, ladies and gentlemen:

I began today with the statement that we have, this week, an opportunity to improve the condition of mankind. This fact alone represents an extraordinary change in the human condition. Throughout history, man's imagination has been limited by his circumstances -- which have now fundamentally changed. We are no longer confined to what Marx called "the realm of necessity." And it has always been the case that the wisest realists were those who understood man's power to shape his own reality.

The steps we take now are not limited by our technical possibilities, but only by our political will. If the advanced nations fail to respond to the winds of change, and if the developing countries choose rhetoric over reality, the great goal of economic development will be submerged in our common failure. The speeches made here this week will be placed alongside many other lofty pronouncements made over decades past in this organization on this subject, buried in the archives of oblivion.

But we would not all be here if we did not believe that progress is possible and that it is imperative.

The United States has proposed a program of action. We are prepared to contribute, if we are met in a spirit of common endeavor.

-- We have proposed steps to improve basic economic security --
to safeguard the world economy, and particularly the developing
countries, against the cruel cycles that undermine their export
earnings.

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-- We have proposed measures to improve developing countries'
access to capital, new technology, and management skills to lift
themselves from stagnation onto the path of accelerating growth.

-- We have proposed structural improvements in the world trading
system, to be addressed in the ongoing multilateral trade negotiations,
to enhance developing countries' opportunities to earn their own way
through trade.

-- We have proposed a new approach to improving market conditions
in food and other basic commodities, on which the economies and indeed
the lives of hundreds of millions of people depend.

-- We have proposed specific ways of giving special help to the
development needs of the poorest countries.

My Government does not offer these proposals as an act of charity, nor
should they be received as if due. We know that the world economy
nourishes us all, we know that we live on a shrinking planet.
Materially as well as morally, our destinies are intertwined.

There remain enormous things for us to do. We can say once more to
the new nations: we have heard your voices. We embrace your hopes.
We will join your efforts. We commit ourselves to our common success.

* * * * *

# The Industrial Democracies and the Future

Address by Secretary Kissinger¹

I am glad to be here after recent events in Washington—in more ways than one. [Laughter.]

I am especially happy that Representative [H. John] Heinz is here, for many reasons—because he has supported the Administration on the recent Sinai agreement and other foreign policy matters, and also because that a Member of Congress should sit still and listen to me for a half hour is a pleasure I do not always have. [Laughter.]

I cannot come to Pennsylvania to discuss foreign policy without paying tribute to two of this state's great legislators whose stalwart efforts have been so important to America's place in the world today.

Senator Hugh Scott's career has been marked throughout by qualities of statesmanship, learning, and commitment to civilization's finest ideals. As Republican leader and member of the Senate Foreign Relations Committee, Senator Scott time after time has played a critical role as the Senate has sought to strengthen the legislative underpinnings of our foreign policy. Today is his birthday, and we sent him our warmest good wishes and thanks for all he has done and will continue to do for our country.

I want to take this opportunity also to salute another great American. I and each of my predecessors as Secretary of State over

the critical decades since World War II have benefited to an extent which can scarcely be exaggerated from the counsel and legislative leadership of "Doc" Morgan [Representative Thomas E. Morgan]. Without such wise and firm support, the U.S. foreign policy could not have exercised that leading role which was thrust upon us 30 years ago. Only Doc Morgan could have watched over the growth of America's greatness while finding the time to attend to the electorate of the 22d District.

I want to talk to you tonight about the central concern of American foreign policy: our relationship with the industrial democracies of the world.

For three decades we and our allies in the Atlantic community and Japan have been the engine of the global economy and the cornerstone of global peace. But fundamental change is now before us; the world we have known is in the process of transformation.

We must understand this change and help shape it. Thirty years ago the democracies banded together in the Marshall plan and peacetime alliance to overcome the chaos of the aftermath of the Second World War. Today a decade of upheaval impels us to make the cooperation of the industrial democracies as dynamic and creative a force in shaping a new world environment as it was a generation ago. The challenge is, above all, to our imagination and our vision.

Americans have learned several times in this century that their own security and global peace, their own prosperity and the global enonomy, are inextricably linked. In an age of intercontinental missiles and thermonuclear weapons, of global communi-

¹ Made on Nov. 11 at Pittsburgh, Pa., before a dinner meeting sponsored by the Pittsburgh World Affairs Council and 18 other area organizations (text of the five introductory paragraphs from press release 562A; balance of address from press release 562).

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757

cations and a world trading system, events in other continents touch our lives directly and immediately. The 1973 Middle East war, oil embargo, and price rises—which cost the United States over 500,000 jobs and over $10 billion in national output—brought home to us that a breakdown of peace far away can have profound political and economic consequences here at home. If this self-interest determines America's involvement, our traditional moral concerns—for the survival of freedom, the relief of suffering, and the security of our friendships—produce the conviction to carry out our responsibilities.

We will not now fail the tradition which has made us a beacon of hope to millions around the world.

At the close of World War II, this country broke with its isolationist tradition and undertook a role of leadership in world affairs. In those 30 years America has achieved an extraordinary record. We have made our mistakes—but we assured the economic recovery of Western Europe and Japan; our alliances safeguarded the common security and maintained the balance of power; we built an economic system that has fostered unprecedented growth and prosperity around the world; we created international organizations to help keep the peace and to promote economic development; we have pioneered in arms control; we have mediated conflicts; we have fed the hungry, educated young men and women from other lands, and been a refuge and symbol for all those who resisted tyranny and oppression.

America since its birth has symbolized, above all, the power of free men to choose their future, to be masters and not victims of their fate. When we took the lead, others took heart; when we exerted ourselves for the common good, others were encouraged to redouble their own efforts. The American people can be proud of what they have done to safeguard the strength and well-being of the industrial democracies.

We now face different international challenges. The allied statesmen who shaped the postwar international order would not recognize the planet we inhabit today. The growth of nuclear arsenals and the proliferation of nuclear weapons give confrontation and con-

flict a perilous new dimension; multiplying centers of power and influence call for new approaches to international issues; interdependence has spawned a host of unprecedented social, ethical, and economic dilemmas. No government alone can resolve the range of problems before it. In the words of a famous Pennsylvanian, we must hang together or we shall surely hang separately.

In an age of undiminished ideological competition, America will never forget that its most important relationships are with those nations which share our principles, our way of life, and our future. It is for this reason that next Saturday President Ford will meet in Europe with the heads of government of Britain, West Germany, France, Italy, and Japan at what has come to be called the economic summit.

The immediate task of the summit is to deal with economic questions. But in a more fundamental sense, it is a step to confirm and consolidate allied cooperation in every sphere at a crucial moment in history. It will not resolve all problems, but it can set goals for common policies and chart a direction for common action.

## Central Role of the Industrial Democracies

Clearly the postwar era of international relations is ended. No single upheaval marked this transformation in the way that two World Wars shattered the earlier structure of the international order. But the cumulative evolution of a generation has profoundly altered our world.

In the forties and fifties, the world was divided into rigid blocs locked in continual confrontation. Western Europe and Japan needed our military shield for security and our aid for reconstruction. Crises were frequent—in Greece, Berlin, the Taiwan Strait—and in Korea and Indochina there was war.

The industrial democracies responded with courage and imagination, building new institutions and relationships. America's nuclear supremacy and economic strength gave us the predominant roles in our alliances and in world leadership. We drew on our domestic experience of reform and organizing skill

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in dealing with global issues. We mobilized
vast material resources. The American peo-
ple, with pride in victory and with fresh
memory of the folly of isolationism, confi-
dently assumed the responsibilities of an
active foreign policy.

Today, as basic conditions have changed,
so have our challenges. America's role is still
crucial, but we can no longer overwhelm our
problem with resources. Thirty years of ex-
ertion have distributed power in the world
and require wider participation. We have
reached a new stage of alliance relations,
marked by greater equality and sharing of
initiative and responsibility. Europe's unity
has grown hand in hand with its economic
and political revival. The European Com-
munity is heading toward political unity and
a greater European role in both political and
economic issues. Japan and Canada have
made remarkable progress.

We welcome and support these trends.
The unity of the industrial democracies is
one of our greatest material—and moral—
assets. Collective approaches to our common
problems have become more and more
indispensable:

—The military strength of our alliances is
the foundation of the global balance of power
that permits all nations to live in peace and
security. A strong joint defense is the pre-
condition for all other policies.

—There can be no durable progress in
East-West relations unless we maintain our
political cooperation. If the Soviet Union is
permitted to play one ally off against an-
other, the reduction of tensions becomes a
tool of political warfare and not an instru-
ment of peace.

This Administration has never had any
illusion about the nature of the Soviet sys-
tem or about some of its objectives. But
neither must there be any illusions about
how to deal with it. In the thermonuclear
age, there is no alternative to coexistence.
Rhetoric cannot remove the Soviet nuclear
arsenal or reduce the risk of needless con-
frontation.

We will never give up our vital interests
or those of our allies. But we must also seek
to ease tensions and resolve conflicts. The

principal challenge is to make coexistence
compatible with our values and over time to
turn it into a more constructive relationship.

In relations with Communist countries,
therefore, all allied governments are chal-
lenged to maintain a steady course. We must
pursue a strategy far more complicated than
that of the past. Our peoples must under-
stand the need for both strong defense and
efforts to seek more constructive relations;
we must vigilantly defend our interests and
seek to negotiate solutions to the underlying
problems. We must face up to this moral
complexity, for it is the reality we face. If
we cannot pursue both the course of concilia-
tion and the requirements of conciliation, we
will not be able to achieve either.

Together the industrial democracies have
been the engine of global prosperity. We ac-
count for 65 percent of the world's produc-
tion and 70 percent of its trade. The inter-
national financial and trading system de-
pends crucially on our performance. Together
we have led the global effort of assistance to
developing countries and the fight against
hunger and disease.

But the institutions and practices created
at Bretton Woods in 1944, which fostered
expanding trade and monetary stability for
a generation, were founded on realities in
the process of change: American preponder-
ance, the exclusive participation of the devel-
oped countries, and the openness of the free
market.

Today, fresh centers of economic power—
in both the industrial and developing worlds
—strain the system. New participants, prac-
tices, and demands have given rise to dis-
putes over energy, food, raw materials, and
rules for exploitation of ocean resources.
Economic issues are now a central dimension
of international politics.

The interdependence of all our econo-
mies—consumer and producer, industrial and
developing—emphasizes the necessity of
cooperative solutions. Only cooperative solu-
tions can maintain and spread global pros-
perity; an era of economic warfare would
spell common decline. The industrial democ-
racies, as the wealthiest and most technically
advanced, would best survive economic con-
flict; but we take no comfort in suffering

December 1, 1975

759

less when everybody will suffer. How these
economic issues are addressed by the world
community will determine the kind of world
that our children will inhabit and the nature
of international relations over the last quar-
ter of this century.

The actions of the industrial democracies
therefore are crucial to the peace and pros-
perity of the world. And the United States
has most at stake.

In 1973, the United States called for a re-
affirmation of the solidarity of our alliances
with the Atlantic community and Japan.
We emphasized the overriding need for a
fresh, common approach to the interrelated
issues of politics, economics, and security.
We stressed the necessity of galvanizing our
peoples with the challenge of new positive
endeavors.

In the last two years, this need has been
brought home by economic difficulties. All of
our countries have been in the throes of
recession and inflation more severe than at
any time since World War II.

The European experience in the 1920's and
1930's teaches us the crucial relationship be-
tween economic vitality and the health of
political institutions and global stability.
Then, inflation and depression tore the fabric
of democratic societies. Social and political
divisions weakened the capacity of demo-
cratic governments to overcome economic
and social problems. In some countries the
confidence of people in free institutions
eroded; the habits of accommodation that
bind societies together gave way to extrem-
ism and mounting civil strife. Strains *within*
nations spawned economic nationalism; in-
creased tensions *between* nations led to war.

Similar economic problems, if of a lesser
magnitude, have assaulted almost the entire
industrialized world in the last few years—
unemployment, loss of production, rapid in-
flation. The oil embargo and the quadrupling
of oil prices dealt further severe blows; a
central element of the price structure of our
economies was now at the mercy of other
countries whose interests were hardly iden-
tical with our own.

The deepest consequence is not economic

but the erosion of people's confidence in their
society's future and a resulting loss of faith
in democratic means—in governmental insti-
tutions and leaders. Criticism degenerates
into demagogy. In some countries public
cynicism is reflected at the polls or in the
weakening of traditional party loyalties; in
other countries it spawns the resurgence of
extremist political parties of left and right;
in yet other countries, it leads to communal
or ideological violence. In America, we suf-
fered the additional tragedies of a divisive
war and constitutional crisis, though our in-
stitutions have shown a resilience that is the
envy of our partners.

In every one of the industrial democracies
a new generation accustomed to freedom and
military security questions the very values
and institutions that have brought these
conditions about. It does not remember the
spirit of the late forties and fifties—the
immediacy of the dangers that brought
about our alliance or the enthusiasm with
which we undertook the Marshall plan and
collective defense.

Instant communications force the pace of
events and expectations. Unwieldy modern
bureaucracies become obstacles to creative
government, making more difficult the tasks
of political leadership. The technical com-
plexity of issues challenges the capacities of
leaders, legislators, the media, and the public.

Ironically, democratic ideals are most
cherished in countries where they are least
practiced by governments and most dis-
paraged in the countries of their origin,
where they too often are taken for granted.
What we need now is the boldness and crea-
tive spirit that animated our response to
crisis a generation ago; we must infuse our
actions with an overriding sense of our
common heritage and common future.

This worldwide crisis to the democratic
process is the deepest challenge before the
leaders at the economic summit. They meet
to give their peoples the sense that they are
masters of their destiny, that they are not
subject to blind forces beyond their control.

I am confident that this test will be met.
The industrial democracies will demonstrate,

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Department of State Bulletin

as so often before, that the greatest force
in the world today is the voluntary associa-
tion of free peoples.

The Economic Summit

It is the economic issues which must be
solved first. Since the Great Depression, the
well-being of our citizens has been a funda-
mental goal of all our societies. High un-
employment and the persistence of poverty
have become politically and morally intolerab-
le. Inflation, which eats away at the living
standard and status of all classes of society,
is rightly regarded as a social evil.

The striving for a share in national prosperity drives groups into sharper competition with each other. As competing sectors press for higher wages, more credit, increased Federal spending, or rising industrial or agricultural prices, the claims on the economy expand faster than its capacity to produce. A slackening of capital investment retards the growth of productivity. Budgets become chronically unbalanced. If these trends persist, all industrial democracies will be locked in a cycle of growing frustration—with raised but unfulfilled expectations and sluggish growth and continuing inflation.

In such a situation, the close and impor-
tant ties among the industrial nations are
imperiled. Trade is threatened by protection-
ist measures that attempt to shift the burden
to consumers and other nations. Continued
instability of exchange rates, swings in
short-term capital movements, and periodic
crises in the international monetary sys-
tem—all these reflect and exacerbate in-
stability in our economies.

Because of interdependence, no country's
national programs for recovery can succeed
fully in isolation. The economic summit
springs from the conviction of all of the
leaders of the industrial democracies that
only by cooperative decisions can the trade
and monetary system be adapted to chang-
ing conditions and yet be kept stable enough
to stimulate the international flow of goods,
services, and investment.

Cooperation among the industrial nations
is also essential if we are to achieve greater
self-sufficiency and less vulnerability in
energy; if we are to maintain and expand
the world's markets and supplies of food;
and if we are to insure adequate supplies
and market stability for other vital raw
materials. Our relations with the developing
world and the centrally planned economies
are becoming increasingly important in the
international system; we can meet this
challenge effectively, and turn it into oppor-
tunity, only if we are conscious of our own
common interests and move boldly and
jointly in these new areas.

A special responsibility falls on the United
States. We are the world's largest and most
dynamic economy. We produce fully two-
fifths of all the goods and services of the
industrial democracies. Our leadership is
essential in the trade and monetary nego-
tiations. Our example is vital in the field of
energy, food, and raw materials. The re-
covery of the other industrialized states de-
pends importantly on our own. As President
Ford said in his state of the Union message
last January: "A resurgent American econ-
omy would do more to restore the confidence
of the world in its own future than anything
else we can do."

The United States intends to discharge its
responsibility.

The Program Before Us

At the economic summit this weekend the
leaders of the industrial democracies will
concentrate on these specific tasks:

- First, to cooperate more closely on poli-
  cies for recovery.

—Second, to look beyond this to common
action to strengthen the basic structure of
the international economic system for long-
term stability, expansion, and prosperity.

—Third, to review their policies on trade
negotiations, monetary questions, and our
dialogue with the developing countries.

The first task, economic recovery without
inflation, is of immediate concern to every

December 1, 1975

761

American. The industrial democracies are already on the road to recovery—partly as a result of cooperative actions over the recent period. At the beginning of the recession and the oil crisis, the United States joined other industrial countries in a pledge not to resort to restrictive trade practices to deal with payments deficits caused by excessive oil prices. We set up institutions and mechanisms to cope with financial emergencies and to guarantee emergency sharing in the case of any new oil embargo.

Last winter, in a fresh departure in allied collaboration, President Ford held a series of bilateral meetings with heads of government of Germany, France, the United Kingdom, and Japan to review the state of our economies and to determine whether new action was required. After these meetings, expansionary measures were adopted in several of the major industrial countries, including, most decisively, our own.

A strong recovery is well underway in the United States, as shown by the 11 percent increase (annual rate) in our national product in the third quarter of this year. Other nations—while our efforts cannot substitute for theirs—will feel their recovery reinforced by ours.

We intend at the economic summit to consolidate the cooperation of the industrial democracies. We plan to discuss common goals and agree on cooperative means to achieve them. The heads of government can assess the current situation, identify needs, and discuss measures that they should take in common.

In the U.S. view, the summit should set as our goal generalizing the recovery during 1976 among the major industrial countries. We should seek to restore vigorous, sustained expansion and high employment by 1977. We should aim to reduce inflation in our economy as a whole as well as disparities in our national inflation rates. And we should seek to restore vigorous growth in world trade as our domestic recovery proceeds.

The United States will propose that ministers of our countries responsible for economic policy meet periodically to follow up on policy directions set at the summit and to

review what further decisions may be needed. The U.S. representative would be Treasury Secretary Simon.

