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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 com-
prehensive 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 United Nations
General Assembly this fall.

Conclusion

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.

UNCLASSIFIED

"1. THE COUNCIL OF THE OECD MET AT MINISTERIAL LEVEL ON 28TH MAY, UNDER THE CHAIRMANSHIP OF THE RIGHT HONOURABLE JAMES CALLAGHAN, MP, UNITED KINGDOM SECRETARY OF STATE FOR FOREIGN AND COMMONWEALTH AFFAIRS, AND ON 29TH MAY, WITH THE RIGHT HONOURABLE DENIS HEALEY, MBE, MP, UNITED KINGDOM CHANCELLOR OF THE EXCHEQUER, IN THE CHAIR.

THE ECONOMIC SITUATION

"2. MINISTERS EXPRESSED CONFIDENCE THAT THE POLICIES OF OECD GOVERNMENTS WILL LEAD TO A RECOVERY OF DEMAND AND EMPLOYMENT AND THAT THIS WILL BE COMBINED WITH FURTHER REDUCTIONS IN THE AVERAGE RATE OF INFLATION. THEY ARE DETERMINED TO ACHIEVE THESE GOALS, AND TO ENSURE, BY TIMELY ADJUSTMENTS OF POLICIES, THAT THE RECOVERY IS UNDER-PINNED SHOULD THIS PROVE NECESSARY, AND THAT, ONCE UNDER WAY, IT DOES NOT DEGENERATE INTO A NW PERIOD OF EXCESSIVE DEMAND PRESSURES AND INFLATIONARY TENDENCIES. MINISTERS NOTED THAT THE SUBSTANTIAL INTERNATIONAL PAYMENTS DEFICIT ON CURRENT ACCOUNT OF OECD COUNTRIES AS A GROUP, WHICH HAS RECENTLY DECLINED, IS NEVERTHELESS LIKELY TO PERSIST FOR SOME YEARS. THEY ALSO UNDERLINED THE IMPORTANCE OF ENSURING THAT ECONOMIC POLICIES ARE SUCH AS TO SECURE, AMONG OECD COUNTRIES, A LESS UNBALANCED DISTRIBUTION OF CURRENT ACCOUNT POSITIONS, MORE COMPATIBLE WITH A SUSTAINABLE PATTERN OF CAPITAL FLOWS. GIVEN SUCH POLICIES, MINISTERS WERE CONFIDENT THAT, BACKED BY OFFICIAL BILATERAL AND MULTILATERAL ARRANGEMENTS, THE FINANCING OF EXISTING AND PROSPECTIVE DEFICITS COULD BE CONTINUED ON AN ORDERLY BASIS; IN THIS CONNECTION THEY WELCOMED THE STEPS BEING TAKEN TO OBTAIN EARLY RATIFICATION OF THE AGREEMENT ESTABLISHING THE OECD FINANCIAL SUPPORT FUND.

"3. MINISTERS STRESSED THAT POLICY DECISIONS CONCERNED WITH THE IMMEDIATE FUTURE HAD TO BE RELATED TO THE FORESEEABLE MEDIUM AND LONGER-TERM PROBLEMS OF STRUCTURAL CHANGE, AND TO BROAD STRATEGIES FOR RESOLVING THEM. MINISTERS AGREED THAT THE OECD SHOULD CARRY FORWARD AND ACCELERATE ITS RE-ASSESSMENT OF THE PROSPECTS FOR SUSTAINED ECONOMIC GROWTH AND THE CONSTRAINTS ON SUCH GROWTH, PARTICULARLY THOSE ARISING FROM INFLATION, UNDER THE CHANGING CIRCUMSTANCES. THEY NOTED WITH INTEREST THE PROPOSAL MADE BY THE UNITED STATES GOVERNMENT THAT A NUMBER OF ECONOMISTS OF INTERNATIONAL REPUTE SHOULD BE INVITED, DRAWING ON THIS WORK, TO EXAMINE THE POLICY ISSUES AND MAKE RECOMMENDATIONS. IN A BROADER AND LONGER RUN CONTEXT, MINISTERS ALSO NOTED WITH INTEREST A PROPOSAL INITIATED BY THE JAPANESE GOVERNMENT FOR A STUDY OF THE FUTURE DEVELOPMENT OF ADVANCED INDUSTRIAL SOCIETIES IN HARMONY WITH THAT OF DEVELOPING COUNTRIES.

TRADE

UNCLASSIFIED

UNCLASSIFIED

"4. MINISTERS () DECIDED TO RENEW, FOR A FURTHER PERIOD OF ONE YEAR, THE DECLARATION ADOPTED ON 30TH MAY, 1974, STATING THE DETERMINATION OF ALL OECD GOVERNMENTS TO AVOID RECOURSE TO NEW RESTRICTIONS ON TRADE AND OTHER CURRENT ACCOUNT TRANSACTIONS AND THE ARTIFICIAL STIMULATION OF VISIBLE AND CURRENT INVISIBLE EXPORTS. IN RENEWING THE DECLARATION, MINISTERS STRESSED THAT THE PRESENT SITUATION REQUIRED A HIGH DEGREE OF ECONOMIC COOPERATION. NOTING THAT THERE HAD BEEN A MARKED DIFFERENCE IN THE BALANCE-OF-PAYMENTS SITUATIONS OF OECD MEMBER COUNTRIES, THEY WELCOMED THE ECONOMIC MEASURES TAKEN BY CERTAIN OF THEM; AND THEY REAFFIRMED THAT, IN THE PRESENT STATE OF THE WORLD ECONOMY, IT REMAINED OF THE HIGHEST IMPORTANCE TO FOLLOW AN ECONOMIC POLICY WHICH COMBATTED INFLATION BUT ALSO AIMED AT MAINTAINING A HIGH LEVEL OF EMPLOYMENT AND EXPANSION OF WORLD TRADE. THE WAY IN WHICH THIS POLICY SHOULD BE IMPLEMENTED MUST TAKE ACCOUNT OF THE RESPECTIVE SITUATIONS OF MEMBER COUNTRIES.

() THE GOVERNMENT OF PORTUGAL IS NOT, AT THIS STAGE, IN A POSITION TO RENEW THE DECLARATION.

"5. MINISTERS AGREED THAT, GIVEN THE IMPORTANCE OF THE TERMS OF EXPORT CREDITS IN INTERNATIONAL COMPETITION, AN ARRANGMENT OF A GENERAL NATURE IN THIS RESPECT, BETWEEN AS MANY AS POSSIBLE OF THE INDUSTRIALISED COUNTRIES OF THE OECD, SHOULD BE ACHIEVED. THIS WOULD CONSTITUTE SIGNIFICANT PROGRESS IN INTERNATIONAL CO-OPERATION. THEY ALSO AGREED ON THE NEED TO CONTINUE CLOSE CONSULTATIONS ON EXCHANGE-RATE DEVELOPMENTS IN THE APPROPRIATE BODIES. THEY NOTED THAT THE PROBLEMS OF THE DEVELOPING MEMBER COUNTRIES HAVE BECOME MORE SERIOUS IN SEVERAL RESPECTS DURING THE PAST YEAR, AND DESERVE TO BE CONSIDERED WITH SPECIAL ATTENTION WITHIN THE OECD.

"6. MINISTERS REAFFIRMED THAT LIBERAL AND EXPANDED TRADE WAS OF THE UTMOST IMPORTANCE FOR THE FURTHER DEVELOPMENT OF THE WORLD ECONOMY AND THAT, TO THIS END, THEY WOULD WORK TOGETHER FOR THE SUCCESS OF THE MULTILATERAL TRADE NEGOTIATIONS NOW UNDER WAY.

ENERGY

"7. MINISTERS STRESSED THE IMPORTANCE THEY ATTACHED TO CONTINUING AND DEVELOPING CO-OPERATION IN THE FIELD OF ENERGY. A REPORT FROM THE BELGIAN FOREIGN MINISTER, MR. RENAAT VAN ELSLANDE, CHAIRMAN OF THE GOVERNING BOARD OF THE INTERNATIONAL ENERGY AGENCY'S MEETING AT MINISTERIAL LEVEL ON 27TH MAY, DESCRIBED THE PROGRESS BEING MADE AND THE NEW IMPULSE GIVEN TO ENERGY COOPERATION WITHIN THAT BODY.

UNCLASSIFIED

UNCLASSIFIED

"8. MINISTERS AGREED THAT INCREASED CO-OPERATION BETWEEN PRODUCER AND CONSUMER COUNTRIES WAS NEEDED IN ORDER TO ENSURE EQUITABLE AND STABLE CONDITIONS IN THE WORLD ENERGY MARKET.

