The Secretary
of State

DEPARTMENT OF STATE
UNITED STATES OF AMERICA

[LC]

Speech

May 6, 1976

Nairobi, Kenya

Bureau of Public Affairs

Office of Media Services

## UNCTAD IV: EXPANDING COOPERATION FOR GLOBAL ECONOMIC DEVELOPMENT

Secretary Henry A. Kissinger before the Fourth Ministerial Meeting of the United Nations Conference on Trade and Development (UNCTAD).

We are assembled here to carry forward one of the most important enterprises in history—the endeavor of independent nations to advance global economic development and so to better the quality of human life on Earth. Our goal is nothing less than to shape an enduring structure of international 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 possibility. Their attainment will require us to meet challenges whose scale eludes the grasp of individual nations, whose complexity mocks the slogans and solutions of the past, and whose pace outstrips the measured processes of traditional diplomacy.

There is before us all the imperative of world stability—the task of resolving conflicts, 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 Happiness." 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 necessities imposed by our economic interdependence. 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 issues dominate the agenda of the evolving relationship between North and South, the industrial and the developing countries.

* They are issues of economics—of an effective 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 international 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 dignity and

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the fulfillment of the human personality. But a
world in which poverty and misery continue to
afflict countless millions would mock these impera-
tives. The daily preoccupation of men and women
would be the harsh necessities of survival; the ener-
gies of nations would be consumed in hatred and
rivalry. We must build, instead, a world of coopera-
tion and widening human opportunity reflecting
the fundamental interdependence of our destinies.

Today the accelerating forces of moderniza-
tion-technological, economic, social, and politi-
cal-link the peoples of the world as never before.
They can intensify conflict or they can provide us
with unprecedented possibilities to advance our
common aims. All nations are part of a global
economic system. If that system is to flourish it
must rest on the firm foundation of security, fair-
ness, and opportunity to all who wish to partici-
pate-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 construc-
tive and cooperative 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 alto-
gether fitting, for Africa's importance in world af-
fairs is growing. And African countries have an
especially high stake in a successful conference
leading to concrete progress. No continent has
been more vulnerable to worldwide economic in-
stabilities. No continent suffers so cruelly when
crops fail for lack of rain. No continent endures a
heavier burden when commodity prices fluctuate
violently. And no continent has more to gain from
the organized cooperation of all nations to pro-
mote 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 deter-
mination 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 privi-
leged to be a guest in Africa and to enjoy the extra-
ordinary hospitality of its people and leaders. I

have greatly benefited from my discussions with
African statesmen, and I have learned much about
the concerns and hopes of the peoples of Africa.
The nations of this continent can be confident that
the United States is prepared to cooperate 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 [Jomo] Kenyatta, for making this beau-
tiful city available as the site of this conference.
The U.S. delegation has come to Nairobi to
achieve, with representatives of other nations, a
major step forward in international cooperation.

We begin this conference at a moment of
opportunity. The world economy is recovering
from a deep recession-my own country perhaps
most rapidly. Increasing American demand for
products of other countries will make a major con-
tribution to recovery around the world. Many
obstacles to sustained 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 moment
which offers us a brief, but special, opportunity 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 confrontation and rhetorical
attacks if other nations choose that path. And we
can ignore unrealistic proposals and preemptory
demands. But the historic opportunity which is at
hand would slip away. It is up to us, as the spokes-
men 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 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

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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 Session of the U.N. General Assembly last September. At that meeting the industrial and developing nations, in an encouraging demonstration of consensus, put aside ideological confrontation, declared their common purpose 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 declaration and in other forums, including
the Conference on International Economic
Cooperation [CIEC] in Paris.

These proposals represent the contributions
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 representing our two political parties [Jacob K. Javits and Abraham A. Ribicoff]. 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 together
have achieved since last September.

* We agreed at the Seventh Special Session to take measures to help insure basic economic security against cycles that devastate export earnings and undermine development. In January the International Monetary Fund 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 technology. 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. Negotiations 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 Development Bank; we will contribute to an expansion 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 community dedicated itself to improving trade and investment in key commodities. International 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 countries which have suffered the most from recent economic dislocations. We have made significant progress by providing financial and technical assistance to increase food 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

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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. Comprehensive efforts are crucial; 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 demonstrate not only 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, 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 commodity 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 their 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.

Let me discuss each of these elements in turn.

**Adequate Investment.** Most of the world's raw material production, in fact, takes place in the industrial countries. But if development is to take hold, a special effort must be made to expand 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 resource 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 developing countries have clouded the general climate for resource investment in the developing world. Social and political uncertainties have further complicated investment prospects. As a result commercially viable projects have been postponed, cancelled, or relocated; and capital, management, and technology have been diverted to production of

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higher cost raw materials in the industrialized world.

Second, in the next decade alone the total requirements for global investment in resources 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 uncertainties and further inhibit rational investment.

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

If present trends continue, serious misallocations of capital, management, and technology are inevitable. The costs of raw material and agricultural production will escalate. Many potential producers will be unable to attract adequate capital. All countries will pay the price in accelerated inflation and retarded growth—with the poorest countries suffering the most.