In a climate of recovery and renewed confidence, the United States and its major allies must then lift their sights beyond the business cycle to the fundamental challenge of improving the structure of the international economy in order to foster stable growth and cooperation over the long term. Let me suggest some of the areas that the United States will submit for consideration.

## Trade and Monetary Issues

World trade has been a major stimulus to our economic growth. Encouraged by progressive reductions in tariffs, it has increased at a rate twice that of domestic economic activity. The United States and over 100 other countries have therefore undertaken a new round of multilateral trade negotiations to continue trade expansion by reducing barriers. Congressional passage of the Trade Act in December of 1974—an impressive example of executive-legislative cooperation—gave the President the authority to participate and lead in this important process.

The present recession, with its high unemployment and large trade deficits in some countries, is now subjecting governments to domestic pressures to impose trade restrictions. Such restraints invite retaliation. Without a determined international effort, they could set off a cycle of barriers that would choke off trade generally. Protectionism raises prices to consumers; it jeopardizes jobs and incomes; it creates political frictions among allies; and it undermines our efforts to achieve other American objectives in the trade negotiations. It would weaken recovery.

The economic summit should therefore seek explicitly to expand world trade through joint efforts in economic policy. The President intends to propose that we reaffirm our common determination to avoid new barriers to trade as well as actions which provoke countries to erect them. We plan also to put forth specific goals for the trade negotiations. The industrial democracies should use

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Department of State Bulletin

the summit to renew their resolve to pursue
the multilateral trade negotiations to an
early conclusion and to develop a forward-
looking program.

The industrial countries have been moving
toward a broad understanding on the con-
temporary requirements of the *international
monetary system*. The summit should add to
our progress. The United States believes that
the system should foster, not restrict, poli-
cies for domestic growth and price stability.
We believe that to achieve this goal, each
country should be free to choose the ex-
change rate regime that best suits it, pro-
vided it respects international obligations to
avoid trade and capital restrictions and
competitive devaluations. By implementing
policies for noninflationary growth at home,
we can promote more stable exchange rates
and more orderly foreign exchange markets.

Energy, Food, and Commodities

Because *energy* is at the heart of our in-
dustrial system, the recent dramatic changes
in the price of oil are a direct challenge to
all the industrial democracies. They affect
the price level in all our economies, the
standard of living in all our societies, and
our freedom to determine our foreign poli-
cies according to our own objectives. We
must not let our economic future remain
indefinitely subject to decisions made by
countries which cannot be expected to have
our best interests at heart.

We can end our vulnerability to outside
pressures and transform the conditions of
the international oil market only by deter-
mined joint actions that give the industrial
democracies a greater voice in economic de-
cisions affecting their future.

In order to reduce their dependence on
imported oil, the industrial democracies since
1973 have launched substantial conservation
programs. We have undertaken to develop
alternative sources of energy—by removing
legal obstacles to exploration and production,
by measures to sustain or guarantee return
on investment, and by research and develop-
ment on a large scale. The 18 countries in
the International Energy Agency are now

developing a detailed program of conserva-
tion and alternative sources for adoption by
December 1.

The United States will urge the summit
to recommit the industrial democracies to
an even more forceful pursuit of the funda-
mental long-term goal of depriving the oil
cartel of the power to set the oil price uni-
laterally. The U.S. effort would be power-
fully reinforced by agreement on an ener-
getic and far-reaching American program.
Since all industrial democracies are pro-
foundly affected by the energy crisis, joint
action toward greater self-sufficiency will be
a vital test of their ability to act and to
cooperate.

The significant rises in *food* prices in the last few years have taught every American consumer that the international market in food now affects our economy directly and pervasively. The world faces the specter of chronic shortages of food. This means severe price fluctuations everywhere and the scourge of famine in the poorer countries.

Because of our central position in the
world food economy—and because this crisis
requires the contribution of *all* countries—
the United States in 1974 proposed the
World Food Conference, which met in Rome
a year ago. We set forth a plan for inter-
national collaboration, based on the proposi-
tion that foreign assistance could only allevi-
ate but not resolve the long-term problem
of shortages. However important our food
aid, any lasting solution requires an expan-
sion of food production in the developing
countries themselves.

Much of our plan is now becoming reality:
a higher target for food aid programs by
all the food-producing nations; a new fund
to develop agricultural production in poor
countries; and an international system of
grain reserves to build stocks in good crop
years and to alleviate shortages, mitigate
price rises, and meet famine emergencies in
poorer crop years.

The economic summit can spur joint action in each of these areas.

In the field of *commodities*, the industrial
countries as a group already largely enjoy
self-sufficiency. But many developing coun-

December 1, 1975

[LC]

763

tries are critically dependent on earnings from their commodity exports to finance their development and feed their peoples. This instability of export earnings is one of the principal concerns of the developing nations, who comprise most of the world's 4 billion people and who seek responsible participation in the global economic system. At the seventh special session of the United Nations this past September, the United States proposed a new development security facility which would provide international loans, and in some cases grants, to offset such sudden shortfalls in export earnings.

The economic summit provides an opportunity to advance this proposal and to review other proposals to fashion mutually beneficial and durable long-term relationships with developing countries. The dialogue between the industrial and the developing nations is of crucial importance to the building of international order.

The industrial countries have common interests—and a conciliatory attitude. We shall resist tactics of bloc confrontation. But fruitful cooperation requires that both developed and developing countries—and especially the moderate developing countries—see a prospect for achieving some real progress. The forthcoming Conference on International Economic Cooperation between consumer and producer countries is a crucial stage of this dialogue. The United States intends to ask its partners at the summit to consider what programs and positions the industrial countries can take together in these efforts.

## A Common Heritage and a Common Purpose

Ladies and gentlemen: For more than three decades America has been the dynamic force in the building of a just international economic and political system. We can take pride in what we have done. But our very accomplishments have produced new challenges. The institutions of the postwar international order depended upon the wisdom and vision of the United States; the course

of the last quarter of this century depends upon American imagination and dedication even more.

Thirty years ago we were predominant; we could overwhelm our problems with our resources. Today we know our limits—perhaps too well. After a decade of war, two years of constitutional crisis, and an uncertain period of domestic recession, there are those who have come to doubt either the wisdom of further involvement abroad or even our moral right to lead.

But this cannot be the view of the great majority of the American people. Moral timidity never characterized America in the 200 years of its history; it does not characterize America today. We have not lost our perception of our interests—or our humane concern for the fate of our fellow men. We have expended great effort—and given lives —in the 30 years of our leadership because we knew that the cost of abdication—for ourselves, our children, and mankind—was far greater. Certainly we have made our share of mistakes, but we know that we have done great things, and we have great things to do now.

All of us want to pass on to our children a more prosperous nation and a more peaceful world. And this means that we and the other industrial democracies must dedicate ourselves to the agenda before us. This is not a goal that can be achieved by an America torn by self-punishment or by an impulse to escape from reality or to shrink from challenges.

Today the world needs most of all the optimism and confidence that America has always embodied. It needs our strong faith as a source of hope to others that the world can solve its problems.

America and her fellow democracies are called upon again to demonstrate our cohesion, our confidence, and our readiness for tomorrow. The belief in man and in freedom is the common heritage we hold in trust and the common promise we hold out to the world. This faith defines our duty and assures that we will be equal to it.

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UNCTAD IV: Expanding Cooperation for Global Economic Development

We are assembled here to carry forward
one of the most important enterprises in
history: the endeavor of independent na-
tions to advance global economic develop-
ment and so to better the quality of human
life on earth. Our goal is nothing less than
to shape an enduring structure of inter-
national collaboration that offers peace and
prosperity, equal opportunity and dignity to
all peoples.

Man has always yearned for peace and a
just international order. In our time these
twin goals have become a realistic possi-
bility. Their attainment will require us to
meet challenges whose scale eludes the
grasp of individual nations, whose com-
plexity mocks the slogans and solutions of
the past, and whose pace outstrips the meas-
ured processes of traditional diplomacy.

There is before us all the imperative of
world stability—the task of resolving con-
flicts, reducing tensions, and resisting the
encroachment of new imperialisms, new
oppressions, and new dangers. For this
undertaking the United States, together
with other nations, has assumed a heavy
responsibility.

Beyond it lie our positive aspirations.
The American people are a humane people.
We know that stability is not enough; peace
must extend mankind's reach for a better
life. In the Declaration of Independence of
the United States, the seminal document of
our national existence, we have written that

"all men are created equal" and entitled to
"Life, Liberty, and the pursuit of Happi-
ness." This pursuit has brought me to
Nairobi—to advance on behalf of President
Ford and the U.S. Government the great
cause we all hold in common.

In the long sweep of history, the future of
peace and progress may be most decisively
determined by our response to the necessi-
ties imposed by our economic interdepend-
ence. This is the challenge which we have
assembled here to address: the urgent need
for cooperative solutions to the new global
problems of the world economy. These is-
sues dominate the agenda of the evolving
relationship between North and South, the
industrial and the developing countries.

They are issues of economics—of an effec-
tive system of trade, monetary relations, and
development assistance, and of insuring that
the prosperity of some nations does not come
at the expense of others. They are issues of
politics—of how nations deal with each
other and of how we can construct an inter-
national order that promotes peace. They
are issues of morality—the recognition that
economic might does not make right. And
they are issues of justice—the awareness
that the well-being of our peoples depends
upon an international system fair and open
to all.

The modern age and our common morality
insistently demand respect for human dig-
nity and the fulfillment of the human per-
sonality. But a world in which poverty and
misery continue to afflict countless millions
would mock these imperatives. The daily
preoccupation of men and women would be

¹ Made before the fourth ministerial meeting of the U.N. Conference on Trade and Development at Nairobi on May 6 (text from press release 224).

May 31, 1976

657

the harsh necessities of survival; the
energies of nations would be consumed in
hatred and rivalry. We must build instead a
world of cooperation and widening human
opportunity reflecting the fundamental
interdependence of our destinies.

Today, the accelerating forces of modern-
ization—technological, economic, social, and
political—link the peoples of the world as
never before. They can intensify conflict, or
they can provide us with unprecedented pos-
sibilities to advance our common aims. All
nations are part of a global economic sys-
tem. If that system is to flourish it must
rest on the firm foundation of security, fair-
ness, and opportunity to all who wish to
participate—rich and poor, North and South,
consumer and producer. It must embrace the
interests of all if it is to be supported by all.
President Ford has sent me here, committed
to bring about a constructive and coopera-
tive relationship between the developed and
the developing countries over the remainder
of this century.

This ministerial meeting of UNCTAD is
the first of its kind to be held in Africa. This
is altogether fitting, for Africa's importance
in world affairs is growing. And African
countries have an especially high stake in a
successful conference leading to concrete
progress. No continent has been more vul-
nerable to worldwide economic instabilities.
No continent suffers so cruelly when crops
fail for lack of rain. No continent endures a
heavier burden when commodity prices fluc-
tuate violently. And no continent has more
to gain from the organized cooperation of
all nations to promote economic and social
progress and to insure a greater role for the
developing nations in the world's economic
deliberations.

This is a continent of proud traditions and
new nations, of rising aspirations and of
determination in the face of monumental
challenge. Here it can—indeed, it must—be
demonstrated that men of all races and
colors can live and prosper together in peace
with equal rights and mutual respect.

During the past two weeks I have been
privileged to be a guest in Africa and to
enjoy the extraordinary hospitality of its

people and leaders. I have greatly benefited
from my discussions with African states-
men, and I have learned much about the con-
cerns and hopes of the peoples of Africa. The
nations of this continent can be confident
that the United States is prepared to co-
operate with them in their great struggles
for justice, economic progress, and freedom
from external intervention.

Today we are all especially indebted
to the Republic of Kenya and its world-
renowned leader, President Kenyatta, for
making this beautiful city available as the
site of this conference. The U.S. delegation
has come to Nairobi to achieve, with repre-
sentatives of other nations, a major step
forward in international cooperation.

We begin this conference at a moment of
opportunity. The world economy is recover-
ing from a deep recession, my own country
perhaps most rapidly. Increasing American
demand for products of other countries will
make a major contribution to recovery
around the world. Many obstacles to sus-
tained economic growth remain; but there
are convincing signs that we have sur-
mounted the worst part of the economic
crisis and that before us, if we act with
wisdom and energy, is the opportunity for
a new and prolonged period of prosperity.

This, therefore, may be a decisive mo-
ment which offers us a brief, but special, op-
portunity to reinvigorate and improve the
world's international economic system. Now
is the time to free the world from disruptive
cycles of boom and bust and to enhance the
opportunities of the developing countries.

The United States, better than almost
any other nation, could survive a period of
economic warfare. We can resist confronta-
tion and rhetorical attacks if other nations
choose that path. And we can ignore un-
realistic proposals and peremptory de-
mands. But the historic opportunity which
is at hand would slip away. It is up to us,
as the spokesmen of nations meeting in this
world forum, to reach beyond the doubts
and temptations of the moment toward the
permanent international interests of us all.
In so doing, we can take courage from the
knowledge that the means exist to achieve a

658

Department of State Bulletin

brighter future. It lies within our power to
shape a world where all men can live in
dignity and aspire to progress.

Let us therefore hold before us as the
goal of this conference, and of the dialogue
between developed and developing nations,
the motto of the Republic of Kenya:
"Harambee—work together for the good
of all."

Let us begin by building on the positive
accomplishments of the seventh special ses-
sion of the U.N. General Assembly last Sep-
tember. At that meeting the industrial and
developing nations, in an encouraging dem-
onstration of consensus, put aside ideological
confrontation, declared their common pur-
pose of moving forward cooperatively, and
adopted an agreed agenda for action.

On behalf of President Ford, I call upon
this conference to accelerate the efforts and
continue the cooperative spirit which began
then. I will introduce new proposals on all
the priority concerns of this conference, to
reflect what we have heard of your ideas
and your aspirations in the Manila Declara-
tion and in other forums, including the Con-
ference on International Economic Coopera-
tion in Paris.²

These proposals represent the contribu-
tions of all relevant agencies of the U.S.
Government, under the direction of the
President. I have worked especially closely
with my colleague Treasury Secretary
Simon in shaping the program we are
presenting.

The strong bipartisan support which our
approach enjoys results from weeks of close
consultations between the executive and both
Houses of our Congress. It is demonstrated
by the presence here of two distinguished
Senators [Jacob K. Javits and Abraham A.
Ribicoff] representing our two political
parties. Other Senators and members of the
House of Representatives will follow as your
work proceeds.

The United States pledges its dedication
and willingness to cooperate over the decades

ahead. We do so with an open mind. We
want to hear your ideas and proposals. We
are here to exchange views and to forge a
fresh consensus.

The State of Our Efforts

Let me first review what our nations to-
gether achieved since last September.

We agreed at the seventh special session
to take measures to help insure basic eco-
nomic security against cycles that devastate
export earnings and undermine development.
In January, the International Monetary
Fund (IMF) expanded its compensatory
financing facility, as we had proposed, to
make available several billion dollars to
stabilize export earnings.

In September, we pledged to accelerate
economic growth by improving developing
countries' access to capital and new tech-
nology. To these ends, the United States,
other industrial countries, and several oil-
producing countries have begun to marshal
increased capital, technological, and human
resources to promote development. Negotia-
tions have been completed to increase World
Bank capital by $8 billion; we will contribute
our fair share to a $6 billion increase in the
resources of the Inter-American Develop-
ment Bank; we will contribute to an expan-
sion of the African Development Fund; we
are actively participating in discussions on
replenishment of the Asian Development
Fund and Bank.

At the special session, the world com-
munity dedicated itself to improving trade
and investment in key commodities. In-
ternational solutions have already been
achieved on several key commodity issues,
including the successful negotiation of coffee
and tin agreements. Progress is also being
made in expanding the world's supply of its
most vital commodity—food.

And finally, at the special session, the
world community made a commitment to
meet the special needs of the poorest coun-
tries, which have suffered the most from
recent economic dislocations. We have made
significant progress by providing financial
and technical assistance to increase food

² For texts of the Manila Declaration and Program of Action, adopted on Feb. 7, 1976, by the third ministerial meeting of the Group of 77, see U.N. doc. TD/195.

May 31, 1976

659

production and by introducing new measures to help relieve crushing balance-of-payments problems of the poorest nations.

These achievements are only the beginning of the process. We are, this year, in the midst of what may well be the most extensive series of international negotiations on trade, finance, commodities, and development in history—involving more nations, addressing more issues, and affecting more people than ever before. This conference has a major role to play. In particular we can advance our work in four key areas:

*First, we must make renewed efforts on commodity issues, including the problems of resource investment and trade.* Commodities—energy, food, and other primary products—are the building blocks of growth and prosperity. For many countries, development of resources is the key to industrialization, employment, decent incomes, and healthy diets. All nations need adequate supplies of primary products and fair compensation for their production. Solving the complex of these issues is a critical test of our ability to work together systematically to expand the world's wealth for the benefit of all.

*Second, we must design a far-reaching long-term program to accelerate technology transfer.* The quantity of capital investment by itself does not assure sustained development. There must be as well continuous improvements in productivity that only new technology and trained local manpower can bring. The subject deserves high priority, and comprehensive efforts will be required.

*Third, we must deal with serious balance-of-payments and debt problems which face a number of developing countries.* Rising import costs caused in large part by higher oil prices, and reduced export earnings due to recession in industrialized countries, have created unprecedented international payments problems. An improved world economy will automatically ease the problem for many countries. Nevertheless we must continue to seek means of assistance for the particular problems of certain developing countries.

*Fourth, we must continue to respond to the special and urgent needs of the poorest countries.* Helping these nations will not only demonstrate the capacity of the international economy to serve all countries equitably; it will also reflect our collective sense of responsibility.

Let me now suggest specific new approaches for dealing with each of these four problems.

## A Comprehensive Approach to Commodities

Commodity exports are critical for development. The non-oil developing countries rely on primary products for nearly two-thirds of their export earnings. Yet production and export of these resources are vulnerable to the whims of weather, the swings of worldwide demand, and new technology. Cycles of scarcity and glut, of underinvestment and overcapacity, disrupt economic conditions in both the developing and the industrial world.