## COMMODITIES

9. MINISTERS STRESSED THAT ADEQUATE SUPPLIES OF COMMODITIES AT EQUITABLE AND REMUNERATIVE PRICES ARE ESSENTIAL TO THE WORLD ECONOMY. THEY RECOGNISED THE INTERDEPENDENCE AND COMMON INTEREST OF PRODUCERS AND CONSUMERS, BOTH DEVELOPED AND DEVELOPING COUNTRIES, PARTICULARLY IN RELATION TO THE AVOIDANCE OF EXCESSIVE FLUCTUATIONS IN COMMODITY MARKETS, AS WELL AS THE IMPORTANCE ATTACHED BY PRODUCERS TO ASSURED ACCESS TO MARKETS AND BY CONSUMERS TO SECURE SUPPLIES. THESE QUESTIONS, TOGETHER WITH OTHER ASPECTS OF THE COMMODITY PROBLEM, ARE OF SPECIAL CONCERN TO THE DEVELOPING COUNTRIES IN MAKING THE BEST POSSIBLE USE OF THEIR NATURAL RESOURCES TO FOSTER ECONOMIC DEVELOPMENT.

"10. IN RESPONDING TO THE CONCERNS OF DEVELOPING COUNTRIES IN THE COMMODITY FIELD AND WHILE RECOGNIZING THAT CIRCUMSTANCES VARY GREATLY BETWEEN COMMODITIES R GROUPS OF COMMODITIES AND THAT THIS MUST BE TAKEN INTO ACCOUNT WHEN WORKING OUT PRACTICAL ARRANGEMENTS, MINISTERS AGREED ON THE NEED FOR A MORE ACTIVE AND BROADLY BASED APPROACH TO COMMODITY PROBLEMS AIMING IN PARTICULAR, AT:

- REDUCING MARKET INSTABILITY AND PROMOTING A BETTER BALANCE BETWEEN PRODUCTION AND CONSUMPTION, INCLUDING, WHERE APPROPRIATE, THROUGH COMMODITY AGREEMENTS;

- ENSURING ADEQUATE LEVELS OF INVESTMENT IN PRODUCTION OF COMMODITIES;

- IMPROVING AND INCREASING MARKET OUTLETS AND LOCAL PROCESSING OF COMMODITIES.

IN ADDITION, MINISTERS INDICATED THEIR READINESS TO CONSIDER IMPROVED INTERNATIONAL MECHANISMS TO STABILIZE EXPORT EARNINGS OF DEVELOPING PRODUCING COUNTRIES.

"11. MINISTERS STRESSED THE NEED FOR PROGRESS IN THE VARIOUS INTERNATIONAL DISCUSSIONS ON GRAINS. IN THIS CONTEXT THEY NOTED THAT THE BETTER AGRICULTURAL CROPS EXPECTED THIS YEAR OFFERED THE OPPORTUNITY TO BEGIN REBUILDING STOCKS OF ESSENTIAL FOOD STUFFS, NOTABLY GRAINS, AND TO ENSURE GREATER WORLD FOOD SECURITY. MINISTERS ALSO REITERATED THEIR READINESS TO CONTRIBUTE TO THE EFFORTS NEEDED TO INCREASE FOOD PRODUCTION IN THE DEVELOPING COUNTRIES.

UNCLASSIFIED

UNCLASSIFIED

"12. MINISTERS AGREED THAT THESE QUESTIONS SHOULD BE PURSUED ACTIVELY IN ALL APPROPRIATE BODIES WITH A VIEW TO REACHING CONCRETE SOLUTIONS BASED ON CO-OPERATION BETWEEN PRODUCING AND CONSUMING COUNTRIES. THEY WELCOMED THE ESTABLISHMENT OF A HIGH LEVEL GROUP IN THE OECD TO FURTHER DEVELOP MEMBER COUNTRIES' ATTITUDES BOTH ON GENERAL ASPECTS OF THEIR COMMODITY POLICIES AND ON SPECIFIC ACTION CONCERNING PARTICULAR COMMODITIES.

RELATIONS WITH DEVELOPING COUNTRIES

"13. MINISTER ADPTED AN OECD DECLARATIN ON RELATIONS WITH DEVELOPING COUNTRIES (ANNEXED TO THIS COMMUNIQUE). THEY FURTHER AGREED ON A REVIEW WITHIN THE OECD OF ECONIMIC RELATIONS BETWEEN MENBER COUNTRIES AND DEVELOPING COUNTRIES, WITH A VIEW TO IDENTYFYING WHAT NEW AND OTHER CONSTRUCTIVE APPRACHES COULD BE ADOPTED ON SELECTED SUBSTANTIVE ISSIES, AND TO GIVING SUPPORT AND NEW IMPETUS TO NEGOTIATIONS IN THER BODIES WORKING ON SPECIFIC PROBLEMS. MINISTERS INVITED THE AD HOC HIGH -LE EL GROUP WHICH HAS BEEN CREATED FOR THIS PUROPOSE TO BEGIN ITS WORK AS QUICKLY AS POSSIBLE AND TO SUBMIT A PRELIMINARY PROGRESS REPORT BEFORE THE END OF JULY 1075.

"14. MINISTERS AGREED ON THE NEED TO CONTUNUE THE DIALOGUE BETWEEN DEVELOPED AND DEVELOPONG COUNTRIES. THEY RECONGNIZED THAT, CONCURRENTLY WITH THE PROBLEMS OF ENERGY AND OIL, THERE ARE OTHER PROBLEMS SUCH AS COMMODITIES, INCLUDING FOODSTUFFS, DEVELOPMENT QUESTIONS AND THE INTENSIFIED DIFFUCULTIES OF THE MOST MOST SERIOUSLY AFFECTED COUNTRIES, WHICH WILL HAVE TO BE TACKLED WITH INCREASED VIGOUR IN CO-OPERATION WITH ALL COUNTRIES CONCERNED. THE NEED FOR RENEWED EFFORTS ALONG THESE LINES WAS A RECURING THEME THROUGHOUT THE MEETING OF THE OECD MINISTERS. MINISTERS EXPRESSED THE HOPE THAT THEIR DELIBERATIONS WILL HAVE PROVIDED A BASIS FOR THE RESUMPTION AT AN EARLY DATE OF THE DIALOGUE WHICH WAS INITIATED IN PARIS LST LAST APRIL."

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DECLASSIFIED

[L]

RENEWAL OF TRADE PLEDGE, PROGRESS IN MTN, FURTHER EFFORTS TO RESOLVE ENERGY PROBLEM, AND PROPOSAL FOR SPECIAL GROUP OF EMINENT ECONOMISTS TO IDENTIFY MEASURES OECD COUNTRIES COULD ADOPT TO ASSURE LONGER-TERM GROWTH. ON BETTER INTERNATIONAL COOPERATION, SECRETARY STRESSED FOLLOW-UP TO WORLD FOOD CONFERENCE AND SUGGESTED TIME WAS RIPE FOR DETAILED LOOK AT PROBLEMS OF COMMODITIES TRADE, OUTLINING PROPOSALS MADE IN KANSAS CITY SPEECH AND STATING US PREPARED TO JOIN OTHERS IN REVIEW OF MECHANISMS DESIGNED TO ENSURE STABILIZATION OF LDC EXPORT EARNINGS. SECRETARY ALSO URGED SPECIAL ATTENTION BE GIVEN TO EXPANDED MARKETS FOR LDC EXPORTS AND ADDITIONAL FINANCIAL ASSISTANCE FOR POOREST COUNTRIES. HIGHLIGHTS OF SPEECHES BY OTHER KEY MINISTERS, MOST OF WHICH TOOK GENERAL APPROACH ADVOCATING POSITIVE ATTITUDE FOR BRIDGING DC/LDC DIFFERENCES, REPORTED BELOW. MINISTERS ADOPTED DECLARATION ON RELATIONS WITH LDC'S AND PERMREP COUNCIL ADOPTED RESOLUTIONS ESTABLISHING HIGH LEVEL GROUPS TO SUD STUDY COMMODITY PROBLEMS AND REVIEW POLICIES OF MEMBERS TOWARDS DEVELOPING COUNTRIES (TEXTS REPORTED SEPTELS). MINISTERS HAD FIRST DISCUSSION OF SECTIONS OF COMMUNIQUE DEVOTED TO LDC'S AND COMMODITIES AND GAVE GUIDANCE TO DRAFTING GROUP BUT TEXT REMAINS TO BE IRONED OUT IN THIS GROUP LATER TONIGHT. END SUMMARY

2. FRANCE: PRESENTATION BY SAUVAGNARGUES STRESSED NEED TO RECOGNIZE LINK BETWEEN ENERGY, RAW MATERIALS AND DEVELOPMENT AS PRECONDITION TO DC/LDC DIALOGUE. ON COMMODITIES, FRENCH MINISTER SAID OBJECTIVE SHOULD BE TO ORGANIZE MARKETS FOR LDC PRODUCTS BY STABILIZATION AGREEMENTS WHICH WENT DEEPER THAN IN THE PAST, INCLUDING O CONSUMER PARTICIPATION IN FINANCING OF STOCKPILES. HE ALSO URGED GREATER USE OF INTERNATIONAL INSTITUTIONS FOR FINANCING OF STOCKPILES, AND TO SUPPLY INVESTMENT RESOURCES AND GUARANTIES. ON TOPIC OF DEVELOPMENT, SAUVAGNARGUES SUGGESTED REORGANIZATION OF DEVELOPMENT AID TO INCLUDE TRANSFER OF TECHNOLOGY AND REDEPLOYMENT OF INDUSTRY. HE URGED OTHER MINISTERS NOT TO UNDER-ESTIMATE POSITIVE RESULTS OF APRIL PREPCOM AND TO AGREE ON PROGRAM OF WORK TO DEFINE FORM OF FURTHER DISCUSSIONS TO BE HELD ALONG SAME LINES.