To overcome these problems the United States proposes the establishment of an International Resources Bank [IRB]. This new institution would promote more rational, systematic, and equitable development of resources in developing nations. It would facilitate technological development and management training in the developing countries. It would help insure supplies of raw materials to sustain the expansion of the global economy and help moderate commodity price fluctuations.

The International Resources Bank would mobilize capital for sound resources development projects by assisting individual resources 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 governments and investors the International Resources Bank would begin operations with a capital fund of $1 billion. It would participate with foreign investors and the host government in project agreements

specifying the conditions of the investment on a basis acceptable to all parties. Such an agreement could include a formula for production sharing and arrangements by investors to help develop the managerial, technological, and marketing capabilities of the host country. 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 Resources 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 render even more effective—other institutions 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

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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 trilateral 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 response 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 as-

sured 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 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 financing 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 established. 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 constructive 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 individuals 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.

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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 developing countries' commodity exports. 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 resources development 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 agricultural 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 reserves a reality, to increase support for agriculture 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 Conference on International Economic Cooperation. We urge that our proposal for an international energy institute—which would help developing countries take advantage of their domestic energy resources—receive priority attention in the months ahead.

**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 thus provide general balance-of-payment 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

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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 [GSP] by the United States, combined with the preference systems of other industrial countries, has opened significant trading opportunities for developing nations. Our own preference system 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 including additional products.

The United States will give priority support to the U.N. Development Program 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 under-

way in the MTN on tariff treatment of tropical products—including processed goods and manufactures—that are of particular interest 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. 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-developed countries which are minor suppliers or possible new entrants into the U.S. market.

We recognize, too, that developing countries 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 goodwill on all sides constructive agreement can be reached on specific reform issues within the timeframe of the multilateral trade negotiations.

The reduction of tariffs against the exports of processed raw materials from developing countries is especially important. Lowering these barriers would provide fresh opportunities to expand and diversify exports, 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 system, greater reliability of supply is another. Without reasonable assurance from producer countries that they will not arbitrarily interfere with exports, importers must turn to other sources. Consumers will then

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bear the cost of less efficient production, unreliable producers, the cost of lost markets, and reduced foreign investment.

There is an urgent need to analyze methods 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 exporters; and it would mitigate some of the political 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 International 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 measures from the finite resources of our globe. It harnesses the intelligence of man and the force 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 indus-

trialized 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 founder's 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.

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* 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, 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 education 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 effectively identify, 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

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proposed International Industrialization Institute
and the International Energy Institute.

* 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 to 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 is 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 would 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 Resources 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 developing of 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 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

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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 earning resulting from recession in the industrialized nations have generated unprecedented 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 payment 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 [IFC], which we proposed at the Seventh Special Session, have been completed. The IFC is actively engaged in examining the U.S. proposal for 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 mounting; a number of countries are experiencing serious problems in meeting their debt obligations.

Generalized rescheduling of debts is not the answer. It would erode the creditworthiness of countries borrowing in private capital 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 relation 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.

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To improve the basis for consideration of balance-of-payments problems of particular developing countries, the United States proposes that the CIEC Finance Commission or another mutually acceptable forum examine the economic and acute financing problems of developing countries.

## The Poorest Countries

The needs of many nations in the developing world are great, but the special requirements of the poorest countries are massive. This conference has a collective moral responsibility to respond to this challenge. We must devote major efforts to improve 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 helplessness. We must increase resource flows, improve their terms, and enhance their quality. And aid must be given on softer terms, because the poorest countries are by definition unable to service debt except on a highly concessional basis.

Resource flows to the poorest countries must be freed from restrictions on procurement 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 countries.

For the longer term a substantial replenishment of the International Development Association is imperative. The United States will, as always, meet its commitments to this vitally important source of assistance. And we look forward to generous OPEC [Organization of Petroleum Exporting 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 ease 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 one billion dollar target can be met.

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

* Seventy percent of our bilateral development assistance is now programmed for countries 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 [U.N. Development Program] grants. One-third of this should go to the least developed countries in this category.

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

In the Law of the Sea negotiations now under way 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 PL-480 to grants under certain circumstances. Taken together these two steps will significantly increase the grant element in our bilateral assistance programs.

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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.

## Conclusion

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 scar cities, 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 one-sided 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 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, debilitating illness and ignorance, and demeaning servitude to others. Then development must look beyond survival to provide opportunities 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 institutions 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

[LC]

PRESS
DEPARTMENT OF STATE

May 3, 1976

NO. 221

EXCHANGE OF TOASTS BY
THE HONORABLE HENRY A. KISSINGER
SECRETARY OF STATE
AND
UNCTAD SECRETARY GENERAL GAMANI COREA
AT A LUNCHEON FOR THE IV UNCTAD DELEGATES
HOSTED BY SECRETARY KISSINGER

MAY 3, 1976

SECRETARY KISSINGER:

Mr. Secretary General, distinguished Delegates, gentlemen: I think it is appropriate that the American Delegation begin these meetings by meeting their colleagues from developing countries, because the purpose of this Conference to speed economic progress concerns above all the developing countries and the ultimate goal of our efforts, which is to build a world in which all countries feel a sense of participation, can be achieved only through a sense of cooperation between the developed and the developing countries. It cannot be achieved by confrontation. It cannot be attained by rhetoric.