It has become clear in recent years that a piecemeal approach to these issues will not suffice. The UNCTAD Secretariat has made an important contribution to meeting these problems in its integrated commodities program. While the United States cannot accept all of its elements, there are many parts which we are prepared to consider.

At this conference, the United States proposes its own comprehensive approach to commodity issues. It reflects many of the objectives contained in the integrated program and our desire for constructive action on all aspects of the challenge. It contains the following elements:

- Insuring sufficient financing for resource development and for equitable sharing in the benefits by the host nation;

- Improving the conditions of trade and investment in individual commodities and moderating excessive price fluctuations;

- Stabilizing the overall export earnings of developing countries; and

- Improving access to markets for processed products of developing countries while assuring consumers reliability of supply.

660

Department of State Bulletin

Let me discuss each of these elements in
turn.

Adequate Investment

Most of the world's raw material produc-
tion in fact takes place in the industrial
countries. But if development is to take
hold, a special effort must be made to ex-
pand the production and exports of primary
products of developing countries. Such a
program must overcome the following
problems.

First, we must deal realistically with the
political and economic problems which are
diverting investments from developing to
developed countries. For, paradoxically, re-
source development is often discouraged by
the very countries which are most in need
of it. Nationalization and forced change in
the terms of concessions in some develop-
ing countries have clouded the general cli-
mate for resource investment in the develop-
ing world. Social and political uncertainties
have further complicated investment pros-
pects. As a result, commercially viable proj-
ects have been postponed, canceled, or re-
located; and capital, management, and tech-
nology have been diverted to production of
higher cost raw materials in the industrial-
ized world.

Second, in the next decade alone the total
requirements for global investment in re-
sources will be massive. Individual projects
will require unprecedented sums of capital
and complex financial arrangements. The
time required between the beginning of a
project and its completion is increasing. All
these factors compound the political un-
certainties and further inhibit rational
investment.

Third, there is no one institution that can
work comprehensively to facilitate resource
development, particularly in energy and min-
erals, or to promote equitable sharing of its
benefits.

If present trends continue, serious mis-
allocations of capital, management, and tech-
nology are inevitable. The costs of raw ma-
terial and agricultural production will esca-
late. Many potential producers will be un-

able to attract adequate capital. All coun-
tries will pay the price in accelerated infla-
tion and retarded growth—with the poorest
countries suffering the most.

To overcome these problems the United
States proposes the establishment of an In-
ternational Resources Bank (IRB). This
new institution would promote more ra-
tional, systematic, and equitable develop-
ment of resources in developing nations. It
would facilitate technological development
and management training in the develop-
ing countries. It would help insure supplies
of raw materials to sustain the expansion of
the global economy and would help moder-
ate commodity price fluctuations.

The International Resources Bank would mobilize capital for sound resource development projects by assisting individual resource projects to secure direct financing and issuing bonds which could be secured by a specific commodity. Alternatively, these bonds could be retired through delivery of a specific commodity. "Commodity bonds" of this type could greatly improve conditions of supply and market access and help developing countries to stabilize export earnings.

To enhance confidence for both host gov-
ernments and investors the International
Resources Bank would begin operations with
a capital fund of $1 billion. It would partici-
pate with foreign investors and the host
government in project agreements specify-
ing the conditions of the investment on a
basis acceptable to all parties. Such an agree-
ment could include a formula for production
sharing and arrangements by investors to
help develop the managerial, technological,
and marketing capabilities of the host coun-
try. The Bank would support guarantees of
both investor and host nation performance
in accordance with conditions established in
the project agreement.

To insure effective coordination with other
public institutions, the International Re-
sources Bank could be associated with the
World Bank Group, in a form to be worked
out by the participating countries. It could
operate in close collaboration with—and ren-
der even more effective—other institutions

May 31, 1976

661

such as the World Bank and its associate, the International Finance Corporation, and the Inter-American Development Bank as well as the U.N. revolving fund for mineral exploration.

The IRB proposal offers many advantages and new concepts:

- Its facilitating role as third party with the host country and the foreign investor will encourage conditions for project development consistent with internationally accepted standards of equity.

- The IRB mechanism provides multilateral guarantees of the performance of both the host nation and the foreign investor in accordance with the project agreement—thereby reducing the noncommercial risks. This cannot fail to promote greater flows of investment capital for resource projects on reasonable terms.

- The proposal contemplates production-sharing arrangements under which the foreign investor is assured of an established percentage of total production with disposition of the balance to be controlled by the host nation. This allows the host nation to share in production from the outset, providing it with the basis for further processing of the raw material should this prove to be economically feasible.

- Commodity bonds would be a fruitful new international instrument for forward purchases of commodities. They could contribute to earnings stabilization. They would also provide added assurance of market access for the host country and supply access for the consumer.

- Finally, through the IRB, modern technology would flow into developing nations. The two key elements required for development—management and technology—are provided by the foreign investor directly in a new form of capital investment. The tri-lateral agreement could include provision for the progressive acquisition of technology by the host country and thus contribute importantly to the process of technology transfer.

We consider the International Resources Bank to be an innovative and significant re-

sponse to the basic needs of the developing nations and the international community. It will be a major advance in the sharing of benefits and responsibilities between industrialized and developing nations. It will help insure the essential flow of capital, management, and technology into resource development under conditions acceptable to host governments. And it will enhance the predictability that is essential to attract capital investment. We hope other countries will join us during the coming months to design and establish this global institution.

## Improvement of the Conditions of Trade and Investment in Individual Commodities

We are all conscious of the problems the world economy has faced recently in this area. Within only two years the tight supply and astronomical prices of many critical materials have been followed by a period of declining prices. Many economies have been severely shaken, and several countries have suffered balance-of-payments crises. Drastic price changes affect the developing countries most severely, playing havoc with foreign exchange earnings and development plans. And because raw material production projects require years to develop and involve high risks, volatile prices tend to lead to erratic patterns of investment.

There are a number of ways to improve commodity markets: long-term contractual arrangements, better exchange of market information, improved distribution, more efficient production methods, and better storage and transport facilities.

We agree with the UNCTAD Secretariat that buffer stocks deserve special attention. For those commodities where buffer stocks are feasible, sharp fluctuations in prices can be moderated by building stocks when markets are weak. And adequate supplies at reasonable prices can be assured through releasing stocks when markets are tight.

The United States believes that buffer stocks can be financed from a combination of sources: direct contribution by the participants, export taxes, commercial borrowing

662

Department of State Bulletin

guaranteed by the countries participating in
the buffer stock, or through the existing
facilities of international institutions.
Should existing sources prove inadequate,
we would also be prepared to consider the
IRB as a supplemental channel for financ-
ing a particular buffer stock. In these ways,
we are convinced that adequate international
financing for buffer stocks can be assured
within the context of the specific commodity
agreement under which the stock is estab-
lished. Clearly, the United States would not
want a buffer stock in which we had agreed
to participate to fail for want of adequate
financing.

The United States has pursued a con-
structive approach to other aspects of the
commodities problem:

- We have joined with producers and consumers of key commodities to agree on measures to improve and stabilize markets.

- We have signed commodity agreements on coffee and tin, and we will participate in negotiations on sugar. We viewed cocoa as well suited to a buffer stock arrangement but were disappointed in the agreement negotiated a few months ago, which we believe is unlikely to improve the functioning of the cocoa market. If other parties are interested, we stand ready to renegotiate this agreement.

- The United States recently participated in the first meeting of producers and consumers of copper. We look forward to the establishment of a permanent producer-consumer group.

- Agricultural raw materials need serious attention as well. Those that face declining markets from growing competition from lower cost producers and synthetics can benefit from market promotion, research to improve productivity and marketability, or diversification into other products. We recommend that producer-consumer forums dealing with individual commodities focus on such possibilities. We urge that the World Bank and the regional development banks give high priority to funding projects for these purposes.

Today the United States proposes these
additional measures:

- First, let us reach agreement on a definite timetable for the study of specific commodity problems of interest to developing countries. We are prepared to initiate concerted consideration in producer-consumer forums this year of measures to improve the stability, growth, and efficiency of markets for all key commodity exports of developing countries. Particular attention should be given to the formation of groups for bauxite and iron ore.

- Second, since many of the poorest countries are dependent on these products for export earnings, we urge the World Bank and regional institutions to sponsor projects to improve production efficiency and markets for jute, sisal, and other hard fibers or to facilitate diversification into other products in order to reduce excessive reliance on them.

- Finally, any program of resource devel-
  opment must emphasize the two most vital
  international resources: food and energy.

Forecasts of good harvests must not lull
us into letting the progress begun at the
World Food Conference slip away. At that
conference, nations agreed to work toward
a system of world grain reserves to improve
food security, to increase support for agri-
cultural research, to develop programs for
nutritional improvement, and to increase
agricultural development in low-income
countries. We urge other countries to join
us to make the concept of world food re-
serves a reality, to increase support for agri-
culture development in poorer nations, and
to provide necessary food aid.

In energy we strongly support the efforts
of oil producers and consumers from both
the industrialized and the developing world
to achieve cooperative solutions at the Con-
ference on International Economic Coopera-
tion. We urge that our proposal for an Inter-
national Energy Institute—which would help
developing countries take advantage of their
domestic energy resources—receive priority
attention in the months ahead.

May 31, 1976

663

Stabilizing Export Earnings of Developing Countries

At the seventh special session, the United States listed as its first priority the need to insure economic security for the developing world. We continue to believe that the world economic system must provide the developing nations greater security from the worst effects of fluctuating prices, recession, inflation, and other economic shocks which they are helpless to prevent or avoid.

We are gratified at the rapid implementation of our proposals to the special session for the far-reaching expansion of the International Monetary Fund. These innovations make available billions of dollars in new financing to offset steep declines in export earnings.

The most significant step forward has been the Fund's agreement to liberalize its compensatory financing facility. As of now, roughly $800 million from this improved facility has been provided. If this rate continues, more money will have been lent this year from the facility than the entire amount provided over the last 12 years.

Another major advance has been the establishment of an IMF trust fund to help meet the balance-of-payments needs of the poorest countries. While many developing countries have received substantial benefits from the compensatory financing facility, low-income countries whose export revenues depend on one or two commodities often need additional financial help to meet balance-of-payments problems. To assist the poorest countries, the United States has proposed that the trust fund provide concessional financing to poorer countries to offset declines in earnings from an agreed list of particularly significant commodities.

Moreover, the United States would be ready to join others in a review of the adequacy of the trust fund's resources, should they prove inadequate to stabilize earnings and provide general balance-of-payments financing for low-income developing nations. We especially urge those oil-producing nations with strong reserves to contribute to the trust fund's lending capacity.

Expanding Trade in Resources and Processed Goods

Trade has been an engine of growth for all countries; for many developing countries it is the most critical vehicle of development. The United States has taken a number of initiatives to meet the special needs of developing countries. We have reduced global trade barriers, especially those affecting processed goods; provided preferential access to our market for many exports of developing countries; worked in the multilateral trade negotiations (MTN) in Geneva for reduction of barriers in tropical products; and recognized in our general trade policy the special trade needs of developing countries.

We now have these challenges:

- We must maintain the momentum in reducing world trade barriers.

- We must focus especially on reducing barriers against processed goods, which retard developing countries' efforts to industrialize.

- We need additional international arrangements to assure reliability of supply, for the steady flow of new materials is vital to every country.

To maintain momentum in reducing trade barriers, industrial countries of the OECD [Organization for Economic Cooperation and Development], despite the strains on their economies from higher energy costs and recession, have pledged themselves to avoid restrictive trade measures. The United States intends to join with other developed countries in a renewal of that pledge at the next OECD ministerial meeting in June.

In addition, at the multilateral trade negotiations now taking place in Geneva we will pay special attention to the interests of developing countries, particularly in such areas as processed exports, tropical products, and nontariff barriers.

The institution in January of a generalized system of preferences by the United States, combined with the preference systems of other industrial countries, has opened significant trading opportunities for

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[x]

developing nations. Our own preference sys-
tem already covers more than 2,700 items
from nearly 100 countries. The annual trade
value of these items is roughly $2.5 billion.
We are examining the possibility of includ-
ing additional products.

The United States will give priority support to the U.N. Development Program (UNDP) financing of a joint GATT-UNCTAD [GATT, General Agreement on Tariffs and Trade] program of technical assistance to developing countries. This will help those countries take full advantage of the preference schemes of industrialized countries by finding the most productive areas for new and increased exports and the best techniques of marketing their products.

In addition, intensive negotiation is now
underway in the MTN on tariff treatment of
tropical products, including processed goods
and manufactures, that are of particular in-
terest to developing countries. The United
States intends to implement negotiated tariff
reductions in this area as soon as possible
once the tropical product package is agreed
upon.

In keeping with the Tokyo Declaration, the United States believes that the MTN negotiations on rules concerning nontariff barriers must give greater attention to the needs of developing countries.³ For example, the United States believes that a code to govern the use of countervailing duties against export subsidies should recognize the special conditions facing developing countries. We will urge that the special needs of developing nations be taken into account when new international rules pertaining to offsetting action are being developed.

With respect to new rules on safeguard
measures against injury from imports, we
will consider special treatment for less de-
veloped countries which are minor suppliers
or possible new entrants into the U.S.
market.

We recognize, too, that developing coun-
tries have interests in other reforms of the
trading system which are not presently
under negotiation. We will respond to these
views with an open mind. We are confident
that with good will on all sides, constructive
agreement can be reached on specific reform
issues within the time frame of the multi-
lateral trade negotiations.

The reduction of tariffs against the ex-
ports of processed raw materials from de-
veloping countries is especially important.
Lowering these barriers would provide fresh
opportunities to expand and diversify ex-
ports, particularly in cases where tariffs now
escalate with the degree of processing. To
this end, the tariff-reduction proposal which
the United States has made in the MTN will
not only result in significant tariff cuts but
also will reduce tariff escalation. We expect
that developing countries will regard this as
an incentive to positive cooperation in the
current negotiations.

If more open market access is one pillar
of an expanding international trading sys-
tem, greater reliability of supply is another.
Without reasonable assurance from producer
countries that they will not arbitrarily inter-
fere with exports, importers must turn to
other sources. Consumers will then bear the
cost of less efficient production; unreliable
producers, the cost of lost markets and re-
duced foreign investment.

There is an urgent need to analyze meth-
ods to improve reliability of supply. We urge
that work begin promptly in the GATT to
determine whether an international code on
export controls is feasible. Such a code
should define more clearly the circumstances
under which countries may legitimately
apply export controls. It would reduce the
uncertainties for consumers and for export-
ers, and it would mitigate some of the politi-
cal damage to relations between countries
when restrictions are imposed on exports.

The United States will also continue to
seek commitments of reliable supply in the
context of specific arrangements negotiated
for individual commodities.

This four-point program—a new Interna-

³ For text of the declaration, approved at Tokyo on Sept. 14, 1973, by a ministerial meeting of the Contracting Parties to the General Agreement on Tariffs and Trade, see BULLETIN of Oct. 8, 1973, p. 450.

May 31, 1976

665

tional Resources Bank, a case-by-case effort to improve conditions of trade and investment in primary products, stabilization of export earnings, and improved market and supply conditions—recognizes that these issues are linked; yet it permits pragmatic and flexible treatment of specific problems. The approach I have described is a major effort by the United States to deal on a comprehensive basis with commodity issues. It is workable; it is achievable; it is a program which meets the needs of developing and developed nations alike. We urge favorable consideration and rapid collective action.

## Technology for Development

Let me now turn to another area of major concern: the application of technology for development.

Technology is at the heart of the development process. It enables man to extend his horizons beyond the mere struggle for existence. Technology draws the fullest measure from the finite resources of our globe. It harnesses the intelligence of man and the forces of nature to meet human needs.

For two centuries technological progress has been fundamental to rapid industrial growth. A central challenge of our time is to extend the benefits of technology to all countries.

There are a number of impediments to a rapid and effective technology transfer from industrialized to developing countries.

First, in many cases technology from industrial countries may not fit the real needs of developing countries. By and large, the challenge is not to transfer a carbon copy of existing technology, but to develop new technology and technological institutions that are most relevant to the conditions of individual developing countries.

Second, developing countries often lack adequate information and expertise to identify the technology which best meets their needs.

Third, there is often a shortage of the trained manpower needed to select, adapt, and effectively manage technology.

Fourth, technology often cannot be separated from capital and management. Hence it is one element of the overall investment process. And to be successful, technology must be applied within a framework of government policies which facilitate and nourish the process of technology transfer.

The task therefore is not simply the turnover of formulas or blueprints. We must pursue a comprehensive approach which provides a broad range of programs and incentives to transfer both technology and the fundamental skills that will give it root and effectiveness. To promote this, the United States proposes a five-point approach:

First, to adapt technology to the needs of developing countries, the United States supports the establishment of a network of research and development institutions at the local, regional, and international level. We need to strengthen global research capacities for development and to expand intergovernmental cooperation. Therefore we propose the following:

- An International Industrialization Institute should be established to encourage research and development of industrial technology appropriate to developing countries. A founders conference involving all interested countries should be held no later than this fall.

- The Energy Commission of the Conference on International Economic Cooperation should establish an International Energy Institute to facilitate energy research and the application of energy-related technologies to the special needs of developing countries.

- We should extend existing networks for applied research in the fields of agriculture, health, and education. The creation of new institutions must be accompanied by measures to help the process of technology transfer. To improve cooperation between industrialized and developing countries, the United States proposes new programs in three fields of advanced science, to which we are prepared to make major contributions of knowledge and experience: in satellite technology,

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in water resources development, and in
oceans technology.

—Satellite technology offers enormous promise as an instrument for development. Remote-sensing satellites can be applied to survey resources, forecast crops, and improve land use in developing countries. They can help to foresee and evaluate natural disasters. Modern communication technologies, including satellites, have large untapped potential to improve education, training, health services, food production, and other activities essential for development. Therefore, from July through October of this year the United States will make available to interested developing countries demonstrations of the various applications for development of the experimental ATS-6 communications satellite, the Landsat remote sensing satellite, and high resolution photography. We are prepared to cooperate with developing countries in establishing centers, training personnel, and where possible, adapting our civilian satellite programs to their needs.

—The United States will play a leading role in applying water resources technology to such objectives as improving the quality and productivity of agriculture and developing new industry. We will play an active role at the U.N. Water Conference to be held in March of next year, putting forward practical measures to share our knowledge and experience.