3. JAPAN: FOREIGN MINISTER MIYAZAWA BEGAN BY BOOSTING IN LOW KEY WAY JAPANESE-ORIGINATED OECD PROPOSAL TO STUDY "FUTURE DEVELOPMENT OF ADVANCED INDUSTRIAL SOCIETIES IN HARMONY WITH LESS DEVELOPED COUNTRIES." HE THEN EMPHASIZED NEED TO EXAMINE MEASURES PROPOSED TO HELP LDC'S IN DEPTH TO ENSURE ECONOMIC RATIONALITY BEFORE DC'S COMMIT SELVES TO DEFINITE COURSES OF ACTION. ON COMMODITIES MIYAZAWA URGED DELIBERATE, CALM, AND SOBER APPROACH TO ENSURING ADEQUATE INVESTMENT IN COMMODITY PRODUCTION AND ELIMINATING UNDESIRABLE EFFECTS OF

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EXCESSIVE FLUCTUATIONS WITHOUT DOING AWAY WITH MARKET MECHANISM. HE SAID THAT IN DOING THIS CONSIDERATION SHOULD BE GIVEN TO SPECIAL MEASURES TO HELP COUNTRIES NOT RICH IN NATURAL RESOURCES.

DECLASSIFIED

4. GERMANY: FOREIGN MINISTER GENSCHER'S PRESENTATION CONCENTRATED ON INVESTMENT QUESTION, CITING NEED TO ESTABLISH BALANCE BETWEEN RIGHT TO NATIONALIZE AND DUTY TO COMPENSATE, AND ON COMMODITIES, WHERE HE SAID FRG FOUND SCHEMES TO STABILIZE LDC EXPORT EARNINGS MORE WORTHY OF CONSIDERATION THAN COMMODITY AGREEMENTS. HE MADE STRONG STATEMENT AGAINST CARTELS AND URGED OECD MEMBERS TO ADOPT COMMON POSITIONS ON LDC DEMANDS AND PROPOSALS.

5. UK: CALLAGHAN MADE ONLY BRIEF REMARKS IN CAPACITY AS UK REP, NOTING UK VIEW GAINED FROM EXPERIENCE AT KINGSTON THAT LDC'S WOULD WELCOME OECD DECLARATION. HE SAID UK FAVORED CASE-BY-CASE APPROACH TO COMMODITIES, CLOSE LOOK AT EXPORT INCOME STABILIZATION SCHEMES, AND STILL SAW MERIT IN IDEA FOR A "GENERAL COMMODITY - AGREEMENT".

6. OTHERS: IN COMMODITIES AREA SWEDISH DEL (FELDT) FAVORED CONCENTRATING ON MEASURES TO STABILIZE PRICES OF LIMITED NUMBER OF RAW MATERIALS. HE TOOK CAUTIOUS APPROACH ON NORTH-SOUTH POLICY REVIEW, EXPRESSING SKEPTICISM THAT MANY OTHER AREAS BESIDES COMMODITIES WOULD BE SUITABLE FOR OECD EFFORT, AND SAID LOWEST COMMON DENOMINATOR APPROACH TO LDC POLICY WOULD NOT BE SUFFICIENT. NETHERLANDS EXPRESSED CONCERN THAT ROLE OF OECD COUNCIL BEING DILUTED BY ESTABLISHMENT OF NEW GROUPS. ICELANDIC REP MADE PLEA FOR BETTER TREATMENT OF HIS COUNTRY'S FISH EXPORTS BY OTHER MEMBERS.

7. DECLARATION: IN AFTERNOON SESSION MINISTERS ENGAGED IN SPIRITED DISCUSSION OF DRAFT DECLARATION WHICH STILL CONTAINED SEVERAL POINTS OF DISAGREEMENT. LIVELY AND HUMOROUS EXCHANGE BETWEEN THE SECRETARY, SAUVAGNARGUES, AND CHAIRMAN CALLAGHAN RESULTED IN ACCEPTANCE OF DUTCH AMENDMENT LISTING KEY ISSUES FOR DISCUSSION AT END OF PARA 5 (FOOD PRODUCTION, ENERGY, COMMODITIES AND ASSISTANCE TO MSAS) AND IN AGREEMENT ON FORMULA FOR STATEMENT ON FORA IN LAST PARA.

8. COUNCIL DECISIONS: IN MEETING HELD DURING RECESS OF MINISTERIAL TO ADOPT RESOLUTIONS ON HIGH LEVEL COMMODITIES GROUP AND NORTH-SOUTH POLICY REVIEW, PERMREPS MADE SMALL CHANGES IN TEXT OF LATTER. UK ACCEPTED WATERED DOWN REFERENCE IN PREAMBLE TO LDC SHOPPING LIST, AND FRENCH OBTAINED AGREEMENT TO FORMULA WHICH HAS HIGH LEVEL GROUP "ASSISTING" XCOSS IN REVIEW TASK RATHER THAN UNDERTAKING IT ITSELF. THIS WAS AGREED TO BY UK ONLY ON UNDERSTANDING THAT GROUP WOULD BE CHAIRED BY A NATIONAL AND NOT BY SECRETARIAT. "OPEN TO ALL MEMBER COUNTRIES CLAUSE" WAS ALSO INSERTED AT AUSTRIAN AND SPANISH REQUEST.

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OECD SPEECH DRAFT ( THE IMPERATIVE OF GROWTH
AND COOPERATION).

We meet here today to continue our efforts to create
the conditions for a prosperous, equitable and humane
world. We have together laid the foundations for our
pursuit of this cause over the past thirty years. We
have been rewarded by an unprecedented period of peace
among the major powers and growing world prosperity.

But the system we have labored so hard to construct
of 1973
is now under stress. The energy crisis first dramatized

This Organization was born in one of the great creative
periods of international relations. Its origin in the
postwar Marshall Plan organization represents the great
capacity of free nations for great achievement when they
join forces for a common purpose. The human progress
which we have achieved for our peoples over thirty years
is one of the unique achievements of human history. And most importantly,
our progress has been an engine of global progress; our
success has spelled hope as well as practical possibilities for
the success of all nations to achieve prosperity, economic advance,
and human dignity.

Our endeavors must focus on two important challenges:

- A challenge to the nations of the industrial world to return to sustained economic growth, and thus to renew faith in our institutions and leadership.

- A challenge to all nations to improve the system of international economic cooperation, and thus to provide greater opportunity for the less developed countries to share in the world's growing wealth.

Political and social instability thrive on economic

#3

stagnation and dispute. History confirms that only
economic growth can satisfy competing domestic demands

For more income and more opportunity within and among
countries,
nations; and that an environment of growth and economic

cooperation facilitates solutions to international polit-
ical and security problems. Thus, our survival co-
nations ultimately demands that we meet these challenges.

Economic expansion in the industrial world and
building a new structure of economic cooperation with
the less developed countries go hand in hand. An
expanding world economy best permits increased transfer

of resources through bilateral and multilateral aid
investment as well as
programs. Only sustained growth in the industrialized

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AMEMBASSY BONN

LEADERSHIP WILL DECAY. THE INDUSTRIALIZED NATIONS MUST BE ECONOMICALLY STRONG AND POLITICALLY COHESIVE IF THEY ARE TO CONTRIBUTE TO WORLD SECURITY AND PROSPERITY.