The day is long past when nations could expect to determine their economic destinies by isolated national policies. The world economy has evolved into a single global system in which all our countries sell our goods, buy needed products and materials, support our currencies and otherwise seek to earn our way, and enhance the economic well-being of our people.

The cooperative economic institutions which were created a generation ago have only increased our mutual dependence. The statesmen of a generation ago deserve our gratitude for their historic contribution to mankind's well-being. They shaped the world's economic evolution in the direction of multilateral collaboration. The institutions for trade, monetary affairs, and development have helped accelerate world-wide growth and thereby expanded the economic system. We have all flourished in reliance on these institutions.

Today, a second generation of international economic cooperation must begin. We face challenges of adapting institutions to fundamentally new international conditions. The number of the world's nations has tripled since 1945. The complexities of maintaining international cooperation is formidable. Yet the political role and economic power of the new nations is undeniable. The structure of international cooperation must be brought to embrace their constructive participation. A world that is permanently divided between rich and poor cannot be a world that will be considered just or acceptable. This is the fundamental task of building a world order in our time.

Both the industrial world and the developing world have to recognize some realities in this process. The industrial nations must recognize that the developed nations have legitimate claims for equity and for a voice

For further information contact:

PR # 221

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in international deliberations affecting the world's trade and monetary institutions because of their relative weakness. The developing nations are not always automatically heard. But we must realize — we in the industrial nations must realize — that their prosperity can become a powerful force for global prosperity and is, in addition, a moral imperative of our time.

At the same time, the developing nations must recognize that they too are dependent on the flourishing of the economic system for achievement of their own development goals. Attempts to wield block economic power disrupt the entire system, as we have seen in recent years, and ultimately rebound to the detriment of all. The nations of the Third World have a choice, just as the industrialized nations do, between slogans and solutions, between rhetoric and reality.

In the last few years, the international community has in fact gone through another period of extraordinary creativity. Major improvements have been made in the world's institutional arrangements to broaden the participation and to affect new means of strengthening the role and performance of developing countries in the world economy. New forums and institutions have been created. Imaginative use is being made of institutions and forums that have long existed.

But we must always remember that we are not dealing in dry, economic statistics and specialized, technical mechanisms. We are speaking of the well-being of peoples, of the age-old struggle against poverty, illiteracy, malnutrition, hunger, disease, unemployment, and social conflict. Whether we describe ourselves as materialists, or men of religious faith, we share a universal aspiration to raise all men and women to a level of well-being and personal fulfillment and dignity.

The issues we grapple with as governments are not simply political and economic, but at their roots, moral. If our efforts show visible success our period will be looked upon someday as another historic moment of transformation and achievement. This is the attitude with which my colleagues and I have been sent here by President Ford to begin our discussions on difficult problems of development.

We will do our best to listen to your concerns and we will present proposals which go as far as is possible for the United States, but which we are prepared to modify and to discuss in weeks that are ahead of us.

We believe that this Conference will be judged, not only by the concrete, technical measures that are before us, but by the spirit with which we deal with each other, by our ability to create a sense of community, by our conviction that our prosperity, our security, and our development can only be achieved in a world of cooperation and mutual respect. And therefore, I would like to ask my colleagues here to join me in a toast to our cooperation, to the success of this Conference, and to the great goals of peace, justice and progress.

### UNCTAD SECRETARY GENERAL COREA:

Mr. Secretary, distinguished Delegates: I think that I would be according the wish of all of you if I were to take this opportunity to convey our very sincere and warm thanks to Mr. Kissinger, not only for the hospitality he has afforded us this afternoon, not for his very presence here

PR # 221

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in our midst at this, the beginning of the Fourth Session of UNCTAD.

I think, Mr. Secretary, that by your participation in the Nairobi Conference you have helped immensely to focus the attention of the entire world on the very important issues that will be discussed at this meeting.

I think that we all appreciate the fact that this session of UNCTAD is going to be a particularly crucial one. It is taking place as you yourself said, at a moment of time when new initiatives, new advances, are being sought in relation to the whole question of development, in relation to the very relationships between developed and developing countries.

If we succeed in Nairobi, I think we would be laying very sound and very secure and very enduring foundations for the future. If we do not succeed, then I think we would be facing a major setback. It is the first prospect that I look forward to.

I am very encouraged to hear this afternoon from you, and also in the discussions we had, of the very constructive, positive way you are approaching this Conference and of the proposals that you intend to present to it. We all look forward to these with great anticipation, with great expectation, with great hope. If they do succeed, as you said, in generating the right spirit of negotiation, of the search for common ground, then I think, Mr. Secretary, that you, yourself, would have laid the foundations for a successful Conference.

So once again I would like, on behalf of all of you, to convey our very warm thanks to you and to the Members of your Delegation for receiving us this afternoon and giving us the opportunity of being with you. May I, in turn, invite everybody to raise their glasses in a toast to the Secretary of State and to the Members of the American Delegation.

* * * * *