—The technology necessary to mine the deep seabed, to manage fisheries, and to exploit the vast potential of the oceans is rapidly being developed. The United States has made major advances in this field. We plan to invite scientists, managers, and technicians from different countries to participate in our scientific projects. And we strongly support provisions in the law of the sea treaty which will provide incentives for sharing of deep-seabed technology appropriate to developing-country needs.

—Finally, there is a pressing need to develop new ways to use technology to improve the basic condition of the poor. The United States is increasing the technical

component of its development programs to
provide basic nutrition, health, and educa-
tion services.

The second element of our program is to improve the amount and quality of technological information available to developing countries and to improve their selection of technology relevant to their needs. We will support the efforts of the U.N. International Center for Exchange of Technological Information to provide comprehensive information on the capabilities and facilities of national and regional information services. For its part, the United States will inventory its national technological information resources and make available, both to developing countries and to the U.N. Center, consultants and other services to improve access to our national information facilities. These include the National Library of Medicine, the division of scientific information of the National Science Foundation, the National Agricultural Library, and the Smithsonian information service.

The United States also supports the proposed UNCTAD advisory service to strengthen the ability of developing nations to identify effectively, select, and negotiate for technology most appropriate to their requirements. We support the concept of regional advisory services under UNCTAD auspices, to provide expertise and resources to the technology requirements of particular regions and countries. These regional centers could act as conduits for the activities of other programs and institutions for the application of technology to developing countries.

Third, to nurture new generations of
technologists and technology managers, the
United States proposes a priority effort to
train individuals who can develop, identify,
and apply technology suited to the needs of
developing countries. To this end:

—Training competent managers of future technology should be central objectives of the proposed International Industrialization Institute and the International Energy Institute.

May 31, 1976

667

[LC]

—For its part, the United States will encourage universities, research institutes, and industrial training schools in the United States to create special institutes and curricula for technology training for the developing countries; we will provide for and assist their sister institutions in developing countries. We invite other developed countries to join us in this effort.

—Finally, the United States proposes that appropriate incentives and measures be devised to curb the emigration of highly trained manpower from developing countries; for the benefits which developing nations derive from trained technology managers are of no consequence if they leave their home countries.

In this connection, the U.S. Government will encourage the formation of a technology corps, which will parallel our executive service corps in organization and operation. This will be a private, nonprofit organization to which corporations and universities will contribute highly skilled personnel experienced in the management of scientific and technical operations. They will work with and help train local manpower in specific development projects.

The *fourth* element of our approach is to make the process of transferring existing technology more effective and equitable.

New technology in industrialized countries resides primarily in the private sector. Private enterprise is in the best position to provide packages of management, technology, and capital. To enhance that contribution, both industrialized and developing countries must create an environment conducive to technology transfer.

The United States recommends that voluntary guidelines be developed that set forth the conditions and standards of technology transfer which encourage, facilitate, and maximize the orderly transfer of technology.

The proposed International Resources Bank also contains features which can enhance the ability of developing countries to manage technology and thereby encourage its transfer. In the trilateral agreement with the host nation and the International Re-

sources Bank, the foreign investor would generally undertake to provide both management and technology. The investment project could, by mutual agreement, include the obligation to progressively transfer some of the technology to the host nation over the period of the agreement—as well as accelerate the country's capacity to manage such technology.

The flow of technology in the channels of world commerce can be diverted by restrictive practices. Some practices may directly limit the transfer of technology; in addition, where technology is transferred, restrictive provisions on trade in high-technology products can limit its benefits for others. The United States proposes that international attention be focused on the full range of these practices, with a view to their reduction or elimination.

The *fifth* element of the U.S. program is to set goals for achievement before and during the U.N. Conference on Science and Technology for Development, now proposed for 1979. The United States strongly supports this conference and its objectives. Preparations for it provide a major opportunity for both developed and developing countries to review their responsibilities for the sharing and use of technology.

To speed our preparations, the United States will convene a national conference next year to bring together our best talent from universities, foundations, and private enterprise. They will be asked to consider the broad range of technological issues of concern to the developing world. They will be invited to help mobilize American resources to assist developing countries to meet their research requirements. And they will be encouraged to prepare detailed American proposals for the conferences and institutes I have described.

We recommend also that the OECD nations urgently study the possibilities of a greater contribution by all industrialized nations to overcoming the problems of technology transfer.

This five-point program represents the most comprehensive effort ever put forward

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by the United States to deal with the challenge of applying technology to development. We hope that the UNCTAD Conference will give these initiatives serious consideration. We invite your ideas and proposals. Working together, we can see to it that this age of technology will improve the quality of the lives of all of our peoples in a manner undreamed of by previous generations.

## Balance-of-Payments and Debt Problems

Rising import costs caused in large part by higher oil prices, and reduced export earnings resulting from recession in the industrialized nations, have generated unprec- edented international payments deficits. Although global economic recovery has begun, many countries will face persisting deficits this year.

A major institutional effort must be made if these countries are to avoid severe cutbacks in their imports and consequent reductions in their economic growth. There are three priority areas:

- We must insure that flows of funds for development projects are neither reduced nor diverted by short-term economic problems. In addition, long-term financing must be increased and its quality enhanced.

- We must enable private markets to continue to play a substantial role in providing development capital. For many countries, private capital flows are, and will continue to be, the principal form of development finance.

- We must see to it that the domestic economic policies of all our countries are sound. They should not place undue pressures on payments positions by unnecessary accumulations of debt. And we must give particular attention to those countries unable to avoid critical debt problems.

## Resource Flows

We have been heartened by the immense effort made since the seventh special session to assure adequate balance-of-payments financing for less developed nations. Especially important has been the expansion of the

International Monetary Fund's lending facilities. These efforts should help insure that sufficient balance-of-payments financing is available on an aggregate basis to developing countries.

But emergency lending cannot be a substitute for effective and high-quality foreign aid. Although most foreign assistance from the United States and other donors is provided on highly concessional terms, much can be done to improve the quality of resource flows. In many cases, the conditions of assistance restrict its financial and developmental impact; one example is the tying of aid to procurement in donor countries, which can reduce its value. The United States therefore will urge the OECD Development Assistance Committee to develop arrangements for the reciprocal untying of development assistance.

## Private Capital

For many developing countries, particularly those in the midst of industrialization, private sources make up the bulk of development capital. Of the $35 billion balance-of-payments deficit of the non-oil-producing developing countries in 1975, nearly half was financed by private capital flows. Without this contribution, the consequences of the mammoth deficit would have been unmanageable. The IMF-IBRD Development Committee is studying a wide range of measures to insure that international capital markets continue their imaginative adaptation to the needs of developing nations.

In addition, negotiations on the replenishment of the International Finance Corporation, which we proposed at the seventh special session, have been completed. The IFC is actively engaged in examining the U.S. proposal for an International Investment Trust to mobilize portfolio capital for investment in local enterprises. The United States gives its full support to these efforts.

## Debt Problems

Many countries have had to resort to short-term external borrowing to finance their deficits. Debt payment burdens are

May 31, 1976

669

mounting; a number of countries are experi-
encing serious problems in meeting their
debt obligations.

Generalized rescheduling of debts is not
the answer. It would erode the creditworthi-
ness of countries borrowing in private capi-
tal markets. By tying financing to debt, it
obscures the significant differences among
countries and prevents an appropriate focus
on those in most urgent need. And it would
not be fair to those nations which have
taken strong policy measures to reduce their
obligations.

The debt problem must be addressed in re-
lation to each country's specific position and
needs. The United States stands ready to
help countries suffering acute debt service
problems with measures appropriate to each
case. The procedures must be agreeable to
creditor and debtor alike. The device of a
creditor club is a flexible instrument for
negotiations.

To improve the basis for consideration of
balance-of-payments problems of particular
developing countries, the United States pro-
poses that the Finance Commission of the
Conference on International Economic Co-
operation or another mutually acceptable
forum examine the economic and acute fi-
nancing problems of developing countries.

The Poorest Countries

The needs of many nations in the devel-
oping world are great, but the special re-
quirements of the poorest countries are
massive. This conference has a collective
moral responsibility to respond to this chal-
lenge. We must devote major efforts to im-
prove programs for the poorest countries
and to devise new ones where necessary, for
without adequate assistance the poorest will
be condemned to continuing poverty and help-
lessness. We must increase resource flows,
improve their terms, and enhance their qual-
ity. And aid must be given on softer terms,
because the poorest countries are by defini-
tion unable to service debt except on a highly
concessional basis.

Resource flows to the poorest countries
must be freed from restrictions on procure-

ment sources and the financing of local costs
which distort the design of projects, waste
resources, and cause excessive reliance on
imported equipment.

The IMF trust fund now being established
will importantly ease the immediate balance-
of-payments problems of the poorest coun-
tries.

For the longer term, a substantial re-
plenishment of the International Develop-
ment Association is imperative. The United
States will, as always, meet its commitments
to this vitally important source of assist-
ance. And we look forward to generous
OPEC [Organization of Petroleum Export-
ing Countries] support for this important
institution.

Thus the United States has already taken
a number of steps to assist the most needy
countries. We will do more:

- To meet the urgent needs of the Sahel region, we are actively participating in the deliberations of the *Club des Amis du Sahel*. In addition, we have proposed that an urgent study be undertaken on ways not merely to case the drought but to end the water shortage by mobilizing the great African rivers— not to perpetuate relief but to initiate basic reform.

- The U.S. Congress has already authorized a contribution of up to $200 million for the International Fund for Agricultural Development; we look forward to the June plenipotentiary conference which has been called to sign the agreement; and we urge others to contribute generously so that the $1 billion target can be met.

- We have secured authority under our Foreign Assistance Act to finance all costs of aid projects in least developed countries when necessary to insure their success.

- Seventy percent of our bilateral develop-
ment assistance is now programed for coun-
tries with per capita GNP of $300 or less.

- For countries whose per capita GNP is less than $500, we strongly support proposals to increase their share to over 80 percent of all UNDP grants. One-third of this should go to the least developed countries in this category.

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Department of State Bulletin

—We pledge a major expansion of our efforts to develop integrated systems for basic community health services. These will combine medical treatment and family planning and nutritional information, while making full use of locally trained paramedical personnel.

In the law of the sea negotiations now underway in New York, the United States has made a detailed proposal that revenues from deep-seabed mining and resources exploitation be shared with the international community especially for the benefit of the poorest countries.

This is a substantial effort. It must be complemented, however, by improvement in the terms of bilateral assistance to the poorest countries. To this end, the United States proposes that all donor countries agree to provide all development assistance to the relatively least developed countries on the UNCTAD list on a grant basis.

The United States will seek authorization from the Congress to provide all development assistance to the poorest countries on this basis. We already have congressional authorization to convert repayment of a portion of our loans under Public Law 480 to grants under certain circumstances. Taken together, these two steps will significantly increase the grant element in our bilateral assistance programs.

Human suffering and human deprivation are not questions of ideology or bloc politics. They touch the elemental needs of mankind and the basic imperatives of universal moral values. We must not fail to do our duty.

## Dimensions of Task of Development

Economic development is a task of many dimensions. Whatever may be our differing perspectives, the United States believes that a number of conclusions stand out clearly:

—Development is a mutually reinforcing endeavor. There is nothing permanent about the distinction between the developed and developing worlds. Developed countries thrive and advance most surely when the international economy grows vigorously and

steadily. As the United States sees other nations develop and industrialize, we feel renewed confidence in the world economic system and in our own economic future. Sustained growth and development require that we work together cooperatively.

—Development involves mutual responsibility. International cooperation cannot be one-sided. The strength of the industrial countries must be regarded as a trust for the progress of all; the developing countries only hurt themselves if they weaken that strength through contrived vacancies, cartels, embargoes, or arbitrary seizures of property. At the same time, the developed countries have an obligation to do their utmost to spur development. Our efforts here must take into consideration the concerns and the contributions of all countries, developed and developing, producer and consumer, East and West, North and South.

—Development is a process of change and innovation. It must respond not only to rapidly changing technology but also to the evolution of political attitudes. The old relationships of donor and recipient are increasingly paternalistic and anachronistic to the recipient; they may also come to seem a onesided burden to those who have long been donors. We must fashion a new sense of cooperation that is based on the self-respect and sovereign equality of all nations. Each nation must find its own path to development which allows it to retain its self-respect and identity, its culture, and its ideological preference. But development itself is not a function of ideology; it must unite practical solutions and a philosophy of international cooperation. It cannot grow from doctrines of confrontation and the exploitation of despair.

—Development is a human enterprise. It is the talents and efforts of individuals which make development a reality, and it is they who are its ultimate beneficiaries. Our first aim is the minimum essentials of life—food, clothing, shelter—and the relief of human suffering and monotony and debilitating illness and ignorance and demeaning servitude to others. Then development must look beyond survival to provide opportunities

May 31, 1976

671

for education, greater personal freedom, and individual dignity and self-respect. Finally, development must deal with the quality of life: the dignity of the individual, personal freedom, and equality of opportunity regardless of race, religion, sex, or political belief.

The magnitude of the task before us will require unprecedented international collaboration. No nation alone can surmount—and only together can all nations master—what is inescapably a global challenge of historic proportions.

But we are not confronted by overwhelming odds or by intractable obstacles. We have it in our power to achieve in our generation a rate of economic advance that has no parallel in human experience.

In each age, men and women have striven for greater prosperity and justice and dignity. Yet always in the past there have been setbacks; history has recorded a surfeit of misery and despair. Our age is the first where we can choose to be different. And therefore we must.

If we succeed, this decade could be remembered as a turning point in the economic and political evolution of man. The new institu-

tions and mechanisms we create could be perceived as building blocks of international cooperation that strengthened the world's sense of community. The implications for world peace, as well as for economic cooperation, are vast.

The United States proceeds from the conviction that both morality and practical interest point in the same direction, toward a dedicated enterprise of cooperation. If we are met in a cooperative and realistic spirit, we are prepared to offer our national capacities in support of a historic extension of the global economy and global development.

So let us get down to business. Let us make this task a priority of all our foreign policies. Let us set our sights high, but let us not make our desire for the ideal block achievement of the attainable. Let us reach agreement on practical steps that improve the lot of our fellow man. We owe our people performance, not slogans; results, not rhetoric.

The United States extends its hand to those who will travel with us on this road to a more humane and bountiful future. We must travel it together, and we must take another step at this conference.

## United States Policy on Southern Africa

### Address by Secretary Kissinger¹

President Ford has sent me here with a message of commitment and cooperation.

I have come to Africa because in so many ways the challenges of Africa are the challenges of the modern era. Morally and politically, the drama of national independence in Africa over the last generation has transformed international affairs. More than any

other region of the world, Africa symbolizes that the previous era of world affairs, the colonial era, is a thing of the past. The great tasks you face—in nationbuilding, in keeping the peace and integrity of this continent, in economic development, in gaining an equitable role in world councils, in achieving racial justice—these reflect the challenges of building a humane and progressive world order.

I have come to Africa with an open mind

¹ Made at Lusaka on Apr. 27 at a luncheon hosted by President Kenneth Kaunda of Zambia (text from press release 205).

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# The Cohesion of the Industrial Democracies: The Precondition of Global Progress

The Council of the Organization for Economic Cooperation and Development (OECD) met at ministerial level at Paris June 21-22. Following is a statement made before the Council by Secretary Kissinger on June 21, together with the texts of a Declaration on International Investment and Multinational Enterprises with its annex (Guidelines for Multinational Enterprises) and Decisions on Inter-Governmental Consultation Procedures on the Guidelines, on National Treatment, and on International Investment Incentives and Disincentives, adopted by the Council on June 21.

## STATEMENT BY SECRETARY KISSINGER

Press release 311 dated June 21

The purposeful cooperation of our nations has been at the heart of the world's progress for three decades. Today, we are challenged to deepen and advance that common effort. The cooperation of the industrial democracies is decisive for world peace, prosperity, and the cause of justice and human dignity.

No group of nations is better equipped to master these challenges. Ours are the societies that launched the two great events that gave birth to the modern age—the political revolutions of the 18th and 19th centuries that shaped today's community of nation-states and the Industrial Revolution that produced the contemporary world economy. We share a heritage of pioneering effort in all the modern forms of commercial, social, and governmental organization. And we have been able to perceive and respond to new

challenges, especially in giving effect to our recognition of the imperatives of interdependence.

Our democratic systems have disproved the doctrine that only repression and authoritarianism could advance human well-being. On the contrary, the industrial democracies assembled here have demonstrated conclusively that it is in freedom that men achieve the economic advances of which ages have dreamed. There is some irony in the fact that after years of disparaging our economic system, both the Socialist countries and the developing countries have turned to us to help them advance more rapidly. Today it is the industrial democracies which primarily have the resources, the managerial genius, the advanced technology, and the dedication which are needed for sustained economic development under any political system.

The advanced industrial nations have conducted themselves of late with vigor, determination, and a sense of shared purpose. Most of the OECD countries are now entering a period of economic expansion. We have worked together in the process of recovery, averting protectionist tendencies in trade and the selfish pursuit of oil and raw materials at each other's expense. Largely due to this, we are recovering quickly and with excellent prospects for continued progress.

We have acted together because we recognize that the world economy has become global. National interests cannot prosper or endure in isolation. And the nations assembled here are the engines of the world economy. Our performance is the pivot around which international trade and finance revolve. Our technology and investment are the

July 19, 1976

catalysts of development and economic progress in developing nations.

Today the world economy faces new and demanding challenges. Our past cooperation must be given fresh impetus in our twofold task: to improve our performance in areas where we have already begun to work together and to create mechanisms of cooperation to deal with new issues and opportunities.

This organization is well suited to this task. Its history and durability are a demonstration of the unity and cooperation of the industrial democracies. It has provided a unique forum and necessary focus for dealing with the critical link between national aspirations and global opportunity. This is no accident; it reflects our fundamental moral and political fraternity. Our traditions of freedom give moral meaning and political purpose to our technical achievements.

This is why I wish to stress the importance of furthering our unity and progress through the OECD. The objective is not to forge a bloc for our own advantage or for purposes of confrontation. It is to shape a new international environment based on the consciousness that in an age of interdependence national interests can best be served by advancing the aspirations of all mankind through cooperative efforts.