8. ECONOMIC EXPANSION IN THE INDUSTRIAL WORLD AND BUILDING A NEW STRUCTURE OF ECONOMIC COOPERATION WITH THE LESS DEVELOPED COUNTRIES GO HAND IN HAND. ONLY AN EXPANDING WORLD ECONOMY PERMITS INCREASED TRANSFER OF RESOURCES THROUGH BILATERAL AND MULTILATERAL AID PROGRAMS. ONLY SUSTAINED GROWTH IN THE INDUSTRIALIZED WORLD CAN PROVIDE A LONG-TERM MARKET FOR RAW MATERIALS, FOR MANUFACTURES, AND FOR THE AGRICULTURAL PRODUCTS ON WHICH THE PROSPERITY OF THE DEVELOPING COUNTRIES DEPENDS. ONLY INCREASING INCOME FOR BOTH DEVELOPED AND DEVELOPING

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AMEMBASSY BONN

MEET THESE CHALLENGES. FOR POLITICAL AND SOCIAL INSTABILITY THRIVE ON ECONOMIC STAGNATION AND DISPUTE. CONFLICT WITHIN AND AMONG NATIONS IS INTENSIFIED BY THE STRUGGLE TO OBTAIN A LARGER SHARE OF A STATIC GLOBAL OUTPUT.

6. HISTORY CONFIRMS THAT ONLY ECONOMIC GROWTH CAN SATISFY COMPETING DOMESTIC DEMANDS FOR MORE INCOME AND MORE OPPORTUNITY; AND THAT AN ENVIRONMENT OF GROWTH AND ECONOMIC COOPERATION FACILITATES SOLUTIONS TO INTERNATIONAL POLITICAL AND SECURITY PROBLEMS.

7. MOREOVER, INDUSTRIAL NATIONS CANNOT ACT WITH AUTHORITY IN AN ENVIRONMENT OF STAGNATION AND INCREASING DOMESTIC AND INTERNATIONAL STRUGGLE OVER THE DISTRIBUTION OF ECONOMIC BENEFIT. OUR PURPOSE WILL FALTER. OUR MORAL POSITION WILL ERODE. CONFIDENCE IN OUR INSTITUTIONS AND

CONFIDENTIAL

Growth among the Industrialized Nations

We have witnessed thirty years of economic growth among

the industrialized nations. Now, however, we are in the
midst of a recession, the most serious since the great
depression of the thirties. Our cardinal task is to
foster a resumption of growth.

Sustained growth requires a political and social
consensus that government policies are equitable. The
distribution of economic benefit must be broadly accepted;
otherwise escalating wage and price demands, lagging
work performance and labor unrest will result. Continu-
ing inflation that destroys growth will be the arbiter
of social priorities.

-7-

[Y]

Within the industrial world the signs of disquietude are everywhere. We see it in the inflation that has become the hallmark of our societies. We see it in the increasing difficulty of governments to control their budgets. We see it in the declining portion of their income that many of the industrial democracies are willing to save and invest in future growth. These disturbing signs will abate, and growth resume, only if the industrialized nations take strong action. The finance ministers, meeting tomorrow, will discuss specific actions we can take separately and together to achieve these goals. Secretary Simon will

memories while we discuss specific actions we can take separately and together to achieve these goals. Secretary Simon will

The premise of this Organization, and the reality of the new interdependence of the modern world require that we learn to coordinate our economic policies for growth.

discuss the American recovery in detail. Let me offer
some general propositions that should frame our long-
term actions.

First, the industrial nations must build an atmo-
sphere of confidence by strong and coordinated actions
to promote sustained expansion. In the short and
medium term management of our economies, we must

recognize the effects of the economic policies of one
we recognise that in this regard a few
nation on others. In the past we have used this
organization as well as bilateral contacts to keep each
other informed on short-term policy measures. For
President Ford consulted with
example, this winter Chancellor Schmidt, Prime Minister
and
Wilson, President Giscard D'Estaing, Former Prime

will impose an annual transfer of more than one percent
of our output, which otherwise would be available for
consumption or investment within our economies.

Finally, we must develop longer-term growth
strategies. We must identify the political and economic
conditions necessary for sustained growth in the late
1970's and early 1980's. We must begin a systematic
attempt to answer some fundamental, long-range questions:

--How can the industrial societies create the conditions
necessary for the massive capital formation required
over the next decade, not only for an adequate rate of
growth, but for a new quality of life
growth?

--What policies are needed to restore a non-inflationary environment for longer-term growth?

--How can we encourage the research and development effort needed to sustain, and transfer to others, the changing technology so vital to our post war growth?

To begin the search for answers to these questions, I propose that we constitute a special high-level group of distinguished economists both in and out of government to draw up an OECD growth strategy for the next five years. This group should draw on the projections now being developed within the economic policy committee but its focus should be on policy. It should report to the next ministerial meeting.

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EVO

Our not only has obvious immediate economic utility; it is also Close economic cooperation is an important element of our unity and sense of common interest in its deepest dimensions. in the cohesiveness of our alliances. This cohesiveness,

as well as our economic strength and vitality, are

directly relevant to our collective security.
indispensable if we are to discourage threats to our

economically weak, or
common security. We cannot be disunited, and preoccupied

competitive interests,
with economic problems if we are to cooperate in times

of political and military crisis.

The United States was criticized two years ago for suggesting the interrelationship of our political, economic & security interests. As we all recognize now, this was not an artificial or self-seeming American theory; it is a simple fact. And its recognition is a first step in the solution of the full range of our common problems.

Moreover, stable relations with the Communist world, which are becoming a practical possibility, are best achieved from the platform of our own economic strength.

require us to demonstrate the strength and vitality of our system has unmistakably demystified its security. Thus their desire to participate in the fronts of our system is a striking fact of our open economic system. Their incentive to play a contemporary politics.

responsible role in the world economy and in their political relationships with the West will be enhanced as

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It is a sign of non-depulency on us
not of our dependency on him.

their stake grows in our economic success.

That this remains the case -- and we accomplish this by
maintaining our own economic strength.

Finally, stable growth is critical to the well-

being of the developing world. Let me now turn to the
international dimension of the world economy --

crucial question of the relationship between the
nations
industrialized and the developing world.

Cooperation with the developing nations

The return to growth is primarily the task of the
industrialized nations, since they account for 65 per-
cent of the world's output and 70 percent of its trade.

But sustaining that growth requires a structure of
international cooperation in which the developing
countries are, and perceive themselves to be, effective

participants, for the new problems of our era -- food,

energy, and raw materials -- can be resolved only within

new communities of interest that include developing as

well as developed countries.

The problem of an effective relationship with the less

developed countries is a challenge shared by all the
industrialized nations. Its solution is a test of our

ability to act decisively in the face of other challenges.

A solution is essential if we are to build on our

international system for the maintenance of world order

and peace. Quick and fair resolution of economic

differences among nations will help establish the atmo-

EY

growth -- and retard everyone's progress. We have witnessed this starkly in the past two years. And it is also clear

sphere required for the resolution of political and
that there can be a

security differences. There can be no stable inter-
only

national system so long as some nations have little share
and perceive it as just.

in its economic benefits or reject it as unjust.

United States

The U.S. is ready to join others in meeting this
a new attitude and

challenge with new approaches, and new attitudes. But

But it follows that

others must be equally forthcoming. Cooperation and

confrontation cannot be carried on simultaneously. The
sees no value in international dialogues if they

United States will not tolerate the use ofinte-

are abused
rhetoric or propaganda,
national forums for the self-indulgent exercise of

nationalistic opinion without reflection or responsibility. We have

no need or desire to participate in such exercises; we have a
The confrontation rhetoric and bloc pressure tactics
clear interest in resisting bloc pressure tactics or verbal hostility.

which increasingly have marred international discourse no
Such tactics are futile, or indeed counterproductive, for those that
indulge in them.
end the theoretical debate

longer have reason or place. It is time to define and
Let us instead

If these issues are to be resolved through tests of strength,
it is not the advanced industrial powers who will pay the
highest price; it will be tragically, the poorest and most
disadvantaged, in the name of whom these tactics are
professedly used.

address the common concerns of all the world's people

in a spirit of realism, maturity, mutuality, and

common sense.

One of the striking features of the modern world economy is the diversity of its participants. Among the countries that used to be classed together as "developing," we have now seen obvious in the emergence of new economic powers, most

prominently the oil-rich, but also those with growing

capacity to export manufactures and raw materials.

Fuller participation of these countries is indispensable question left open is how they will play it. And at in the building of a new era of cooperation.

Also we need pay particular concern to the needs as well as well as we may add, the newly-wealthy producing nations-- of the poorest countries. Nations callous to their

plight must forfeit any moral claim to world leadership.

countries. For every economic problem -- stagnation, inflation, high energy prices, food shortages -- hits them the hardest.

Within this extended concept of mutual benefit and the imperative of mutual responsibility, let me outline the program for cooperation on the critical economic issues of out-time that accompanies its economic power, is prepared to tend, in a spirit of equality, mutual respect, and this cooperation. the United States proposes. Yesterday I discussed our

proposals for successful objectives of achieving a multilateral dialogue in energy. Today let me turn to food, raw materials, trade, and finance. For mutually beneficial solutions in

these areas will be the indispensable building blocks for a durable new structure of economic progress for the remainder of the new ear of cooperation we seek. this century.

