Remember the North-South summit at Cancun last October? The hopeful expectation at its conclusion was that a round of "global negotiations" in the United Nations would actually begin, leading to more help for the poor countries.
But the disappointing reality is that while the summit may have blurred the sharp edges of hostility that exists between the rich nations and poor nations, so far it has produced nothing concrete, not even a clear timetable on what happens next.
The still unsettled state of rich-nation, poor-nation talks on aid is only one of many uneasy signs of yet another troubled year on the international economic front, among them continued world-wide recession, increasing frustration with Japan's export successes, brand-new protectionist problems cropping up in investment-related areas, and a major question mark on how President Reagan's stern attitude toward the Soviet Union may affect American-European cooperation on economic issues.
Robert D. Hormats, assistant secretary of State for Economic and Business Affairs, said in an interview that the world this year will face "a watershed in the international trading system."
What Hormats means is that--on the one hand--the United States and its major trading partners in Europe and Japan seem to be on a path leading toward more restrictions and subsidies, unless politicians in all countries can find a way of edging back toward a freer system. And on the other, no real resolution of the North-South problem is in view.
On the industrial world's internal problems, Hormats said he remains "hopeful because I remember that the multilateral trade negotiations (MTN) were successfuly carried on in the wake of the worst post-war recession in 1975 and 1976." There will be several opportunities for the rich countries to try to iron out their difficulties, including continuous discussions within the World Bank and International Monetary Fund, a summit session in France this spring, and an important ministerial meeting of the General Agreement on Tariffs and Trade (GATT) later in 1982. Especially, the United States is anxious to resume a fruitful dialogue with the European Community that will avert a trade war in steel, textiles, and other products.
For all of that, Hormats comes up with the relatively gloomy forecast that total world trade will expand even less than economic growth in the industrial world, estimated at 2 percent or less for 1982.
But any solution, even a partial one, of North-South problems remains elusive. Hormats said that despite the vague promise of President Reagan and other leaders at Cancun that discussions on aid for developing countries would be taken up in the United Nations, the Third World countries themselves "have a better sense than before that the real action" to help them will have to come through the existing financial institutions--the World Bank, the IMF, and the GATT.
"There's still a difference between some developed countries and the developing countries on what global negotiations ought to be, what the mandate ought to be, and what the procedures ought to be--and that still is just not worked out yet," he said.
That sounds pretty much like the U.S. policy "line" early last year, before Reagan agreed to go to Cancun--almost as if Cancun hadn't happened. And indeed, if one were to measure it in terms of follow-through since Cancun, the North-South summit was a non-event.
"There is no clear idea of an agenda (on global negotiations)," Hormats told this reporter. "And it's curious: There is a sense that the developing countries want to negotiate in the U.N., but they're not really sure what they want to negotiate."
John Sewell, president of the Washington-based Overseas Development Council, a non-profit Washington think tank dedicated to Third World problems, suggests that the post-Cancun progress was slowed initially by the internal U.N. debate over a new secretary general, which now has been resolved.
But Sewell said in an interview that the basic reason for the lack of progress is the lack of "a sense of urgency" on the part of the rich nations, especially the absence of "a driving force" within the U.S. government interested in pursuing the idea of global negotiations.
Sewell thinks that the Reagan administration has missed a great opportunity, even within the context of its own philosophy geared to the private sector--and even acknowledging budget restraints--to formulate what could have been called a "Reagan development policy."
Hormats is probably right, Sewell says, that the Third World nations are coming to believe that the First World's scenario for dealing with poor country problems will focus on existing institutions, despite whatever grudging "global negotiations" rhetoric came out of Cancun.
"There is an increasing realization you won't get the rich countries to move in the U.N. format," Sewell said. "But if you believe in the integrity of the international financial institutions like the IMF and the World Bank, you can either say everything is hunky dory and you don't have to make changes, or you have to come forward with proposals to improve things. I may have missed something, but I haven't seen any U.S. propoosals for modification of the IMF or of the bank."
At last year's IMF annual meeting in Washington that just preceded the October Cancun summit, the Third World nations expressed disappointment in the failure of that agency to extend a more generous hand, especially through the continued creation of special drawing rights that would have helped the poor nations pay some of their escalating crude oil bills. As things stand, there will be no new issue of SDRs.
The proposal was defeated by strong American opposition. In fact, the general thrust of American policy at that meeting was that IMF lending practices had to be more strict, and even a Third World moderate like Cesar Virata, deputy prime minister of the Philippines, said publicly that the poor countries might therefore have to think of quitting the IMF.