Let me discuss three areas of challenge and opportunity:

- Strengthening the cohesion and prosperity of the industrialized democracies;

- The new issues we face in economic relations with the Communist world; and

- The ongoing international effort to promote economic development and a constructive long-term relationship between the industrial and developing worlds.

## Relationship of the Industrial Democracies

Our first and fundamental concern must be economic cooperation and progress among the industrialized democracies of North America, Western Europe, and Asia. Tomorrow, finance and economic ministers will discuss these economic questions in detail.

Today I want to sketch in broad terms four essential areas of our cooperation which have the greatest significance for world order and the future of the international system:

- Noninflationary economic growth;

- Strengthening our open international trade and monetary system;

- The encouragement of transnational investment; and

- Greater cooperation in energy.

I shall discuss each of these in turn.

First, as our nations move to recovery and expansion, we must insure steady, noninflationary economic growth. Only in this manner can we resolve conflicting claims on resources, reinforce the political vitality of our institutions, enhance our freedom of action in world affairs, and enlarge the economic horizons of all societies.

We must overcome cycles of boom and stagnation, which in the past have impaired productivity, constricted investment, and choked off our full economic potential. We can achieve sustained growth by containing inflation. The investment needed to create jobs for our growing labor forces will dry up in an environment of rapidly and constantly rising prices. Inflation erodes the progress made in raising the standard of living of our peoples; it strains the social fabric of our democratic societies.

The responsibility for noninflationary growth rests with national governments. But close consultation and collaboration are essential to insure that national policies are complementary and reinforcing; to contribute to exchange rate stability among us; to give special attention to members that are in difficulty; and to collaborate on policies of trade, energy, and relations with the developing countries. The summit meeting at Rambouillet last November made a major contribution to general recovery and promotion of these goals. The summit next week in Puerto Rico will assess the progress we have made and use it as a point of departure for future advances.

This meeting provides an opportunity for the nations assembled here to reaffirm our

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Department of State Bulletin

joint commitment to an open economic system, to national responsibility, and to international cooperation. With sound and concerted policies among us and with efforts to coordinate our strategies for expansion, the potential for the world's sustained economic growth can be realized.

At last year's OECD ministerial meeting, at U.S. recommendation, a Group of Distinguished Economists was set up, chaired by Professor [Paul W.] McCracken. It was assigned the task of examining the medium- and long-term and structural problems of sustained economic growth. It is exploring the problems of inflation, investment, structural imbalances, and adequate supplies of raw materials. We look forward to its conclusions and recommendations.

Strengthening our trade and monetary system also requires enhanced collaboration. In recent years, high unemployment and economic uncertainty have revived protectionist pressures in many countries; inflation and drastic differences in the performance of member nations have produced major payments imbalances, exchange rate pressures, and financial strains.

The Rambouillet summit and the IMF [International Monetary Fund] meeting in Jamaica last January were milestones in adapting the international monetary system to a new era. We have agreed to new IMF rules to avoid the shocks and disequilibrium which plagued the Bretton Woods system and to insure a smoother functioning of our trade and investment.

Today and tomorrow the OECD nations are continuing close and detailed consultations. We will examine both current problems and the long-term future, both the existing institutions and institutional reform. A recent example of our capacity for innovation was the agreement on the OECD Financial Support Fund, designed to help us deal cooperatively with serious economic dislocations aggravated by the oil price rises. The United States is seeking swift ratification of this agreement so that the Fund may come into being soon.

In *trade*, two years ago the OECD nations

jointly undertook an extraordinary political commitment to preserve an open economic system despite a period of general economic difficulty. On May 30, 1974, we pledged to avoid new restrictions on trade. We rejected policies which would tend to shift one nation's difficulties onto others. That declaration strengthened our successful efforts to resist protectionist pressures and thus benefit countries with particularly acute balance-of-payments problems. The declaration was renewed last year. We should now renew it for an additional year.

Our economic recovery provides significant opportunities for further progress:

- First, the political commitment represented by our trade pledge should be the basis for wider cooperation among us. The United States proposes that this organization recommend further areas for common action, not only on current trade problems and negotiations but on the long-term operation of our open trading system.

- Second, all nations assembled here should make a political commitment to accelerate the multilateral trade negotiations in Geneva. We are at the point where we must move forward at a more rapid pace if the negotiations are to reach a successful conclusion in 1977. To this end, the United States strongly recommends that we reach agreement this fall in Geneva on a tariff-cutting formula.

- Third, it is our shared obligation to improve the conditions of trade for developing countries. The postwar trading system was built on a consensus among industrial countries in which the developing countries did not participate and which they now challenge in several important respects. We need to reexamine the trading system, prepared to change or strengthen it where necessary. In the multilateral trade negotiations we will be negotiating new provisions in such areas as nontariff barriers, supply access, the settlement of disputes, and trade restrictions that are justified for balance-of-payments purposes. This organization and its members can play a crucial role in building a new global consensus on these issues.

July 19, 1976

75

[LC]

*Transnational investment* is the third area calling for close collaboration among the industrial nations.

Investment is the lifeblood of our economies and vital to worldwide development. It has been a principal source of the economic growth and security and prosperity which the nations represented here enjoy. It has been the single largest source of development capital for Third World nations and a powerful force marshaling management and technology for their benefit. It has developed resources; it has increased income; it has provided jobs. Since the midsixties, foreign direct investment has been growing faster than international trade and global GNP.

The increasing importance of transnational investment to the global economy has been accompanied by no little concern over the activities of private investors, particularly the multinational corporations. Questions have been raised as to how the international firms can serve the national interests of their hosts as well as their own. A few notorious cases of illicit payments have stirred apprehension and cast a cloud over the overwhelming majority of international firms whose behavior has been beyond reproach.

Governments, too, have impeded the flow of capital through inconsistent policies or discriminatory treatment of international firms. And most industrial countries have been under pressure at home to take increasingly nationalistic positions toward international investment.

If this trend is not halted, we shall face a gradual deterioration in the international investment climate, with serious consequences for economic development and the global economy.

It is highly significant, therefore, that this organization undertook two related tasks: to negotiate voluntary guidelines for multinational firms and to clarify governmental responsibilities to preserve and promote a liberal investment climate. We are able to announce today the acceptance by OECD member governments of a declaration on investment. This declaration extends the co-

operation which has characterized our trade and monetary relations into the area of investment. It includes:

- Recommended guidelines for the activities of multinational corporations;

- An agreed statement of the basic responsibilities of our governments with respect to transnational investment;

- Provision for strengthened cooperation on the questions of incentives and disincentives to foreign direct investment; and

- Provision for increased consultations between our governments on all these matters.

The United States strongly endorses this declaration and urges its widest possible adoption and observance.

A framework for investment is now emerging. We must encourage its development. Therefore, in addition to our full support for the OECD declaration, the United States urges the following policies for our nations:

- First, we should support the work of the U.N. Commission on Transnational Corporations and the related U.N. Information and Research Center within its Secretariat, which will develop a comprehensive information system on issues relating to transnational corporations. This will contribute to a fuller understanding of investment issues among all nations.

- Second, we should review the proposal of the International Resources Bank which the United States put forward at UNCTAD [U.N. Conference on Trade and Development] at Nairobi last month. While the Bank will focus on energy and raw materials, its principal features—as a multilateral guarantor against noncommercial risk and as a facilitator of production sharing and technology transfer—have important implications for development generally.

- Third, we should take strong collective measures to eliminate corrupt payments. Bribery and extortion are a burden on international trade and investment. We reiterate our proposal that negotiation of a binding international agreement on corrupt practices

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Department of State Bulletin

[L]

begin at next month's session of the U.N.
Economic and Social Council.

—Fourth, we should cooperate to restrain
anticompetitive practices of firms which
undermine the benefits of our open economic
system. The United States proposes a dual
effort: to reduce international procedural
obstacles to the enforcement of laws against
international restrictive business practices
and to pursue bilateral and multilateral
agreements for international antitrust co-
operation similar to that about to be con-
cluded between the United States and the
Federal Republic of Germany.

—Fifth, we should strengthen the work
of specialized OECD committees which deal
with investment problems such as harmoniz-
ing statistical systems, cataloguing restric-
tive business practices, improving the ex-
change of tax information, dealing with tax
haven problems, as well as their work now
underway on the general topics of technol-
ogy transfer and short-term capital move-
ments.

The fourth crucial sphere of cooperation
among the industrial nations is *energy*. The
cooperation of energy-consuming nations
has become an imperative, for the last few
years have demonstrated the economic and
political costs of loss of control over this
critical component of industrial growth.

For the next several years, our nations'
heavy dependence on imported oil will con-
tribute to our political and economic vulnera-
bility. The outlook for reducing our depend-
ence in the next decade is not encouraging.
Forecasts based on existing energy pro-
grams in the industrial countries indicate
that our imports of OPEC [Organization of
Petroleum Exporting Countries] oil will in-
crease from 27 million barrels a day in 1975
to as much as 37 million barrels per day by
1985. At the same time, it has become clear
that oil reserves, while still large, are finite.
Thus we must reduce our immediate depend-
ence on imported oil side by side with be-
ginning a long-term transition to alternative
energy systems through the most rapid pos-
sible development of new and alternative
sources of energy.

The industrial countries have begun to re-
spond to the energy challenge. The difficult
process of reorienting energy priorities and
establishing new energy policies has been
started. When the energy crisis became ap-
parent, we moved rapidly to set up the new
International Energy Agency (IEA), within
the framework of the OECD. Through its
impetus, a comprehensive structure of tech-
nical cooperation and policy coordination
among industrial countries has grown up. At
the same time, a dialogue with the OPEC
countries has been started in the Conference
on International Economic Cooperation
(CIEC). And the importance of helping the
poorer developing countries—especially those
with limited energy resources—to survive
the energy crisis has been recognized.

Despite these accomplishments, our ef-
forts have fallen far short of our needs.
They will neither adequately reduce our im-
mediate energy vulnerability nor achieve a
satisfactory global balance of energy supply
and demand over the longer term. The United
States therefore proposes that OECD mem-
bers take the following cooperative steps:

—First, that we establish on an urgent
basis joint energy production projects to
pool technical know-how and financing in
areas such as coal extraction and utilization,
uranium enrichment, and synthetic fuels.
Such actions would accord with the commit-
ments we undertook in the IEA Long-Term
Program. They will contribute to the early
availability of commercially attractive addi-
tional energy sources.

—Second, that we establish collective and
individual goals for substantially reduced de-
pendence on imported oil by 1985. This will
require agreed targets for additional energy
production, particularly in the coal and nu-
clear energy sectors; these represent our
best hope for substantially reducing our
energy dependence in the next decade.

—Third, that we agree to intensify our
national efforts to reduce the growth in
demand for energy.

The United States urges that the Govern-
ing Board of the IEA launch these efforts on
a priority basis. Member governments

July 19, 1976

77

should endorse these goals for reduced de-
pendence and also make the essential polit-
ical commitments to specific and concrete
actions to achieve them. We should aim for
a ministerial meeting in six to nine months
to accomplish these objectives. The minis-
terial meeting should also look beyond the
next decade to the post-oil era and seek ways
to build on cooperative research and develop-
ment efforts in such areas as solar power and
nuclear fusion. OECD countries not members
of the IEA should be given an opportunity
to participate fully in this process.

This agenda—of action for growth, trade and monetary affairs, investment, and energy—suggests an expanding role and responsibility for the OECD. Working together, the nations of the OECD face an unprecedented opportunity to advance their common welfare and prosperity. And from this foundation of cooperation we can more effectively deal with the issues which involve us with nations outside the OECD region.

Let me now turn to these relations with
the rest of the world.

East-West Economic Relations

Our relations with the nations of the East turn primarily upon political and security issues. In the past, trade and economic relations with the Soviet Union and Eastern Europe have not been among our central concerns. But a new dimension of economic interaction between East and West has begun to take shape. It is time to act cooperatively so that this new economic factor becomes an increasingly positive element in the world economy.

The Soviet Union has the second largest
economy in the world. Together with all
COMECON [Council of Mutual Economic As-
sistance] countries, it accounts for about 20
percent of world output. But despite the size
of its economy, the Soviet Union is not a
major factor in the world economic system.
Its trade is relatively small; it has made
little contribution to economic development.

In recent years, however, the Soviet

Union and the countries of Eastern Europe have moved toward greater economic contact with the West. The basic reason is plain. These countries have come to realize that they cannot provide for growing consumer demand or meet the technological imperatives of the more sophisticated economy they seek solely from their own economic resources. Further, many of the countries of Eastern Europe wish to diversify trading patterns that were established in the aftermath of World War II.

As a result, in the last four years, trade
between the COMECON countries and the
OECD countries has increased nearly four-
fold. Most East European countries now de-
pend on and prefer Western machinery, tech-
nology, and material imports for the dynamic
element of their economic growth. And in
matters of finance, the sudden increase in
the external debt of the Soviet Union and the
countries of Eastern Europe has been strik-
ing. Their net debt to private Western banks
doubled in 1975 to $15 billion, and their total
hard currency debt has reached nearly twice
that amount.

The most familiar example of the impact
of Communist countries on the international
economy has been Soviet shortfalls in the
production of grain, which has become the
single most volatile element in the world food
picture. In addition the Socialist countries
can become an important element in the
global energy balance. And in an era where
adequate supplies of many other industrial
raw materials can no longer be taken for
granted, the extensive mineral reserves of
the East can expand resource availability
worldwide. It is therefore clear that in our
multilateral efforts to build a strengthened
international economic system, we will have
to take account of the potential needs and
contributions of the centrally planned
economies.

For us, the industrial democracies in the
OECD, the growing economic interaction be-
tween East and West and the Eastern in-
fluence on the global economy are realities
that if arranged wisely can be positive de-
velopments, stabilizing relationships and

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Department of State Bulletin

broadening contacts. At the same time, managing relations between free economies and state trading systems has inevitable complications. Dealing with a centrally planned economy under strict political direction can never be treated simply as a commercial enterprise alone.

Certain principles stand out:

- All our nations have been engaged in this process.

- State trading countries must not be permitted to use their centrally directed systems for unfair advantage, nor should they be permitted to play off the industrial democracies against each other through selective political pressure.

- Growing East-West trade also presents hopeful prospects, both economic and political, if approached with understanding, skill, and foresight.

- In short, it is up to the industrial democracies to consult closely and to manage this process cooperatively.

Therefore the United States proposes that the OECD nations adopt a systematic work program for developing objectives and approaches for our economic relations with the Communist countries. To this end, some progress has already been made; for example, in aligning national export credit policies among the industrial countries. If we are to face this issue in an intelligent and harmonious fashion, many additional areas should be examined. Specifically, our nations should seek answers to the following questions:

- How can we insure effective reciprocity in trade between market and nonmarket countries?

- How do we deal with the problem of dumping and other unfair trade practices by countries in which prices need not bear a relation to costs or market forces?

- What are the implications of the growing external debt of the Communist countries?

- How can the industrial democracies deal with possible efforts to misuse economic relations for political purposes inimical to their interests?

- What should be the relationship between the nations of the East and the multi-lateral bodies dealing with economic affairs?

- How do we take account of the diversity of interests and needs that has already appeared among Eastern countries?

- And finally, is it possible to bring the Soviet Union and the Eastern European countries into the process of responsibly assisting development in the Third World?

The United States will elaborate its views on these issues at the next meeting of the Executive Committee in Special Session. The results of our examinations of these questions could be embodied in a report to the next ministerial meeting of this organization.

Growing East-West trade presents problems together with great opportunities. It is up to the countries assembled here to understand the process and its complexities and to manage it cooperatively. In that case, it can contribute to the vitality of our economies and to the stability of the international order.

## The Relationship Between North and South

One of the most urgent and compelling challenges that summon our cooperation is the relationship between the industrial and the developing nations. The new era of international cooperation we seek must include economic relations that offer mutual prosperity and widening opportunity for all the peoples of the world.

Every nation has a stake in global stability and world peace. But the ultimate good must be to look beyond the maintenance of peace to a world which offers its children a hope of a better future.

The United States has made its commitment. We have demonstrated our determination at the seventh special session of the U.N. General Assembly, at the Conference on International Economic Cooperation in Paris, at Kingston in January, and at the UNCTAD Conference in Nairobi last month.

July 19, 1976

79

Our efforts begin from the conviction that an effective international system must be founded upon a consensus among all nations and peoples. The world community which is our ultimate aspiration can only be realized if all nations and peoples can pursue their goals with a sense of participation and an awareness that their concerns are heeded. If we are to live in a stable world, the preponderant number of nations must be persuaded that their legitimate concerns are taken seriously.

The poor nations cry out for development. Their objectives are clear: economic progress, a role in international decisions that affect them, and an equitable share of global economic benefits. The objectives of the industrialized nations are equally clear: widening prosperity for all peoples produced by an open world system of trade and investment with expanding markets for North and South. We want to see stable and equitable development of the world's resources of food, energy, and raw materials as the fundamental basis for a prosperous world economy.

Thus, the objectives of the industrial democracies and those of the developing nations should be complementary. The process of building a world community must therefore be shared by nations of both North and South and must address the issue of economic development in the context of growing global prosperity.

But this is not inevitable. Effective cooperation presupposes that both sides face certain realities without illusion.

The most critical of these realities is that development is a long-term process. Sustained economic development cannot possibly result from any one conference or any one set of proposals. It will depend primarily upon the internal effort, the domestic policy, and the national will of the developing countries themselves. In most cases the effort will extend over decades. Often this will require painful short-term sacrifices for longer term gains. Development cannot be created by rhetoric or by parliamentary victories in international forums.

Development further requires the sustained and collective effort of the industrial countries. The role of the industrial democracies is critical, for we possess the largest markets and most of the world's capital and technology. Thus real development presupposes a serious, unemotional, constructive North-South dialogue.

In such a dialogue it is futile for one party to seek to impose solutions to the problems of development on another. An atmosphere of extortion or pressure, unworkable proposals, or excessive reliance on parliamentary maneuvers will ultimately undermine public support in the only countries capable of contributing effectively to development.