## Food

If we do not move to solve our problems in food, nothing else we do can have meaning. The world's total require-

ments for food are growing dramatically. The gap

between what developing countries can produce and what
they need now amounts to about 25 million tons. At
present rates of food production and population growth,

is expected to
this could double or triple in ten years. Unless we
act now, over the next quarter century the world will
face a series of increasingly unmanageable food crises.

And short-term fluctuations in food production,
Moreover, food production has never proceeded along
due to weather or other natural or other catastrophes,
a smooth trend. Weather-induced supply fluctuations are
an important cause of instability in food prices and avail-
abilities and availability of precious grains.
Adequate grain reserves are critical to relieving
a major need, causing sharp swings in the
 prices and availability of precious grains.
an indispensable means for
ability. A

relieving starvation
hunger in the bad years as well as the good and reduce

pressures on supply and markets.

For the short-term, until progress is made on the fundamental problems of production and reserves, food aid will continue to be vital to feed the hungry and starving victims of poverty and natural disaster.

Increased food aid is an international responsibility -- to be shared by all financially able countries.

But no fundamental, long-term solution to the food problem is possible unless:

- World food production capacity is increased, especially in the developing countries; and

- An international system of grain reserves is created.

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

Through better yields and more extensive use of water and cultivatable land, the less developed nations, 

possess an unparalleled potential for increased pro-

duction. Their efforts require new financial resources-

of planning and funding more
and new methods to link funding to the development of

effective agricultural policies and practices in the

food-deficit countries. To these ends, the United States supports

two new international mechanisms:

First, an international fund for agricultural devel-

opment. This approach, proposed by the oil-producing

nations, can help bring together all donors prepared to

contribute additional resources, over some agreed base
year, to agricultural development. President Ford has
asked me to tell you today that the United States will partici-
pate in the commitments needed to create such a fund,
whose resources, we believe, should total at least
$1 billion a year.

The link between funding and effective agricultural
development strategies can be provided by the second
organization, the Consultative group on food production
and investment, organized under the world's leading
financial and agricultural institutions. The group,
which plans its first meeting in July, should be the
central mechanism for cooperation among both traditional

and new donors and the developing countries themselves.

The second key element in a long-term food action plan is reserves. We agreed at the Room Food Conference to negotiate a new international system of nationally held grain reserves. I recently outlined our suggested principles for such a system:

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

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

- Third, there should be agreed international rules or guidelines to encourage members to build up reserves.

in times of good harvest.

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

5. Fifth, rules or guidelines should be agreed in advance for the draw-down of reserves, triggered by shortfalls in world production. There must be a clear pre-sumption that all members would make reserves available when needed and, conversely, that reserves should not be released prematurely or excessively and thus unnecessarily depress market prices.

6. Sixth, in times of shortage the system must assure

access to supplies for countries that participate in it,
and there must be special provision to meet the needs
of the poorer developing 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 in negotiating a reserves system, agreement on

us outlines can be achieved before the end of the year.

Commodities

A second critical area for action is commodities, where
recent years unresolved
simmering differences threaten to unsettle wider efforts
at economic and political cooperation between the

developing and the developed. The time is ripe for a new

look at problems of commodity trade -- for new solutions

of mutual benefit to producers and consumers. The current system is
increasingly vulnerable to volatile prices, disruption of supplies

Price volatility, supply disruption, investment

disputes, and increasing hostility to the private firms
is still no adequate substitute as a source of resources and
that provide managed technology for resource development
management skills. Thus consumers as well as producers have
are not in the interests of either producers or con-
an interest in improvements in the present system. The
consumers, for over the long-term they adversely affect the
consuming nations want greater more reliable supplies and
price and availability of raw materials vital to

prices; the
economic progress of consuming nations. And producing

countries need an adequate return on their investments

in natural resources and stable and growing export
reliable/

earnings to finance their development plans on a reliable

basis.

ly markets.

First, we will propose that new rules and procedures
for access to markets and supplies be negotiated in the
multilateral trade negotiations now taking place in Germany.

Second, we are prepared to discuss new arrangements
for individual commodities on a case-by-case basis. We
have already made innovative proposals for a new inter-
national coffee agreement. We are participating in dis-
cussions with the members of the International Tin Council.
And we are prepared to join other copper producers
and consumers in a dialogue about the problems
and possible actions in this area.

-31-

-29-

EYD

Third, I have recently suggested that the World Bank expand its financing of resource investments and explore new ways of combining its financing with private management, technology and capital. The World Bank and the International Monetary Fund could also provide improved facilities for financing counter-cyclical stockpiles of materials as protection against fluctuations in supply & demand, while holding where agreed by producers and consumers.

For many less developed countries, the real issue is not price instability, but their desire for reliable, long-term stability and growth in their export earnings. The time has come to review existing techniques for earnings stabilization, such as those of the IMF and

those of the new Rome Convention, to see what might be

done to ensure the neediest developing countries against

excessive fluctuation in their export income.

We should agree among ourselves, first, on these new ways of addressing the concerns of the developing nations.

Cooperative action among the industrialized nations is a way, first, of guaranteeing the effectiveness of whatever new methods are

is crucial to the outcome of our commodities effort. Our devised. This is in the interest of the developing countries themselves, first, of course, it ensures that we have a clear idea and

success in this area is essential to the structure of understanding of our own needs. A proper solution in this age will be one that accommodates to serves both developed + international cooperation that we hope to achieve.

developing, in this spirit

Thus the United States supports the OECD proposals for a high level group on commodities to study proposals in

this area.

## Trade and Finance

The more traditional areas of international cooperation, trade and finance, cut across our efforts on the growing

of course remain central elements of the economic structure. The global economy cannot accommodate problem of production and commerce in natural resources,

-31-

adequately provide for new areas of cooperation, such as raw
progress on general trade and monetary matters must be
materials, energy, + food, unless the trading + monetary
sustained if we are to deal successfully with the new-
system is also guaranteed against breakdown + crisis. This
economic issues.
system has come through the last few years quite well.

same

At the present time, two problems stand out:

-- First, developing countries with large and growing
industrial sectors, particularly in East Asia and Latin
America, require expanding markets for their manufac-
tured goods. For these countries, the Tokyo Declara-
tions pledge to provide access to industrial world
markets for developing countries must become a reality.

At the same time, the success of these negotiations
demands serious participation by the developing countries
in the give and take of discussions that will bring gains

If we are to succeed in

increasing trade for all nations.
---
from trade to all the parties involved.

-- Second, the poorest countries need help from our
to international financial system. For they now bear the
burden both of higher prices for imported energy, food,
fertilizer and industrial goods, and of reduced export
causing uncertainty, due to
potential caused by worldwide recession. For this reason,
we consider it a matter of urgency that a special trust
fund of up to $2 billion be established under the IMF by
1976. We have proposed that gold now held by the IMF
be supplemented by other contributions, especially from oil
producers, and used to provide resources for half this
total. We believe the industrial countries could
be flexible in meeting the desires of contributing

need for-unity. But we must all realize their diversity

that diversity demands a variety of responses; that no comprehensive solution is possible; and that effective cooperation

only path among parties most concerned is the key to solving specific problems.

The OECD nations have a history of cooperation.

The economic system of the postwar world has been an incredible in addressing the problems of the less developed vehicle of progress worldwide, countries, and no amount of complaining that not enough for the developing countries has been done will change that fact. We, the developed nations, have a duty to warn against and to resist confrontation; for it is in the long-term interest of no nation. And we cannot be expected to remain silent and generous as well if no matter what we do, it is

not by Continued hostilities or ever greater demands. characterized as less than what is due the recipient.

The move away from existing patterns of confrontations as visible as it is today. We have a unique situation will be a difficult and time-consuming process.

opportunity to shape our future, + seize the But, in order to preserve and build upon the entire

positive possibilities inherent in the new era, in structure of world economic relationships, it is

unfolding. We should be confident and not timid; the important that all of our countries play a constructive

challengers of the economic system will soon realize that role in promoting specific and practical approaches

are not secured what they really seek to join, not destroy it. It is certainly worthwhile for us in this Organization to study that can be broadly acceptable. As a first step, the

the problem systematically. Therefore welcomes United States

comprehensive review of our economic relationships with developing countries. We also welcome the proposal of the

Government of Japan for a major policy-oriented study of within the OECD on the longer-run development of

developed countries.

But we must continue to develop our positions on

* going, before, not during or after, the major international issues of mutual benefit to developing and developed
* cause deliberations on these issues

nations in other forms such as the Seventh Special Session

## Conclusion

Our modern era has been created and shaped by the

* industrial revolution and the progressive economic

* growth it brought. Its impact has been rapid, its

results prodigious, its effects unprecedented. It has

created a new age of well being and provided the means

-37-

which was
by which rapid economic growth, confined to Western
Europe and the United States a century ago, has
expanded into many parts of the globe.