But at Cancun, the Reagan administration emphasized over and over its commitment to the IMF and World Bank, and made clear--as Hormats did in the interview for this article--that the administration clings to the belief that the "functional" multilateral lending institutions, rather than a debating society like the United Nations, is where North-South compromises should be hammered out.
Yet, the administration next month will issue a Treasury report recommending new limitations on the scope of these agencies, and will indicate that the U.S. will sharply curtail its own subsidized aid for the poorest countries through the World Bank's International Development Association.
In Sewell's view, the present phase of the North-South dialogue comes down to a question whether the IMF and the bank will be allowed to play "a role adequate for the 1980s." Sewell's ODC believes that if the United States wants to sidestep negotiations in the United Nations, there is still a lot more that it can do for the Third World within the IMF, World Bank, and GATT.
Sewell, and many other supporters of a free-trading system, believe that the administration had a chance to help Third World countries in a meaningful way, and blew it, when it failed to stand firm against the imposition of more restrictive quotas on textile imports in a renewed Multi-Fiber Agreement (MFA).
But Sewell thinks there are other opportunities, all within the framework of the private sector (as opposed to government) and of the multilateral institutions (as opposed to the United Nations). He cited several specific areas, ranging from the general proposition that the rich nations' markets should be more open to imports from the poor countries, to boosting the capital resources of the World Bank.
In terms of the private sector approach, Sewell backs the idea advanced by World Bank President A. W. Clausen that private investment in Third World countries be stimulated by some sort of insurance scheme or guarantees.
"They (the Reagan administration) should also acknowledge and recognize that there is a nonprofit private sector as well as profit-making private sector dealing in international affairs. There are foundations that attract a lot of private capital. Last year, these nonprofit institutions got donations amounting to $1.3 billion for international aid use." Sewell thinks that the role of such institutions (CARE, the Church World Service, and Africare are examples) can be broadened.
Another point is one that former World Bank president Robert McNamara has made frequently--that American development aid should be concentrated on the lowest-income counntries. McNamara said last year in an interview published by the Institutional Investor magazine that "a redistribution" of subsidized aid monies is necessary.
McNamara, now chairman of the ODC board, pointed out that on a per-capita basis, the poorest of the poor countries actually get less subsidized aid than the middle-income countries. "They must have additional assistance," he said, "and if they don't get it, one billion persons (in the poorest countries) are going to face very serious economic and social problems."
What it comes down to is that the Reagan administration has in effect turned away from the "global negotiations" at the United Nations, yet is not matching with action its free-trade rhetoric supporting greater trade opportunities for the poor nations, nor its "commitment" to the multilateral lending institutions. In fact, its drift is to curbing the power of those institutions.
Returning to the trade and economic problems within the industrial world, Hormats emphasized that "the key issue" relates to Japan's tremendous strides in penetrating European and American markets at the same time Japan effectively limits penetration of its own market.
Even making allowance for the fact that some American (and other) exporters have been slow to adapt their products and services to the special needs of Japanese consumers, Hormats says "there is a growing frustration, both in Europe and the United States, at the inability to secure the same degree of access to the Japanese market that they have to our own markets."
He added that despite American efforts to solve the problem without sliding into protectionist responses, "there is a growing tendency to say if the imbalance and opportunity is not redressed by the Japanese opening up their markets, it's going to be redressed by the others' closing (theirs)."
Although autos still steal the headlines, the rawest nerve being struck by the Japanese at the moment is the greater competition they are offering in high technology equipment. Some of the advanced developing countries, mostly in Southeast Asia, are also making important inroads in the high technology markets of Europe and this country.
In part, the U.S.-Japanese problem revolves about the massive drain on American resources caused by the administration's big defense budget. As Robert De Grasse Jr. and David Gold of the Council on Economic Priorities have pointed out, "while military demands are pushing American development of computer chips in the direction of still higher speeds at higher cost, Japanese manufacturers are developing cheaper, more reliable chips with greater storage capacity, and are (thus) threatening to dominate the civilian side of this industry by the end of the decade."
Hormats fears that "there is a general drift in the international trading and investment system toward more national types of actions. And I think all these have just led to a series of pressures that have to be addressed . . . You know, if you look at the international trading system, for the most part, free trade is more a myth than a reality today."
The unanswered question, he suggests, is whether the system can be moved toward a greater degree of openness, with new rules covering investments and financial services, or whether it slips back into a more protected, nationalistic mode.