We of the industrial democracies have a special responsibility. What we do—or fail to do—is critical to the future of the countries of the Third World. If we substitute competition among ourselves for a dispassionate analysis of the issues, the development process will falter. Our resources will be inefficiently scattered or misallocated; projects will too often prove fruitless for lack of careful analysis or want of wider support. We do no one a favor when we substitute rhetorical concessions for intelligent and realistic proposals that link the interests and concerns of both sides in a prospering global economy. Those who curry short-term favor may mortgage the long-term future.

It is imperative that the North-South dialogue advance in a way which benefits both sides. In the long run, progress, stability, and peace depend upon it.

The United States has done its utmost to be forthcoming in the dialogue. We have strained our domestic processes to develop pragmatic proposals to meet real problems in our relations with the developing world. As our economies improve and as we, together with the developing world, identify new areas for cooperation, we can look forward to widening global cooperation which can serve the interests of all.

The spirit of cooperation necessary between North and South requires first a commitment to cooperation among the industrial nations. This is not a call for confrontation

80

Department of State Bulletin

with the Third World. It is an indispensable step we must take if we are not to fragment our efforts and fail in our objectives.

The United States believes that this or-
ganization should focus on three areas where
our cooperation is most necessary and would
be most effective:

- We must improve our ability to concert our development efforts in international forums, for it is in these meetings that ideas are launched, compromises are made, and political directions are set.

- We must enhance our collaboration in our bilateral and multilateral aid programs; for our resources are limited, and closer alignment of programs is essential for their effectiveness.

- We must develop a longer term strategy for development which integrates the diverse strands of North-South policy, including for- eign aid, technology transfer, financial pol- icy, and trade. For development is a compre- hensive and never-ending process with impli- cations for every area of the international economic system.

Let me discuss each area in turn.

First, we must improve the coordination
of our positions at major international con-
ferences. Recent unfavorable experiences at
UNCTAD in Nairobi and at other interna-
tional forums should make clear the impor-
tance of this step. We in this organization
have supporting mechanisms for coordina-
tion of positions on energy, commodities,
finance, and development, but their effective-
ness has been frequently less than adequate.
For the remainder of this year we will be
relying on these bodies to continue to sup-
port our work in the Conference on Interna-
tional Economic Cooperation. It is therefore
imperative that we review now our recent
experience with the objective of strengthen-
ing the coordinating role of each OECD sup-
port mechanism as well as the relationship
among them.

The United States recommends that the
Secretary General undertake an immediate
examination of the issues and present recom-
mendations to the Executive Committee in

Special Session on ways in which we may
more closely align our positions.

We suggest as well that this organization
take a more active role in developing views
on key North-South issues than it has in the
past. We believe this could most fruitfully
be done by identifying in advance of inter-
national meetings specific issues of major
concern to industrialized countries and ar-
ranging for consultations to develop mutu-
ally supporting positions. It makes no sense
to work out our differences under the pres-
sure of deadlines and of other participants
at international conferences.

The next several months will be a test of
our ability to work together in a variety of
international settings. The agenda of confer-
ences is full. We will be considering on a
case-by-case basis measures to improve the
functioning of individual commodity mar-
kets, including the reduction of excessive
price fluctuations and methods of buffer
stock financing. We will also be translating
the analysis of the first six months of the
year into concrete results in CIEC. In this
forum, the United States looks forward to
visible and concrete achievements in energy,
raw materials, investment, trade, and meas-
ures to address the problems of the poorest
countries. We will want:

- To explore possibilities for further con-
sultations on energy, including ways to assist
developing nations that have no energy
resources;

- To facilitate progress on commodity dis-
cussions, including ways to improve the
functioning of individual commodity mar-
kets; and

- To begin work on the International Re-
sources Bank proposal, which we see as relat-
ing to the work of all the CIEC commissions,
particularly those dealing with energy and
raw materials.

Second, we must increase the effectiveness
of our bilateral and multilateral aid efforts
in addressing specific problems in the devel-
oping world. The OECD Development Assist-
ance Committee has done important work to
improve and coordinate development assist-

July 19, 1976

81

ance policies. There are, as well, over 20 con-
sultative groups working with regard to
specific developing nations. We should review
our coordination in all these areas. We may
consider streamlining some of those mecha-
nisms and eliminating duplication.

We must seek to enhance the coordination
of assistance policies and programs which
have a regional or even continental focus.
The *Club des Amis du Sahel* is a recent suc-
cessful effort to concert our resources to
combat the problems of that African sub-
region. We should explore whether there are
other regions, in Africa or elsewhere, where
similar approaches are needed. The recent
initiative by the President of France for
focusing joint attention on specific problems
on the African Continent is an example of
the kind of effort we must make together in
the future.

Third, we must devote a major portion of
our efforts to longer range planning for
global development. The problem of growth
will not go away. No one policy will be de-
cisive; no one conference will devise perma-
nent solutions. We must begin to focus
honestly and carefully on the development
challenge through the distant future.

A high priority in this effort must be to
consider together the various development is-
sues we have been addressing separately.
Development policies can be either mutually
reinforcing or they can undermine one an-
other. We must find a way to look at devel-
opment as a comprehensive and integrated
whole, harmonizing our long-range planning
efforts in trade, aid, investment, and tech-
nology. These individual policies need to be
placed into a larger coherent plan so that the
industrial nations' development efforts can
more efficiently respond to the most pressing
issues in the developing world.

To achieve a more effective integrated de-
velopment strategy, the United States pro-
poses that OECD countries decide now to
review the entire range of North-South is-
sues which we will be addressing over the
remainder of this decade and beyond. Over
the next year we should develop a consistent
and comprehensive set of objectives and
strategies.

At the same time, we should now move to
strengthen the institutional arrangements
within this organization for handling North-
South issues. There should be a central focal
point in the OECD for consideration of all
such activities. This will give a greater po-
litical impetus to our efforts. And it should
also stimulate greater consideration for the
needs and interests of developing nations in
the ongoing work of specialized OECD com-
mittees.

The kind of coordination which I have sug-
gested will require attention at the highest
levels of our governments. It will, of course,
also require compromises on policies and pri-
orities which each of us has developed in the
past. But it is our best, perhaps our sole,
chance to accelerate the pace of constructive
progress in our relations with the Third
World while not undermining our relations
with each other.

The Imperative of Cooperative Action

The nations assembled in this room pro-
ceed from two main premises: the interde-
pendence among the OECD nations and our
common desire to help shape a new era of
global economic cooperation among all na-
tions.

The central task before the industrialized
democracies of the OECD is to give new
focus and purpose to our own cooperative
economic action. Economics is only part of
that enterprise. The choices before us and
the decisions we take will, above all, reflect
our perception of ourselves as peoples and as
nations. The tasks are long term, and they
demand that we extend our line of sight
beyond immediate technical issues or politi-
cal controversies to more distant horizons.

Ours is a time when the centers of global
power and influence are many and diverse.
And ours, therefore, is a choice between co-
operation or chaos. Today more than ever,
the industrial democracies require leadership
determined not to adapt to reality, but to
shape it. Circumstances have provided us
with a clear understanding of our interde-
pendence, and our efforts to translate this
reality into common progress are well begun.

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Department of State Bulletin

[LC]

We have every reason for confidence in our capacities.

Our cooperative endeavor, which has ac-
complished so much in the past, can be even
more dynamic as we turn to the new and
long-term challenges of interdependence.
What we elect to do together is bound to
have vast meaning to a world that seeks
progress and justice and needs from all of
us in this room a fresh demonstration of
what strong and free nations working to-
gether can accomplish.

TEXTS OF DECLARATION, WITH ANNEX,
AND DECISIONS OF THE COUNCIL ¹

Text of Declaration

DECLARATION ON INTERNATIONAL INVESTMENT
AND MULTINATIONAL ENTERPRISES

THE GOVERNMENTS OF OECD MEMBER COUNTRIES ²

CONSIDERING

that international investment has assumed in-
creased importance in the world economy and has
considerably contributed to the development of their
countries;

that multinational enterprises play an important
role in this investment process;

that co-operation by Member countries can im-
prove the foreign investment climate, encourage the
positive contribution which multinational enterprises
can make to economic and social progress, and mini-
mise and resolve difficulties which may arise from
their various operations;

that, while continuing endeavours within the
OECD may lead to further international arrange-
ments and agreements in this field, it seems ap-
propriate at this stage to intensify their co-operation
and consultation on issues relating to international
investment and multinational enterprises through
inter-related instruments each of which deals with
a different aspect of the matter and together con-
stitute a framework within which the OECD will
consider these issues:

DECLARE:

I. Guidelines for MNE's

that they jointly recommend to multinational

enterprises operating in their territories the observ-
ance of the Guidelines as set forth in the Annex
hereto having regard to the considerations and under-
standings which introduce the Guidelines and are
an integral part of them.

II. *National Treatment*

1. that Member countries should, consistent with their needs to maintain public order, to protect their essential security interests and to fulfil commitments relating to international peace and security, accord to enterprises operating in their territories and owned or controlled directly or indirectly by nationals of another Member country (hereinafter referred to as "Foreign-Controlled Enterprises") treatment under their laws, regulations and administrative practices, consistent with international law and no less favourable than that accorded in like situations to domestic enterprises (hereinafter referred to as "National Treatment").

2. that Member countries will consider applying "National Treatment" in respect of countries other than Member countries.

3. that Member countries will endeavour to ensure
that their territorial subdivisions apply "National
Treatment".

4. that this Declaration does not deal with the
right of Member countries to regulate the entry
of foreign investment or the conditions of establish-
ment of foreign enterprises.

III. *International Investment Incentives and Disincentives*

1. that they recognise the need to strengthen their co-operation in the field of international direct investment.

2. that they thus recognise the need to give due weight to the interests of Member countries affected by specific laws, regulations and administrative practices in this field (hereinafter called "measures") providing official incentives and disincentives to international direct investment.

3. that Member countries will endeavour to make such measures as transparent as possible, so that their importance and purpose can be ascertained and that information on them can be readily available.

IV. Consultation Procedures

that they are prepared to consult one another on
the above matters in conformity with the Decisions
of the Council relating to Inter-Governmental Con-
sultation Procedures on the Guidelines for Multi-
national Enterprises, on National Treatment and on
International Investment Incentives and Disincen-
tives.

V. Review

that they will review the above matters within
three years with a view to improving the effec-
tiveness of international economic co-operation

¹ Adopted on June 21 by the OECD Council meeting at ministerial level (texts from OECD press release PRESS/A(76)20).

²The Turkish Government was not in a position to
participate in this Declaration. [Footnote in original.]

July 19, 1976

83

The Secretary
of State

[L4]

1976

Speech

June 25, 1976

London, England

Bureau of Public Affairs
Office of Media Services

THE INDUSTRIAL DEMOCRACIES:
THE IMPERATIVE OF COOPERATION

Secretary Henry A. Kissinger's address before the
International Institute for Strategic Studies
inaugurating the Alastair Buchan memorial lecture
series.

Ladies and gentlemen, friends: On my arrival in Washington seven years ago, one of my first acts was to gather a group of senior scholars of European affairs to have them give their advice to a new President on relations with our allies. The chairman of that group was Alastair Buchan.

He should not be held responsible for the
results. But it was only natural to seek his counsel.
For Alastair was more than a distinguished expert;
he was a consummate man of the West. A Scot by
birth, he considered himself, and referred to him-
self, as a European. He lived many years in the
United States and visited us often, applying his
incisive mind to the study of America and its role
in the world. He was a champion of the import-
ance, indeed the inevitability, of the transatlantic
tie between North America and Europe.

Beneath the skeptical air was a passionate
commitment to the values and traditions we
cherish as Western civilization. Sir Peter Rams-
botham [U.K. Ambassador to the United States]
said in his eulogy of Alastair in Washington that no
other countryman of his had contributed more to
the understanding of international affairs and the
strategic implications of nuclear power in the latter
half of the 20th century. But Alastair's focus was
not simply the structure of global politics and the

roots of war; it was the central role of the West in
preserving peace and giving it more purpose.

This institute is a monument to his quest.

Alastair had that combination of intellect and
compassion known as wisdom. It motivated the
great contribution he made to scholarship and to a
generation's understanding of the transformation
of international relationships. He has left his mark
on every person in this hall. During the last seven
years, he never hesitated to scold me in all friend-
ship when he thought that American policy did not
do justice to the great cause of European-American
cooperation. I would like to think that, had he
lived, he would feel that, after many starts, we
have made great strides in strengthening the unity
of the West. And if that were his conviction, I for
one would be very proud.

"Structural changes," Alastair wrote, "are occ-
urring in the relative power and influence of the
major states; there has been a quantitative change
of colossal proportions in the interdependence of
Western societies and in the demands we make on
natural resources; and there are qualitative changes
in the preoccupations of our societies." He then
posed the question: "Can the highly industrialized
states sustain or recover a quality in their national
life which not only satisfies the new generation,
but can act as an example or attractive force to
other societies?"

All of us who wish to honor Alastair's
memory must do so in the way he would want
most of all—by proving that the answer to his ques-

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tion is yes. A world that cries out for economic advance, for social justice, for political liberty, and for a stable peace needs our collective commitment and contribution. I firmly believe that the industrial democracies working together have the means, if they have the will, to shape creatively a new era of international affairs. Indeed we are doing so on many fronts today, thanks to the clarity Alastair brought to our purposes and directions.

A generation ago Western statesmen fashioned new institutions of collaboration to stave off a common threat. Our progress after 30 years has been striking. Global war has been deterred, and all of the industrial democracies live with an enhanced sense of security. Our economies are the most prosperous on earth; our technology and productive genius have proven indispensable for all countries seeking to better the welfare of their peoples, be they Socialist or developing. Our societies represent, more than ever, a beacon of hope to those who yearn for liberty and justice and progress. In no part of the world and under no other system do men live so well and in so much freedom. If performance is any criterion, the contest between freedom and communism, of which so much was made three decades ago, has been won by the industrial democracies.

And yet at this precise moment we hear in our countries premonitions of decline, anxieties about the travail of the West and the advance of authoritarianism. Can it be that our deeper problems are not of resources but of will, not of power but of conception?

We who overcame great dangers 30 years ago must not now paralyze ourselves with illusions of impotence. We have already initiated the construction of a new system of international relations—this time on a global scale. We must summon the determination to work toward it in unity and mutual confidence.

For America, cooperation among the free nations is a moral, and not merely a practical, necessity. Americans have never been comfortable with calculations of interest and power alone. America, to be itself, needs a sense of identity and collaboration with other nations who share its values.

Our association with Western Europe, Canada, and Japan thus goes to the heart of our national purpose. Common endeavors with our sister democracies raise the goals of our foreign policy beyond physical survival, toward a peace of human

progress and dignity. The ties of intellectual civilization, democratic tradition, historical association, and more than a generation of common endeavor bind us together more firmly than could any pragmatic conception of national interest alone. The unity of the industrial democracies has been the cornerstone of American foreign policy for 30 years, and it will remain so for as far ahead as we can see.

So I would like to pay tribute to Alastair this evening by addressing the issues he raised: Can America, Europe, and the industrial democracies meet the challenge of the world's future? What is the state of our relationship?

## The U.S. and a United Europe

In 1973, with Viet-Nam at last behind us and fresh from new initiatives with China and the Soviet Union, the United States proposed that the collaboration of the industrial democracies be given new impetus. Military security, while still crucial, was no longer sufficient to give content or political cohesion to our broader relationship or to retain support for it from a new generation. We faced important East-West negotiations on European security and force reductions; a fresh agenda of international economic problems; the challenge of shaping anew our relationship with the developing world; and the need to redefine relations between America and a strengthened and enlarged European Community.

It is academic to debate now whether the United States acted too theoretically in proposing to approach these challenges through the elaboration of a new Atlantic declaration, or whether our European friends acted wisely in treating this proposal as a test case of European identity. The doctrinal arguments of 1973 over the procedure for Atlantic consultations, or whether Europe was exercising its proper global role, or whether economic and security issues should be linked, have in fact been settled by the practice of consultations and cooperation unprecedented in intensity and scope. The reality and success of our common endeavors have provided the best definition and revitalization of our relationship. There is no longer any question that Europe and the United States must cooperate closely, under whatever label, and that the unity of Europe is essential to that process.

In its early days, the European Community

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was the focus of much American idealism, and perhaps of some paternalism, as we urged models of federal unity and transatlantic burdensharing on our European friends. By now, leaders on both sides of the Atlantic have come to understand that European unity cannot be built by Americans or to an American prescription; it must result from European initiatives.

The evolution of European initiatives—both its successes and its setbacks—inevitably gives rise to new questions about whether the United States still welcomes European unification. Let me take this occasion to emphasize our conviction that European unity is crucial for Europe, for the West, and for the world. We strongly support and encourage it.

We have perhaps become a little more sophisticated about our contribution to the process. We no longer expect that it will grow from the desire to ease American burdens. If Europe is to carry a part of the West's responsibilities in the world, it must do so according to its own conceptions and in its own interest. Alastair Buchan wrote: "It is impossible to inspire Western Europe to political unity or to encourage Japanese self-reliance unless they have the freedom and confidence to define their interests in every sphere, interests which must be reconciled with those of the United States but not subordinated to them."

The United States endorses this principle wholeheartedly. It is not healthy for the United States to be the only center of initiative and leadership in the democratic world. It is not healthy for Europe to be only a passive participant, however close the friendship and however intimate the consultation.

We therefore welcome the fact that Europe's role in global affairs is gaining in vigor and effectiveness. A vital and cohesive Western Europe is an irreplaceable weight on the scales of global diplomacy; American policy can only gain by having a strong partner of parallel moral purposes.

Of course we do not want Europe to find its identity in opposition to the United States. But neither does any sensible European. Of course there will be disagreements between us of tactics, and sometimes of perspectives, if not of ends. But I do not believe that Americans have so lost confidence in ourselves that we must inhibit the role of others, with whom we may have occasional differences, but who share our highest values. The wisest

statesmen on the two sides of the ocean have always known that European unity and Atlantic partnership are both essential and mutually reinforcing.

So let us finally put behind us the debates over whether Europe's unity has American support. We consider the issue settled. Let us rather address ourselves to the urgent challenges of mutual concern which a uniting Europe, the United States, and all industrial democracies must face together—common defense, East-West relations, and the international economy.