At home, this economic progress has been an
For the industrial nations growth promotes security,
essential underpinning of our democracy,
sustains prosperity and social values. It has pro-

resources for social within our societies
vided the means for addressing the problem of distribution
with an unprecedented degree of success in preserving
at home, within a stable political and social
environment. No other system has matched those results.

Those nations now can draw -- and are
For those still striving to industrialize, growth
drawing -- the appropriate conclusions. We have every-
reason to expect similar success in embracing the
chance to share in the world's growing wealth.
new challenges of food, raw materials, + energy --
For the new challenges we face, a vital, growing
and indeed all the new nations -- within our
system provides the only means for making the
System of Progress, But it will not happen
automatically.

resources required for creative and sustained solutions
to the problems of food, energy, environment and the
other great global imperatives of our time. It provides
a foundation on which to build a stable and equitable
world system.

There are no plateaus in the affairs of mankind.
What is not a step forward is at best stagnation; but
more often, it is a pause before retreat. There is
no need to be dismayed or distraught by the problems
we face, for progress implies problems. The circum-
stances of our time have provided the nations of the
world, with a uniquely shared perception of our common
predicament. The opportunity to write a new and

-39-

enduring chapter in the story of international cooperation is before us.

If so, We cannot pause to rest. We cannot find comfort in old solutions or outmoded slogans. We cannot mistake our own field of vision for the horizon of all mankind.

But we can respond to the imperatives before us. We have the awareness, the tools and the determination.

Let us now resolve to build the new era that our times demand.

Schmidt, Prime Minister Wilson, President Gissard

D'Estaing and former Prime Minister Tanaka in order

~~to develop our respective plans to combat the recession.~~

~~The major industrial countries should build on this~~

~~need to continue~~

~~economic at all levels,~~

~~procedure to coordinate policies for the expansion of~~

~~If they do so, it~~

their economies; ~~this will greatly improve the chances~~

of avoiding the sequence of boom and bust experienced these

last three years. The United States is prepared to

~~fully~~

cooperate ~~in such efforts.~~

~~we will cooperate with~~

Second, we must sustain the growth of international
trade and investment. 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 generation. Trade has
consistently expanded at a rate twice that of our
domestic economy. We must carry this momentum forward

- 11 -

long-term growth. This group should draw on the projections now being developed within the Economic Policy Committee and turn them into policy recommendations in time for the next ministerial meeting.

The importance of our economic cooperation transcends immediate economic utility; it also fosters our sense of community and a common interest.

If we are to cooperate in times of political and military crisis, we cannot be economically weak, or disunited, or preoccupied with clashing economic interests in periods of seeming normalcy. The interrelationship 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 Communist

- 13 -

trade. But stable growth can be sustained only through a

a structure of international cooperation in which the developing
countries are, and perceive themselves to be, effective
participants. The new problems of our era -- ensuring
adequate supplies of food, energy, and raw materials --
require for their solution a world economy that recognizes
and accommodates the interests of developing as well as
developed countries.

We in this organization all face the same challenge,
and we must face it together. Political evolution and economic
growth of the last thirty years have brought about a new
diffusion of power. Economic issues are becoming central
political issues. No nation or bloc can dominate. It has
become a test of statesmanship to ensure the smooth
reconciliation of conflicting interests and to prevent a slide

- 14 -

into political and economic warfare. Misused economic power --
as the past two years have shown, can reverse the trend of worldwide growth -- and retard
progress for everyone. The past two years have born stark
witness to this. An international system will be stable only
so long as its economic benefits are widely shared and its
arrangements are perceived as just. The United States,
and I am sure all of us in this room, are ready to seek
imaginative and compassionate solutions to the problems of
international cooperation, with imagination + compassion.

But it is evident that others must be ready to follow
a similar course. Cooperation and confrontation cannot be
carried on simultaneously. International dialogues that are
inland + themselves in our self-righteous
abused for self-indulgent rhetoric and propaganda help us
no one. We have no desire to participate in such exercises;
or no cause, we have a clear interest in resisting bloc pressure tactics

- 16 -

Simple labels falsify the many real communities of
interest which exist. -- some overlapping, some competitive,
some complementary. 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 making any
moral claim to world leadership -- we as well as the newly-
wealthy nations -- must contribute to easing the plight of the
poorest countries. For every economic problem -- stagnation,
inflation, high energy prices, food shortages -- hits them
hardest?

- 17 -

The United States recognizes the responsibility that accompanies its economic power, and is prepared to do its part, in a spirit of equality, mutual respect, and cooperation.

Yesterday I discussed our proposals for achieving a successful multilateral *dialogue in energy*. Today let me turn to food, raw materials and trade and finance. Failure in these areas would speed economic chaos and instability. Progress can usher in a new era of economic progress and cooperation.

## Food

If we do solve the global problems in food, nothing else - *moral* + *political* challenge. A. we do can will have much meaning. The world order in which *and million more undernourished* tens of millions starve will ever be accepted as just. The good harvests expected this year should not make us complacent, *food* *continue to* for the world's total requirements for food are growing dramatically.

- 18 -

currently what they need amounts to about 25 million tons. At current rates of good production and population growth, that gap is expected at least to double in ten years. Unless 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 starving victims of poverty and natural disaster. It is an international responsibility -- to be shared by all financially able countries. The United States has pledged that it will make every effort to match or surpass its record over 19 of the last twenty years and to contribute at least four million tons of food aid annually. However, we cannot ensure that we will have enough.

But no fundamental, long-term solution to the food problem is possible unless we require that

be World food production capacity be greatly increased.

- 19 -

-- An international system of grain reserves is being 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 the largest amount of unused water and cultivatable land, and the greatest margin for improvement. Their efforts, however, require large 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 Agricultural Development. This approach, first proposed by the oil-producing nations, is designed to bring together all nations who are prepared to contribute

- 20 -

President Ford has asked me to announce that the
United States will participate in the creation of such a fund.
We believe its resources should total at least $1 billion a year.

The link between funding and effective agricultural
development strategies should be provided by the second
organization, the Consultative Group on Food Production
and Investment, which has already been organized as a result
of the World Food Conference. This group -- sponsored by the
World Bank, the United Nations Development Fund and the
Food and Agricultural Organization -- plans its first meeting
in July. It should be the central mechanism for cooperation
among both traditional and new donors and the developing
countries themselves.

- 21 -

A crucial element in a long-term food strategy is *grain* reserves. Short-term fluctuations in food production, due to weather or natural or other catastrophes, cause sharp swings in the prices, and the availability of precious grains and *hence* *cause* a *plague*. A system of *world* *make it* *serious* *starvation*. Adequate grain reserves are an *possible* *alleviate* *indispensable* means for preventing *famine* in the bad years as *treating* *with* *spring* *is* well as *reducing* *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:

- 22 -

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 to provide for their buildup and maintenance.

- Fifth, rules or guidelines should be agreed in advance for the draw-down of reserves, triggered by shortfalls in world production. There must be a clear presumption that all members will make reserves available when needed and, conversely, that reserves should not be released prematurely or excessively, thereby depressing market prices.

- 23 -

- Sixth, in times of shortage the system must assure participating countries that they have access to supplies for countries that participate in it.

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

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.

## Commodities

A second critical area for action is commodities.

The time is ripe for a detailed look at problems of commodity trade -- for new solutions that will benefit producers and consumers alike. The current system is increasingly

- 24 -

vulnerable to volatile prices, disruption of supplies, invest-
ment disputes, and increasing hostility to the private capital
the transfer of existing resources to investment which remains indispensable for resources and
management skills.

Thus consumers as well as producers have an interest
in strengthening present arrangements. The consuming
nations seek reliable supplies and prices. The producing
seek reliable and growing export countries deserve stable, reliable and growing export
earnings to finance development and an adequate return on
 investments. All nations have an interest in ending the dispute
slave labor, which characterizes the race of an over raw materials which is becoming more polarized and
the debate on the slave question, which has already damaged efforts for far-reaching
international cooperation. The failure of the preparatory
energy conference last month is but a symptom of the larger
we need if we are to meet our problem that is facing us. The longer we delay, the more

- 26 -

First, we will propose that new rules and procedures for access to markets and supplies be negotiated in the multilateral trade negotiations now taking place in Geneva.

Second, we do not believe that exclusive producer organizations are the best way to solve the commodity problem. In our view consumers and producers should jointly discuss their problems and the possible remedial action needed. 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 participating in discussions with the members of the International Tin Council. We are ready to discuss other commodities as circumstances

- 29 -

Functuring effectively,
protected against crisis and breakdown. 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
expanding markets for their manufactured
goods. (For these countries, the Tokyo
Declaration's pledge to provide access
improved
to industrial world markets for developing
countries must urgently be implemented.)