## Security and the Democracies

Security is the bedrock of all that we do. A quarter-century ago, the American defense commitment to Europe provided the shield behind which Western Europe recovered its economic health and political vitality. Today our collective alliance defense—and the U.S.-Japanese relationship—continue to be essential for global stability. But the nature of security and strategy has fundamentally changed since the time when our alliances were founded:

* The Soviet Union has recovered from the devastation of World War II and pressed vigorously ahead on the path of industrial growth. Possessing resources on a continental scale, and imposing on its people enormous sacrifices in the name of its ideology, the U.S.S.R. has developed its economic strength and technology to a point where it can match the West in many sectors of industrial and military power. It shows no signs of changing its priorities.

* For centuries it was axiomatic that increases in military power could be translated into almost immediate political advantage. It is now clear that in strategic weaponry new increments of weapons or destructiveness do not automatically lead to either military or political gains. The destructiveness of strategic weapons has contributed to the emergence of nuclear stalemate. Neither side, if it acts with minimum prudence, will let the balance tip against it, either in an arms race or in an agreement to limit arms.

* Beneath the nuclear umbrella, the temptation to probe with regional forces or proxy wars increases. The steady growth of Soviet conventional military and naval power and its expanding global reach cannot be ignored. Conventional forces and

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military assistance to allies assume pivotal importance. We must insure that the strength and flexibility of all forces capable of local defense are enhanced. And we must conduct a prudent and forceful foreign policy that is prepared to use our strength to block expansionism.

These new realities demand from us steadiness, above all. Democratic societies have always fluctuated in their attitude toward defense—between complacency and alarmist concern. The long leadtimes of modern weapons and their complexity make both these aberrations dangerous. We cannot afford alternation between neglect and bursts of frenzy if we are to have a coherent defense program and public support for the necessary exertions. We need an allied defense posture that is relevant to our dangers, credible to both friends and adversaries, and justifiable to our peoples. And we must be prepared to sustain it over the long term.

It is imperative that we maintain the programs that insure that the balance is preserved. But we owe it to ourselves to see the military balance in proper perspective. Complacency may produce weakness, but exaggeration of danger can lead to a loss of will. To be sure, there has been a steady buildup of Soviet military power. But we have also seen to the steady growth and improvement of our own forces over the same period.

* We have always had to face Soviet ground forces larger than our own—partly because of the Soviet Union's definition of its needs as a power in the heart of the Eurasian landmass, with perceived threats on both flanks. Its naval power, while a growing and serious problem, is far weaker than combined allied naval strength in terms of tonnage, firepower, range, access to the sea, experience, and seamanship.

* The United States, for its part, is expanding its army from 13 to 16 divisions through new measures of streamlining forces; we are increasing our combat forces in Europe; we plan to station a new army brigade on the critical sector of the north German plain; we are augmenting our naval forces. Our European allies have completed major programs to build common infrastructure: We have undertaken new joint efforts of standardization and interoperability of allied forces.

* U.S. strategic forces are superior in accuracy,

diversity, reliability, survivability, and numbers of separately targetable nuclear warheads. We have a commanding lead in strategic bombers. In addition there are American deployments overseas and the nuclear forces of two Atlantic allies.

* Even with our different priorities, the economic and technological base which underlies Western military strength remains overwhelmingly superior in size and capacity for innovation. The Soviet Union suffers endemic weakness in its industry and agriculture: Recent studies indicate that this chronic inefficiency extends even into their military sector to a much greater extent than realized before.

These strengths of ours demonstrate that our present security posture is adequate and that it is well within our capacities to continue to balance the various elements of Soviet power. To maintain the necessary defense is a question of leadership more than of power. Our security responsibility is both manageable and unending. We must undertake significant additional efforts for the indefinite future. For as far ahead as we can see, we will live in a twilight area between tranquillity and open confrontation.

This is a task for both sides of the Altantic. Our defense effort within the alliance will be importantly affected by the degree to which the American public is convinced that our allies share similar perceptions of the military challenge and a comparable determination to meet it. The greatest threat to the alliance would occur if, for whatever reason—through misreading the threat, or inattention to conventional forces, or reductions of the defense efforts of allies, or domestic developments within NATO members—U.S. public support for NATO were weakened.

The challenge of building sufficient hardware is easier than those of geopolitical understanding, political coordination and, above all, resolve. In the nuclear age, once a change in the geopolitical balance has become unambiguous, it is too late to do anything about it. However great our strength, it will prove empty if we do not resist seemingly marginal changes whose cumulative impact can undermine our security. Power serves little purpose without the doctrines and concepts which define where our interests require its application.

Therefore, let us not paralyze ourselves by a rhetoric of weakness. Let us concentrate on build-

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ing the understanding of our strategic interests which must underlie any policy. The fact is that nowhere has the West been defeated for lack of strength. Our setbacks have been self-inflicted, either because leaders chose objectives that were beyond our psychological capabilities or because our legislatures refused to support what the executive branch believed was essential. This—and not the various “gaps” that appear in the American debate in years divisible by four—is the deepest security problem we face.

## East-West Relations

As long ago as the Harmel Report of December 1967, the Atlantic alliance has treated as its “two main functions” the assurance of military security and realistic measures to reduce tensions between East and West. We never considered confrontation, even when imposed on us by the other side, or containment an end in itself. Nor did we believe that disagreements with the Soviet Union would automatically disappear. On the contrary, the very concept of “detente” has always been applicable only to an adversary relationship. It was designed to prevent competition from sliding into military hostilities and to create the conditions for the relationship to be gradually and prudently improved.

Thus alliance policy toward the East has had two necessary dimensions. We seek to prevent the Soviet Union from transforming its military power into political expansion. At the same time we seek to resolve conflicts and disputes through negotiation and to strengthen the incentives for moderation by expanding the area of constructive relations.

These two dimensions are mutually reinforcing. A strong defense and resistance to adventurism are prerequisites for efforts of conciliation. By the same token, only a demonstrated commitment to peace can sustain domestic support for an adequate defense and a vigilant foreign policy. Our public and Congress will not back policies which appear to invite crises; nor will they support firmness in a crisis unless they are convinced that peaceful and honorable alternatives have been exhausted. Above all, we owe it to ourselves and to future generations to seek a world based on something more stable and hopeful than a balance of terror constantly contested.

However we label such a policy, it is imposed by the unprecedented conditions of the nuclear age. No statesman can lightly risk the lives of tens of millions. Every American president, after entering office and seeing the facts, has come to President Eisenhower's view that "there is no ... alternative to peace."

Our generation has been traumatized by World War II, because we remember that war broke out as a result of an imbalance of power. This is a lesson we must not forget. But neither must we forget the lesson of World War I, when war broke out despite an equilibrium of power. An international structure held together only by a balance of forces will sooner or later collapse in catastrophe. In our time this could spell the end of civilized life. We must therefore conduct a diplomacy that deters challenges if possible and that contains them at tolerable levels if they prove unavoidable; a diplomacy that resolves issues, nurtures restraint, and builds cooperation based on mutual interest.

This policy has critics in all our countries. Some take for granted the relative absence of serious crises in recent years, which the policy has helped to bring about, and then fault it for not producing the millenium, which it never claimed. Some caricature its objectives, portraying its goals in more exalted terms than any of its advocates, and then express dismay at the failure of reality to conform to this impossible standard. They describe detente as if it meant the end of all rivalry; when rivalry persists, they conclude that detente has failed and charge its advocates with deception or naivete. They measure the success of policy toward adversaries by criteria that should be reserved for traditional friendships. They use the reality of competition to attack the goal of coexistence, rather than to illustrate its necessity.

In fact, this policy has never been based on such hope or gullibility. It has always been designed to create conditions in which a cool calculus of interests would dictate restraint rather than opportunism, settlement of conflicts rather than their exacerbation. Western policies can at best manage and shape, not assume away, East-West competition.

A pivot of the East-West relationship is the U.S.-Soviet negotiation on limitation of strategic arms. Increasingly, strategic forces find their function only in deterring and matching each other. A continuing buildup of strategic arms, therefore,

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only leads to fresh balances, but at higher levels of expenditures and uncertainties. In an era of expanding technological possibilities, it is impossible to make rational choices of force planning without some elements of predictability in the strategic environment. Moreover, a continuing race diverts resources from other needed areas such as forces for regional defense where imbalances can have serious geopolitical consequences. All these factors have made arms limitation a practical interest of both sides, as well as a factor for stability in the world.

We have made considerable progress toward curbing the strategic arms race in recent years. We will continue vigorously to pursue this objective in ways which protect Western interests and reflect the counsel of our allies.

In defining and pursuing policies of relaxing tensions with the East, the unity of the industrial democracies is essential. Our consultations have been intensive and frequent, and the record of Western cohesion in recent years has been encouraging—in the negotiations leading to the Four Power Agreement on Berlin; in the mutual and balanced force reduction talks; in the SALT negotiations [Strategic Arms Limitation Talks]; and in the preparation for the European Security Conference.

Allied cooperation, and the habits of consultation and coordination which we have formed, will be even more important in the future. For as the policy of relaxing tensions proceeds, it will involve issues at the heart of all our interests.

No one should doubt the depth of our commitment to this process. But we also need to be clear about its limits and about our conception of reciprocity:

* We should require consistent patterns of behavior in different parts of the world. The West must make it clear that coexistence requires mutual restraint, not only in Europe and in the central strategic relationship but also in the Middle East, in Africa, in Asia—in fact, globally. The NATO foreign ministers, at their Oslo meeting last month, stressed the close link between stability and security in Europe and in the world as a whole. We must endorse this not only by our rhetoric, but above all by our actions.

* We should make clear the tolerable definition of global ideological rivalry. We do not shrink from

ideological competition. We have every reason for confidence in the indestructible power of man's yearning for freedom. But we cannot agree that ideology alone is involved when Soviet power is extended into areas such as southern Africa in the name of national liberation, or when regional or local instabilities are generated or exploited in the name of proletarian internationalism.

* We should not allow the Soviet Union to apply detente selectively within the alliance. Competition among us in our diplomatic or economic policies toward the East risks dissipating Western advantages and opening up Soviet opportunities. We must resist division and maintain the closest coordination.

The process of improving East-West relations in Europe must not be confined to relations with the Soviet Union. The benefits of relaxation of tensions must extend to Eastern, as well as Western, Europe.

There should be no room for misconceptions about United States policy:

* We are determined to deal with Eastern Europe on the basis of the sovereignty and independence of each of its countries. We recognize no spheres of influence and no pretensions to hegemony. Two American presidents and several cabinet officials have visited Romania and Poland as well as nonaligned Yugoslavia, to demonstrate our stake in the flourishing and independence of those nations.

* For the same reason, we will persist in our efforts to improve our contacts and develop our concrete bilateral relations in economic and other fields with the countries of Eastern Europe.

* The United States supports the efforts of West European nations to strengthen their bilateral and regional ties with the countries of Eastern Europe. We hope that this process will help heal the divisions of Europe which have persisted since World War II.

* We will continue to pursue measures to improve the lives of the people in Eastern Europe in basic human terms—such as freer emigration, the unification of families, greater flow of information, increased economic interchange, and more opportunities for travel.

The United States, in parallel with its allies,

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will continue to expand relationships with Eastern Europe as far and as fast as is possible. This is a long-term process; it is absurd to imagine that one conference by itself can transform the internal structure of Communist governments. Rhetoric is no substitute for patient and realistic actions. We will raise no expectations that we cannot fulfill. But we will never cease to assert our traditional principles of human liberty and national self-determination.

The course of East-West relations will inevitably have its obstacles and setbacks. We will guard against erosion of the gains that we have made in a series of difficult negotiations; we will insure that agreements already negotiated are properly implemented. We must avoid both sentimentality that would substitute good will for strength, and mock toughness that would substitute posturing for a clear conception of our purposes.

We in the West have the means to pursue this policy successfully. Indeed we have no realistic alternative. We have nothing to fear from competition. If there is a military competition, we have the strength to defend our interests. If there is an economic competition, we won it long ago. If there is an ideological competition, the power of our ideas depends only on our will to uphold them.

We need only to stay together and stay the course. If we do so, the process of East-West relations can, over time, strengthen the fabric of peace and genuinely improve the lives of all the peoples around the world.

## Our Economic Strength

One of the greatest strengths of the industrial democracies is their unquestioned economic preeminence. Partly because we are committed to the free market system which has given us this preeminence, we have not yet fully realized the possibilities—indeed the necessity—of applying our economic strength constructively to shaping a better international environment.

The industrial democracies together account for 65 percent of the world's production and 70 percent of its commerce. Our economic performance drives international trade and finance. Our investment, technology, managerial expertise, and agricultural productivity are the spur to development and well-being around the world. Our enormous capacities are multiplied if we coordinate our policies and efforts.

The core of our strength is the vitality and growth of our own economies. At the Rambouillet economic summit last November, at the Puerto Rico summit next week, in the OECD [Organization for Economic Cooperation and Development], and in many other forums, the major democratic nations have shown their ability to work together. But an extensive agenda still summons us. We will require further efforts to continue our recovery and promote noninflationary growth. We will need to facilitate adequate investment and supplies of raw materials. We must continue to avoid protectionist measures, and we must use the opportunity of the multilateral trade negotiations to strengthen and expand the international trading system. We need to reduce our vulnerability and dependence on imported oil through conservation, new sources of energy, and collective preparations for possible emergencies. And we must build on the progress made at Rambouillet and at Jamaica last January to improve the international monetary system.

Our central challenge is to pool our strengths, to increase our coordination, and to tailor our policies to the long term. On the basis of solid cooperation among ourselves, we must deal more effectively with the challenges of the global economy—such as our economic relations with the centrally planned Communist economies and with the scores of new nations concerned with development.

East-West economic interchange, while small in relative scale, is becoming an important economic and political factor. This growth reflects our fundamental strength. It carries risks and complications, both political and economic. But it also presents opportunities for stabilizing relations and involving the Communist countries in responsible international conduct. If the democracies pursue parallel policies—not allowing the Communist states to stimulate debilitating competition among us or to manipulate the process for their own unilateral advantage—East-West economic relations can be a factor for peace and well-being.

We must insure that benefits are reciprocal. We must avoid large trade imbalances which could open opportunities for political pressure. We should structure economic relations so that the Communist states will be drawn into the international economic system and accept its disciplines. When dealing with centrally controlled state eco-

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nomies, we have to realize that economic relations have a high degree of political content and cannot be conducted solely on the normal commercial basis. Obviously, profitability must be one standard. But we need a broader strategy, consistent with our free enterprise system, so that economic relations will contribute to political objectives. The industrial democracies should coordinate their policies to insure the orderly and beneficial evolution of East-West relations. To these ends the United States has proposed to the OECD that we intensify our analyses of the problems and opportunities inherent in East-West trade with a view to charting common objectives and approaches.

If the economic strength of the industrial democracies is important to the Socialist countries, it is vital for the developing world. These nations seek to overcome pervasive poverty and to lift the horizons of their peoples: They ask for an equitable share of global economic benefits and a greater role in international decisions that affect them.

The process of development is crucial not only for the poorer nations but for the industrial nations as well. Our own prosperity is closely linked to the raw materials, the markets, and the aspirations of the developing countries. An international order can be stable only if all nations perceive it as fundamentally just and are convinced that they have a stake in it. Over the long term, cooperative North-South relations are thus clearly in the interest of all, and the objectives of industrial and developing countries should be complementary.

However, the North-South dialogue has been far from smooth. Tactics of pressure and an emphasis on rhetorical victories at conferences have too often created an atmosphere of confrontation. Such attitudes obscure the fundamental reality that development is an arduous long-term enterprise. It will go forward only if both sides face facts without illusions, shunning both confrontation and sentimentality.

Far more is involved than the mechanical application of technology and capital to poverty. There must be within the developing country a sense of purpose and direction, determined leadership and, perhaps most important, an impulse for change among the people. Development requires national administration, a complex infrastructure, a revised system of education, and many other social reforms. It is a profoundly unsettling process

that takes decades. For many new countries it is in fact even more difficult than similar efforts by the Western countries a century ago, for their social and geographic conditions reflect the arbitrary subdivisions of colonial rule. Some face obstacles which could not be surmounted even with the greatest exertions on their own. Their progress depends on how well the international community responds to the imperatives of economic interdependence.

It is senseless, therefore, to pretend that development can proceed by quick fixes or one-shot solutions. Artificial majorities at international conferences confuse the issue. Confrontational tactics will in time destroy the domestic support in the industrial countries for the forward-looking policy which the developing countries so desperately need.

The industrial democracies have special responsibilities as well. Development requires their sustained and collective cooperation. They represent the largest markets and most of the world's technology and capital. They have an obligation to show understanding for the plight of the poorest and the striving for progress of all developing nations. But they do the developing countries no favor if they contribute to escapism. If they compete to curry favor over essentially propagandistic issues, contributions will be diluted, resources will go unallocated, and unworkable projects will be encouraged.

The developing countries need from us not a sense of guilt but intelligent and realistic proposals that merge the interests of both sides in an expanding world economy:

First, we must develop further the mechanisms of our own cooperation. To this end the United States has made a number of concrete proposals at the recently concluded OECD meeting.

Second, the industrial democracies should coordinate their national aid programs better so that we use our respective areas of experience and technical skill to best advantage. President Giscard's proposal for an integrated Western fund for Africa is an imaginative approach to regional development.

Third, we should regularly consult and work in close parallel in major international negotiations and conferences. The Conference on International

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Economic Cooperation, the multilateral trade negotiations, U.N. General Assembly special sessions, world conferences on food, population, environment or housing, and UNCTAD [U.N. Conference on Trade and Development] all can achieve much more if the industrial democracies approach them with a clear and coherent purpose.

Fourth, we should stop conducting all negotiations on an agenda not our own. We should not hesitate to put forward our own solutions to common problems.

Finally, we need a clear, longer term strategy for development. The diverse elements of the process, including various forms of assistance, technology transfer, trade and financial policy, must be better integrated.

Cooperation among developed countries is not confrontation between North and South, as is often alleged. The fact is that a responsible development policy is possible only if the industrial democracies pursue realistic goals with conviction, compassion, and coordination. They must not delude themselves or their interlocutors by easy panaceas, or mistake slogans for progress. We make the greatest contribution to development if we insist that the North-South dialogue emphasize substance rather than ideology, and concentrate on practical programs instead of empty theological debates.