If we are to succeed in increasing trade
with these nations, they must have the
opportunity to participate in the give and
take of these negotiations.

And they should be given an opportunity
to participate in the negotiations.

- 33 -

## Conclusion

Politically as well as economically, our modern
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 wellbeing and *provided the means by which rapid*
economic growth, which was confined to Western Europe
and the United States a century ago, has expanded into
many parts of the globe.

At home, this economic progress has been an
essential underpinning of our democracies. It has
*provided the resources for constructing a stable and*
progressive and just political and social environment.

- 35 -

The world cannot find comfort in old solutions or

outmoded slogans. We must not mistake our own

field of vision for the horizon of all mankind. But
neither should other nations or groups of nations.

We are prepared to respond to the imperatives
~~we/fau,~~
before us.

CONFIDENTIAL
CLASSIFICATION

2-

DECLASSIFIED

CLASHES, AND FACT THAT FULL TEXT OF OECD INTERVENTION,
DESPITE OUR INTENTIONS, IS NOW IN THE HANDS OF MANY EPB
MEMBERS.

FIRST CONTACTS WITH TREASURY ON OPERATIONAL EXCERPTS
FROM THE SPEECH SUGGEST THAT WITH SOME WORDING CHANGES
THE KEY ISSUE OF INCOME STABILIZATION FOR COMMODITY
PRODUCTION CAN BE HANDLED. BUFFER STOCKS ARE A LITTLE
BIT MORE CONTROVERSIAL. AS PREDICTED TREASURY IS BALMING
ON THE COORDINATION OF ECONOMIC POINTS. WE MAY NEED
SOME MUSCLE ON THIS ONE. ENDERS HAS GIVEN THE WHOLE
GROWTH PART TO ARTHUR BURNS; IF HE SUPPORTS WE CAN USE
HIM AGAINST SIMON.

ENDERS' OBJECTIVE IS TO TRY TO WRAP UP THE TREASURY BEFORE

CONFIDENTIAL
CLASSIFICATION

CONFIDENTIAL

CLASSIFICATION

- 3-

DECLASSIFIED

THE PROPOSED MEETING WITH THE PRESIDENT SATURDAY MORNING.

WILL TRY TO GET AGREEMENT ANY ISSUE WE CAN'T HANDLE WILL

BE HELD OVER FOR YOUR SESSION SATURDAY AFTERNOON WITH

SIMON. END ENDERS COMMENT.

BEGIN TEXT

We meet here today to continue our efforts to create
the conditions for a prosperous, equitable and humane
world. We have together laid the foundations for our
pursuit of this cause over the past thirty years. We
have been rewarded by an unprecedented period of peace
among the major powers and growing world prosperity.
But the system we have labored under hard to construct
is now under stress. The energy crisis first dramatized

which long
the extent to which the forces of change were out-
running our capacity for cooperative progress. A food

*to adapt our policies + institutions.*

a rate of unprecedented in the postwar period
a

*crisis, worldwide recession and inflation have now*

added further elements of strain to the structure of

*international cooperation.***

*as individual governments*
Unless our actions are cooperative, and taken with

full consideration of their wider international consequences,

*we will suffer a powerful erosion of*
*sequences, the results will inevitably erode* the political

and moral environment in which each of our societies

pursues its destiny.

Today let me discuss what we, the industrialized
nations, can do--both in our own interest, and for the
larger human community which ultimately sustains us.

-- A challenge to the <u>nations of the industrial world</u> to <u>recover and return to sustained economic growth, and thus to renewed faith in our institutions and leadership</u>.

-- A challenge to <u>all nations</u>

to improve the system of international
economic cooperation, and thus to
for the less developed countries to share in the world's

*Prosperity,*

growing wealth.

#3

stagnation and <u>dispute</u>. History confirms that only an environment of
<u>retrograde</u>
economic growth can satisfy competing <u>domestic demands</u>

For more income and more opportunity within and among
<u>countries</u>;
nations; and that an environment of <u>growth and economic</u>

cooperation facilitates solutions to international polit-
ical and security problems. (Thus, our survival as
nations ultimately demands that we meet these challenges)

is the best and most abundant source of
expanding world economy <u>best permits increased transfer</u>
<u>resources for development -- through expanding investment as well as</u>
<u>of resources through bilateral and multilateral aid</u>

world can provide a long-term market for raw materials, a sustained and growing one.

for manufacturers, and for the agricultural products on

which the prosperity of the developing countries depends. In their income for development, earn their income for development.

A world of growth for Only increasing income for both developed and developing

countries can create the propitious climate needed for mutual
provide the best
accommodation through dialogue
negotiation on the hard issues of food, energy, raw

materials, trade and investment.

The Organization for Economic Cooperation and Development was founded as a vehicle for the progress of those fortunate few nations which were already the most advanced. We must increasingly address problems in a global

context, recognizing that the challenge of growth in the
industrial world is inextricably linked to the challenge

of our relationships to the developing nations. With rest of the world, we are linked to the challenge.

Let me discuss each of these in turn.

5

Growth among the industrialized nations

We have witnessed thirty years of economic growth among the industrialized nations. Now, however, we are in the midst of a recession, the most serious since the great depression of the thirties. Our cardinal task is to restore the economic stability of the industrial nations. We must immediate fundamental

Sustained growth requires a political and social consensus that government policies are equitable. The distribution of economic benefit must be broadly accepted; otherwise escalating wage and price demands, lagging work performance and labor unrest will result. Continuing inflation that destroys growth will be the arbiter of social priorities.

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devouring growth and feeding its fastest growing peoples.
become the hallmark of our societies, We see it in the
increasing difficulty of governments to control their
budgets. We see it in the declining portion of their national
income that many of the industrial democracies are

willing to save and invest in future growth. We see it in the escalating
wage and price demands, logging productivity, and labor-management difficulties
in many countries that themselves hinder the progress of social and economic development.
These disturbing signs will abate, and growth
 governments of the
resume, only if the industrialized nations take strong
action. The finance ministers, meeting tomorrow, will

measures which
action.
the financial ministers, meeting tomorrow, will
discuss specific actions we can take separately and or
these
together to achieve these goals. Secretary Simon will

The premise of this Organization, and the reality of the new
interdependence of the modern world, require that we --
for the first time -- learn to coordinate our national economic
policies..

discuss the American recovery in detail. Let me offer
more some general propositions that should frame our long-
future term actions.

First, the industrial nations can build an atmo-
sphere of confidence by strong and coordinated actions
in the cause of sustained expansion. In the short-and
medium-term management of our economies, we must
recognize the effects of the economic policies of one
we recognize but a great responsibility in this regard rests on the United States.
nation on others. In the past we have used this
 organization as well as bilateral contacts to keep each
other informed on short-term policy measures. For
President Ford consulted closely with
example, this winter Chancellor Schmidt, Prime Minister
Wilson, President Giscard D'Estaing, Former Prime

Minister Tanaka, and President Ford consulted on their

plans to combat the recession. In the future, we should

must be used to its full potential

use the OECD not just to inform each other but to

develop coordinated policies for the expansion of the

our economies, so that

one nation's policies are not frustrated by the contrary policies of others.

major industrial economies, in order to avoid the

Working in tandem, instead of at random or separately or at cross-purposes, we will improve our chances of avoiding the

years.

A second cardinal objective must be to

trade and investment. Both have nourished our prosperity

for over a generation, consistently expanding at rates

twice that of our domestic economies. This is the fruit

of the great postwar effort to liberalize trade, to

monetary exchanges. We must carry this effort forward:

- In the OECD, by renewing and respecting our pledge

not to adopt restrictive trade measures to cover our respective
exorbitant oil or raw materials prices, or
deficits stemming from current world economic problems;
othervarieties, and
and

- In the GATT, by rigorous conduct of the round of
multilateral trade negotiations, now beginning, to lower
tariff and non-tariff barriers to trade.

Third, as I outlined yesterday in the IEA, we must
adopt policies on energy conservation and alternative
sources that result in returning oil prices to
retard equilibrium. High oil prices limit growth. And when
OPEC's imports catch up with its income, such prices

amount to

attempt to

qualitative enhancement of our standard of living?
growth, but for a new quality of growth?

- What policies are needed to restore a non-inflationary environment for longer-term growth?

- How can we encourage the research and development effort needed to sustain, and transfer to others, the changing technology so vital to our post war growth?

To begin the search for answers to these questions, I propose that we constitute a special high level group of distinguished economists both in and out of government to draw up an OECD growth strategy for the next five years. This group should draw on the projections now being developed within the Economic Policy Committee -- but its focus should be on policy. It should report to the next Ministerial meeting.

Close economic cooperation is an important element
in the cohesiveness of our alliances. This cohesiveness,
as well as our economic strength and vitality, are
indispensable if we are to discourage threats to our
common security. We cannot be disunited and preoccupied
with economic problems if we are to cooperate in times
of political and military crisis.

Moreover, stable relations with the Communist world
require us to demonstrate the strength and vitality of
our open economic system. Their incentive to play a
responsible role in the world economy and in their political relationships with the West will be enhanced as

Finally, stable growth is critical to the well-being of the developing world. Let me now turn to the crucial question of the relationship between the industrialized and the developing world.

## Cooperation with the developing nations

the return to growth is primarily the task of the industrialized nations, since they account for 65 per-cent of the world's output and 70 percent of its trade.

sphere required for the resolution of political and
security differences. There can be no stable inter-
national system so long as some nations have little share
in its economic benefits or reject it as unjust.

The U.S. is ready to join others in meeting this
challenge with new approaches and new attitudes. But
others must be equally forthcoming. Cooperation and
confrontation cannot be carried on simultaneously. The
United States will not tolerate the use of inter-
national forums for the self-indulgent exercise of
nationalistic opinion without reflection or responsibility.

The confrontation rhetoric and bloc pressure tactics
which increasingly have marred international discourse no
longer have reason or place. It is time to define and

1917

But those common concerns encompass a new and shift-
ing diversity of communities of interest. This is made
obvious in the emergence of new economic powers, most
prominently the oil-rich, but also those with growing
capacity to export manufactures and raw materials.

Fuller participation of these countries is indispensable
in the building of a new era of cooperation.

Also we need pay particular concern to the needs
of the poorest countries. Nations callous to their
plight must forfeit any moral claim to world leadership.

Within this extended concept of mutual benefit and
responsibility, let me outline the program for cooper-
ation on the critical economic issues of out time that
the United States proposes. Yesterday I discussed our
objectives of achieving a multilateral dialogue in
energy. Today let me turn to food, raw materials, trade,
and finance. For mutually beneficial solutions in
these areas will be the indispensable building blocks for
the new ear of cooperation we seek.

Food

between what developing countries can produce and what they need now amounts to about 25 million tons. At present rates of food production and population growth, this could double or triple in ten years. Unless we act now, over the next quarter century the world will face a series of increasingly unmanageable food crises. Moreover, food production has never proceeded along a smooth trend. Weather-induced supply fluctuations are a major cause of instability in food prices and availability. Adequate grain reserves are critical to relieve hunger in the bad years as well as the good and reduce pressures on supply and markets.

For the short-term, until progress is made on the
<u>fundamental problems of production and reserves</u>, food
aid will continue to be vital to feed the hungry and

starving victims of poverty and natural disaster,

increased food aid is an international responsibility --
to be shared by all financially able countries.

-- World food production capacity is increased,
especially in the developing countries; and

-- An international system of grain reserves is created.

Through better yields and more extensive use of water and cultivatable land, the less developed nations possess an unparalleled potential for increased production. Their efforts require new financial resources and new methods to link funding to the development of effective agricultural policies and practices in the food-deficit countries. To these ends, the U.S. supports two new international mechanisms:

First, an international fund for agricultural development. This approach, proposed by the oil-producing nations, can help bring together all donors prepared to

The link between funding and effective agricultural
development strategies can be provided by the second
organization, the Consultative Group on Food Production
and Investment, organized under the world's leading
as a result of the World Food Conference at last November.
financial and agricultural institutions, The Group,
which plans its first meeting in July, should be the
central mechanism for cooperation among both traditional

*program* is reserves. We agreed at the *Rome Food Conference* to negotiate a new international system of nationally held grain reserves. I recently outlined our suggested principles for such a system:

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

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in times of good harvest.

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

and draw-downs.

-- Fifth, rules or guidelines should be agreed in advance for the draw-down of reserves, triggered by shortfalls in world production. There must be a clear pre-sumption that all members would make reserves available when needed and, conversely, that reserves should not be released prematurely or excessively and thus unneces-sarily depress market prices.

-- Sixth, in times of shortage the system must assure

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

Commodities

More importantly, the frustration and difficulties

international dispute over
of an increasingly polarized debate on raw materials has already
been proved our efforts for more
will be damaging to attempts at far-reaching inter-

energy conference last month to agree on how to deal with raw

but the materials is a symptom of this larger problem that is coming upon us.

In response to the problems of commodity trade, the

United Kingdom has made a significant set of concrete proposals in this area. In concept and concurrence, these are good proposals, and we are on commodities. While we have reservations about some prepared to discuss Whatever improvements we would suggest, aspects of their proposals, we welcome their initiative in their details.

and concern.

In this same spirit, the United States would like to

offer the following suggestions :

propose new steps for addressing the problems of commodi-

ty markets.

First, we will propose that new rules and procedures
for access to markets and supplies be negotiated in the
multilateral trade negotiations now taking place at Geneva.

management's technology and capital. The World Bank and

improved facilities for financing counter-cyclical stock-

materials as protection against fluctuations in supply + demand,

earnings stabilization, such as that of the IMF and

enhancing trade for all nations.
from trade to all the parties involved.

-- Second, the poorest countries need help from our
international financial system. For they now bear the double
blow of
burden both of higher prices for imported energy, food,
fertilizer and industrial goods, and of reduced export
earnings because of the
potential caused by worldwide recession. For this reason,
we consider it a matter of urgency that a special trust
fund of up to $2 billion be established under the IMF by
1976. We have proposed that gold now held by the IMF
be supplemented by other contributions, especially from oil
producers, and used to provide resources for half this
total. We believe the industrial countries could
be flexible in meeting the desires of contributing

Price volatility, supply disruption, investment
disputes, and increasing hostility to the private firms
that provide managed technology for resource development
are not in the interests of either producers or con-
sumers, for over the long-term they adversely affect the
price and availability of raw materials vital to
economic progress of consuming nations. And producing
countries need an adequate return on their investments
in natural resources and stable and growing export
earnings to finance their development plans on a reliable
basis.

those of the new Rome Convention, to see what might be
done to insure the neediest developing countries against
excessive fluctuation in their export income.

Cooperative action among the industrialized nations
is crucial to the outcome of our commodities effort. Our
success in this area is essential to the structure of
international cooperation that we hope to achieve.

Trade and Finance

The more traditional areas of international cooper-
ation, trade and finance, cut across our efforts on the growing
problem of production and commerce in natural resources,

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progress on general trade and monetary matters must be
sustained if we are to deal successfully with the new
economic issues.

countries regarding management and other arrangements
for a trust fund. I would 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 in two weeks time.

## 50. The basis for a new approach

the building of a new relationship with the developing
nations requires a spirit of cooperation -- not
confrontation. Of central importance will be our
capacity to distinguish between the political perception
of the developing countries as a single entity and the
reality of their diversity -- in resource endowment and
in extent of development. We can accept their political

need for unity. But we must all realize their diversity
demands a variety of responses; that no comprehensive
solution is possible; and that effective cooperation
among parties most concerned is the key to solving
specific problems.

The OECD nations have a history of cooperation
in addressing the problems of the less developed
countries, and no amount of complaining that not enough
has been done will change that fact. We, the developed
nations, have a duty to warn against and to resist con-
frontation; for it is in the long-term interest of no
nation. And we cannot be expected to remain silent
and generous as well, if no matter what we do, it is

The move away from existing patterns of confronta-
tion will be a difficult and time-consuming process.

But, in order to preserve and build upon the entire
structure of world economic relationships, it is
important that all of our countries play a constructive
role in promoting specific and practical approaches
that can be broadly acceptable. As a first step, the
United States supports the Secretary General's proposal
for a review of our economic relationships with develop-
ing countries. We also welcome the proposal of the
Government of Japan for a major policy-oriented study
within the OECD on the longer-run development of

But we must continue to develop our positions on
issues of mutual benefit to developing and developed
nations in other fora such as the Seventh Special Session
of the United Nations General Assembly this fall.

## Conclusion

Our modern era has been created and shaped by the
industrial revolution and the progressive economic
growth it brought. Its impact has been rapid, its
results prodigious, its effects unprecedented. It has
created a new age of well being and provided the means

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For the industrial nations growth promotes security, sustains prosperity and social values. It has provided the means for addressing the problem of distribution at home, within a stable political and social environment.

For those still striving to industrialize, growth represents the best hope for a better life -- the chance to share in the world's growing wealth.

For the new challenges we face, a vital, growing system provides the only means for massing the

There are no plateaus in the affairs of mankind.
What is not a step forward is at best stagnation; but
more often it is a pause before retreat. There is
no need to be dismayed or distraught by the problems
we face, for progress implies problems. The circum-
stances of our time have provided the nations of the
world with a uniquely shared perception of our common
predicament. The opportunity to write a new and