## Future of Democratic Societies

In every dimension of our activities, then, the industrial democracies enter the new era with substantial capacities and opportunities. At the same time, it would be idle to deny that in recent years the moral stamina of the West has been seriously challenged.

Since its beginnings, Western civilization has clearly defined the individual's relationship to society and the state. In southern Europe the humanism of the Renaissance made man the measure of all things. In northern Europe the Reformacion, in proclaiming the priesthood of all believers and offering rewards for individual effort, put the emphasis on the individual. In England the sense of justice and human rights and responsibilities evolved in the elaboration of the common law. Two hundred years ago the authors of our Declaration of Independence drew upon this heritage; to them every human being had inalienable rights to

life, liberty, and the pursuit of happiness. The state existed to protect the individual and permit full scope for the enjoyment of these rights.

Today in the West, 30 years after the Marshall plan, our deepest challenge is that a new generation must explore again the issues of liberty and social responsibility in an era when societies have grown vastly in size, complexity, and dynamism. The modern industrial society, though founded in freedom and offering prosperity, risks losing the individual in the mass and fostering his alienation. The technical complexity of public issues challenges the functioning of democracy. Mass media and the weakening of party and group structures further the isolation of the individual; they transform democratic politics, adding new elements of volatility and unpredictability. The bureaucratic state poses a fundamental challenge to political leadership and responsiveness to public will.

Basic moral questions are raised:

* How do we inspire a questioning new generation in a relativist age and in a society of impersonal institutions?

* Will skepticism and cynicism sap the spiritual energies of our civilization at the moment of its greatest technical and material success?

* Having debunked authority, will our societies now seek refuge in false simplifications, demogogic certitudes, or extremist panaceas?

These questions are not a prediction but a test—a test of the creativity and moral fortitude of our peoples and leaders.

Western civilization has met such tests before. In the late 15th century, Europe was in a period of gloomy introspection, preoccupied with a sense of despair and mortality. The cities which had sparked its revival following the Islamic conquests were in decline. Its territory was being diminished by the depredations of a powerful invader from the East. Its spiritual, economic, and cultural center—Italy—was a prey to anarchy and dismemberment.

And yet Europe at that very moment was already well launched on one of the world's periods of greatest political and intellectual advance. The Renaissance and Reformation, the great discoveries, the revival of humanistic values, the industrial and democratic revolutions—these were all to create the character and the dynamism of the

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Western civilization of which we, on both sides of
the Atlantic, are the heirs... of all industrial

Similarly today, the West has assets to meet its challenges and to draw from them the material for new acts of creation. It is our nations that have been the vanguard of the modern age. Intellectually and morally, it is our societies that have proven themselves the vast laboratory of the experiment of modernization. Above all, it is the Western democracies that originated—and keep alive today—the vision of political freedom, social justice, and economic well-being for all peoples. None of us lives up to this vision ideally, or all the time. But the rigorous standard by which we judge ourselves is what makes us different from totalitarian societies of the left or the right.

This, then, is our moral task:

First, as democratic governments we must redeem, over and over again, the trust of our peoples. As a nation which has accepted the burden of leadership, the United States has a special responsibility: We must overcome the traumas of the recent period, eradicate their causes, and preserve the qualities which world leadership demands. In Europe wherever there has been a slackening in governmental responsiveness to the needs of citizens, there should be reform and revival.

Second, we must confront the complexities of a pluralistic world. This calls for more than specific technical solutions. It requires of leaders a willing-

ness to explain the real alternatives, no matter how complicated or difficult. And it requires of electorates an understanding that we must make choices amidst uncertainty, where the outcome may be neither immediate nor reducible to simple slogans.

Third, we must clarify our attitudes toward political forces within Western societies which appeal to electorates on the ground that they may bring greater efficiency to government. But we cannot avoid the question of the commitment of these forces to democratic values, nor a concern about the trends that a decision based on temporary convenience would set in motion. At the same time, opposition to these forces is clearly not enough. There must be a response to legitimate social and economic aspirations and to the need for reforms of inadequacies from which these forces derive much of their appeal.

Finally, the solidarity of the democratic nations in the world is essential both as material support and as a moral symbol. There could be no greater inspiration of our peoples than the reaffirmation of their common purpose and the conviction that they can shape their fortune in freedom.

We cannot afford either a perilous complacency or immobilizing pessimism. Alastair Buchan posed his questions not to induce paralysis but as a spur to wiser action and fresh achievement.

We know what we must do. We also know what we can do. It only remains to do it.

NOV-17, 1976

National Meeting on Science, Technology, and Development

Representatives of industry, universities, foundations, re-
search institutes, private voluntary organizations, and labor
unions attended a National Meeting on Science, Technology, and
Development held by the Department on November 17. The meet-
ing initiated a series of activities leading to a National Confer-
ence on Science, Technology, and Development in 1977. Results
of that conference will further the development of U.S. policy in
this area and support U.S. participation in the U.N. Conference
on Science and Technology for Development scheduled for 1979.

Following are informal remarks made before the meeting by
Secretary Kissinger, together with addresses by H. Guyford
Stever, who is Director of the Office of Science and Technology
Policy and Science and Technology Adviser to President Ford,
and by Daniel Parker, Administrator, Agency for International
Development (AID).

REMARKS BY SECRETARY KISSINGER

Press release 561 dated November 17

First of all, I would like to express my ap-
preciation and that of my colleagues to all of
you for coming here and giving us your time
on a subject that has proved rather obdurate
for us to deal with. Of course, when we called
this conference we were expecting to do some
more long-range planning [laughter] than now
turns out to be the case.

The issue that we are here to consider is
not one that is bounded by any Administra-
tion and deals with problems that will have
to concern us for the indefinite future.

I thought I would make just a few informal
remarks to put before you some of the think-
ing that led to this conference, some of the
questions to which we would appreciate your
answers or your views, and then to turn it
over to the regular proceedings.

Any Administration, any President or Sec-
retary of State, must have as one of his prin-
cipal concerns the problem of international

order. We are always overwhelmed on a
day-to-day basis with the cables and prob-
lems that present themselves. And I have
the impression sometimes that the qualities
of our high officials—that our high officials
need—are becoming more and more those of
an athlete responding rapidly to stimuli with
no opportunity to reflect about the long-term
trends. The problems that present them-
selves, however, are not always the most
significant. And in any event, they are those
that are frequently the most unmanageable.

The fundamental problem is how to create
an international system, or to participate in
creating an international system, in which
the principal participants have a sense of be-
longing. That doesn't mean that everybody
has to be satisfied, but it does mean that
everybody, or at least all those countries or
groups that can upset it, feel either that
their basic concerns have been met or that a
mechanism exists by which their concerns
can be met.

If this does not exist, then those who feel

December 20, 1976

725

themselves disadvantaged, unjustly treated, dispossessed, will band together, and they will join any other group that is willing to undermine the existing order. And then international problems will be settled by endless confrontations, by contests of strength; and we will be living in an environment of political, economic, and, occasionally, military conflict.

Now, the United States is the strongest nation in the world. The United States could survive better than most, in fact probably better than any other country, in such an environment. But it is an environment that would tax even our resources. It would be in the long term incompatible with the sort of economy with which we are familiar and under which we have flourished. And above all, it would be inconsistent with the fundamental American values.

We have to live in a world, not where everybody agrees with us, but where our values have some relevance. We do not wish to live in a siege mentality or in a world in which only might makes right. And therefore, while I know that many of you here are hardheaded businessmen, and while I have been told by all of my advisers never to stray from the emphasis on self-interest, I would like to point out that our self-interest is not incompatible with the world interest and that only to the extent that we can make our self-interest relevant to the world interest can we really prosper as a country and survive with our basic institutions intact.

This is the general problem, as I see it, of the relationship of the tasks that all Administrations since the war have faced in one way or another. It has become particularly acute in recent years because of the beginning cartelization of some of the world's economy; because of the organization of some of the developing countries into political units operating more and more as a bloc; because the United States, while still the most powerful country in the world, is no longer the predominant country it was in the fifties and early sixties—nor can it be.

Therefore our foreign policy problem has become, as it has been for most other nations throughout their history, how to contribute

to a world that can be both secure and make progress, how to do this with resources that are finite in relation to all of the objectives we could be pursuing at any one time, and how to build a consensus of like-minded states.

Now, the trends that I have described have resulted in some tendencies which we find very unfortunate. Too many of the developing countries are following a radical rhetoric that is incompatible with their own progress and indeed with the achievement of the goals they profess. Too many of them seek to achieve by confrontation and extortion what can only result, and what can only be significant, through the voluntary cooperation of all nations.

While it is crucial for the United States to take an enlightened and farsighted view about the process of development, while it is foolish and shortsighted for us to be negligibly and petty in our approach, it is also true that what we offer cannot appear to be, and indeed cannot be, the result of conditions imposed on us by those who will be the primary beneficiaries of the process of development.

So, we have to steer a course in which we show that we are concerned about the problems of the greater part of humanity, but where we also have a right to ask of those countries that they remember that 90 percent of the transfer of all capital from private and public sources comes from the industrial democracies, that there are no realistic alternative sources, and that the process must be a reciprocal one.

The United States, in my view, has an obligation to respond to some of the fundamental concerns of our times. The developing countries must have an enhanced capability of access to worldwide capital markets, especially private capital markets. The markets for the primary commodities sold by developing countries should be stable and efficient. Special measures will be needed to help developing countries find new markets for the goods and services which they will be increasingly able to produce. And the international community should help the developing countries to develop, transfer, adapt, and

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manage technology appropriate to their needs.

On the other hand, we have a right—indeed an obligation—that the process of development is not something that is handed by one group of nations to another group of nations. In all societies it was a process that extended over decades. And indeed in all other societies it was a process that extended over generations. It needs domestic disciplines. It requires a process of education. In many societies it requires an adaptation of our basic values. There is no substitute for hard effort by the developing countries in their own process of development, and no one should create the illusion that there can be.

Developing countries must find a way to encourage savings, reward initiatives and ability, spread education and training, and expand opportunities for all their people.

It is also clear that a constructive world order must have provisions in which foreign investors can operate in a stable and peaceful environment as long as they may give serious contributions to the social and economic progress of the host country. But they must be free of harassment and unreasonable restraints. And it is indeed one of the curious phenomena of this period that, for some reason, transfer of governmental capital is considered in many countries more acceptable than private capital, even though the capacity of governments to attach restrictive conditions is infinitely greater than the capacity of private capital to attach restrictive conditions.

So, in the process of development we need a sense of obligation on the part of the developed countries and a sense of participation and reciprocity on the part of the developing countries.

Now, let me turn to the subject matter of this conference. When you see me shuffle papers here, I have been deluged with words of warning, advice, and some formulations that extend over many pages of dependent clauses. [Laughter.] As far as I can see, every bureau in this building has been given a chance, not just to add its views, but to make an input to each sentence. [Laughter.] I just want you to know that—let it never be

said that we have not institutionalized foreign policy.

Let me turn to the issues of this conference. However we view the process of development, in one way or another it must involve a transfer of technology. Whether we do it directly as an act of policy, or whether we do it indirectly by raising the general level of economic activity of the developing countries, progress in development depends on whether the developing countries learn to harness technology to the purposes of their societies.

Now, among the many warnings I have received is that there is a group—I can't see them with these lights—but I am told there is a group of cold-eyed managers sitting here that is determined not to be impressed by do-gooders who want to spread our technology around the world and to create new competitors. And I am told by my hardheaded business friend over here [Deputy Secretary of State Charles W. Robinson] that I have got to explain to them that they will make more money by spreading technology [laughter]—by spreading technology than by holding onto it. But if you are hardheaded businessmen and if you believe a Harvard professor who tells you how to make money [laughter], then you are in worse shape than I think you are [laughter].

So my friend Chuck Robinson, who specializes in building ports in landlocked countries [laughter], no doubt by telling them that it is highly profitable [laughter], will be able to explain to his colleagues from the business community exactly how this works.

I will talk about the subject that I know something about, which is that if we are going to have an international environment in which our economy can prosper at all—not any one business, but our economy in its present form—then we must be dealing with societies that consider us relevant to their concerns. We cannot abolish the concern for development, nor do we want to abolish it. It is an expression of our entire history. For the United States not to take a leading role in this would be to abdicate from one of the principal currents of our time. It would be to make us irrelevant to the concerns of the

December 20, 1976

727

major part of humanity. I know that it would
undermine the effective conduct of our
foreign policy. I must believe that over a
period of time it would undermine the effec-
tive operation of our economic institutions
around the world.

So, in the broad self-interest of the United
States, which in this sense is identical with
the world interest, development must be one
of the increasing concerns of our country.

Now, I have believed for a considerable
time that this country, representing the most
advanced technology in the world, must be
able to make a contribution to what is, after
all, the principal way in which development
will take place; namely, the development of
technology around the world.

We have found ourselves restricted by
traditional concepts in which the government
would focus primarily on certain types of ex-
change programs and in which private indus-
try was supposed to do its thing entirely on
commercial considerations. And we have
lacked a coherent strategy by which the
benefits of technology that we possess can be
made available in a disciplined and farsighted
and cooperative manner.

During the last year we have made a
number of proposals in international forums.
Our initiatives have generally fallen into two
categories.

One, national. We have proposed national
and international institutes and programs to
provide information, research, and training
assistance to developing countries in science
and technology.

And secondly, we have attempted to take
steps to create an international environment
in which the private sector, which is the re-
pository of most of our technology, can make
its maximum contribution.

The first category includes information
supporting the creation of an international
center for the exchange of technological infor-
mation; proposing the establishment of a
technology exchange service for Latin
America; proposing an inventory of U.S.
national information sources and improved
access to U.S. facilities; supporting the con-
cept of regional advisory services under
UNCTAD [U.N. Conference on Trade and De-

velopment] auspices; and supporting an offer
to host the U.N. Conference on Science and
Technology for Development in 1979.

The second category is in the area of re-
search and training. We have increased our
support for international agricultural re-
search centers; proposed the establishment
of an International Energy Institute; urged
the establishment of an International Indus-
trialization Institute; supported the creation
of an inter-American technology center; and
extended existing support for applied re-
search in nutrition, health, and education.

We have encouraged training by the en-
couragement of formation of a technology
corps and by proposing incentives and meas-
ures to curb emigration of highly trained
manpower from developing countries.

With respect to encouraging the private
sector, we have supported a voluntary code
of conduct for the transfer of technology in
UNCTAD.

We have supported a voluntary code of
conduct for transnational enterprises in the
United Nations.

We have proposed the establishment of an
International Resources Bank. And if I had
not mentioned this I would have been shot in
the back by the Deputy Secretary. [Laugh-
ter.]

We have supported the examination of re-
strictive business practices and recom-
mended that other OECD [Organization for
Economic Cooperation and Development] na-
tions urgently study the possibility of the
greater contribution of all industrial nations
to the problems of technology transfer.

Now, all of these were useful steps, ex-
torted from a recalcitrant bureaucracy with
great pain. [Laughter.]

What we need, however, at this moment,
is some integrated concept—something in
which all sectors of American life address
such questions as:

What technology is it in our interest and in
the global interest to transfer?

How is that transfer accomplished in a way
that the developing countries can benefit
from it and the world economy as a whole ad-
vance?

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Department of State Bulletin

What should be the relationship between our educational institutions, our industrial enterprises, and the host countries so that they can build the most creative partnership, not simply in relationship to any one firm but in relationship to the total environment?

Is the establishment, for example, of regional research centers in developing countries, which has led to major breakthroughs in agricultural research, a useful tool in such fields as industrial technology?

How can multinational corporations relate themselves to universities and the host countries in a deliberate strategy which improves the environment in which they operate and at the same time is of benefit to the host countries?

These and many other questions are the purposes behind our calling this conference. Indeed, we have, as you know, distributed a whole list of questions to this group. You should not feel confined by those questions. You should feel free to tell us that some of these questions are nonsense. My colleagues are experts at being lacerated and ignoring in a graceful way whatever they do not really agree with. [Laughter.]

But we genuinely would like to know what this distinguished group thinks about the problem I have put before you. Have we defined the problem correctly? What approach should be taken? Obviously, we cannot have a strategy emerge out of one conference, but I hope that a work program can emerge out of this conference that can be carried forward in the years ahead.

I do note, to return to my starting point, that the problem of world order is the dominant problem of our time. We have talked a great deal about its military component, and we have an understanding of its political component. But in the decades ahead it is very probable that the social and economic aspects of international order will dominate our concerns, and our ability to solve it will determine whether we live in a world that has a consciousness of cooperation and of progress or in a world of constant strife.

I have no doubt what the U.S. commitment must be. And I can think of no area in which

our host of private institutions, private enterprises, and private initiatives can make a greater contribution to the freedom, prosperity, and peace of man than in the subject matter of this conference.

## ADDRESS BY DR. STEVER

Last May in Nairobi, Secretary Kissinger announced that the United States would convene a national conference "to bring together our best talent from universities, foundations, and private enterprise . . . . to consider the broad range of technological issues of concern to the developing world."¹ I am pleased that so many of you are here today to help us prepare for that conference. What we accomplish here in preparation for our national conference will ultimately have a significant impact on our U.S. contribution to the 1979 U.N. Conference on Science and Technology for Development.

Nothing that has happened since last May has in any way reduced the need for and importance of the 1979 U.N. conference. If anything, the pressures are greater than ever. And they are pressures that may ultimately have greater influence on world order than the relations—including military—of the industrialized nations.

Those pressures, due to population growth, the need for more food and better nutrition, increased energy costs, resource demand, and social and political expectations, will not slacken. They involve the needs, hopes, and dreams of a major part of humanity—and, we must remember, a part of humanity that will grow vastly in proportion to the rest of us who are more fortunate. This growth will take place over the next few decades regardless of a decline in the birth rates in those poorer areas of the world.

Though pressures grow and the clamor for development assistance grows with them—often reaching a strong and strident pitch—there are some signs that a new and healthier climate is emerging in which to pursue industrial-Third World relations:

¹ For an address by Secretary Kissinger made before the fourth ministerial meeting of UNCTAD at Nairobi on May 6, see BULLETIN of May 31, 1976, p. 657.

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