ISSUES AT THE SPECIAL SESSION OF THE 1975

U.N. GENERAL ASSEMBLY

MONDAY, MAY 19, 1975

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERNATIONAL RELATIONS,

SUBCOMMITTEE ON INTERNATIONAL ORGANIZATIONS,

Washington, D.C. The subcommittee met at 2 p.m. in room 2200, Rayburn House Office Building, Hon. Donald M. Fraser (chairman of the subcommittee) presiding.

Mr. FRASER. This afternoon the subcommittee is beginning a series of hearings on issues at the special session of the 1975 U.N. General Assembly. The world is now entering a period in which international economic relations are assuming ever greater importance, as compared to the problems of military security which have preoccupied us for over three decades.

At the same time, the role of the developing countries is growing, and the interdependence of all people is becoming more apparent. Perhaps as a result of these long-term trends, the international economic systems that grew out of the Second World War are being discarded, and the world's economic relations are being fundamentally reexamined. One major aspect of this reexamination is the increasing dissatisfaction of the developing countries with their traditional roles, and their attempts to change the nature of established relationships by their call for a new international economic order.

Clearly, economic relations among developing and industrialized countries are at a critical juncture. The next major forum for dealing with the principal issues in this field will be the special session of the U.N. General Assembly this September. The positions which the United States is developing in preparation for the session not only will have an important effect on the outcome of the session, but may well influence the international economic order for many years to come. We would, therefore, like to encourage full public discussion of the various options open to the United States before this country's positions on the major issues are set. These hearings are an attempt to get on the record the views of nongovernmental experts, as well as the views of the executive branch witnesses, who will appear before the subcommittee on May 21, prior to next month's preparatory conference for the special session.

Today, we are pleased to have with us three witnesses with special expertise on the economic issues at the forthcoming special session. They are Dr. John P. Lewis, Woodrow Wilson School of Public and

International Affairs, Princeton University in New Jersey; Mr. Lawrence Krause, Brookings Institution, Washington, D.Č., and Mr. James P. Grant, president, Overseas Development Council, Washington, D.C.

I have no special order indicated for witnesses' appearance, but we can go in the order in which we had your names on the opening statement. Dr. Lewis, would you begin, please?

STATEMENT OF DR. JOHN P. LEWIS, WOODROW WILSON SCHOOL OF PUBLIC AND INTERNATIONAL AFFAIRS, PRINCETON UNIVERSITY

Mr. LEWIS. Mr. Chairman, I am very pleased to participate in these hearings, especially under your chairmanship. I have a written statement, but I will try to summarize it a bit in a little less time than it would take for reading it in its entirety.

I start off with a paragraph of advertising about the United Nations Committee for Development Planning of which I happen to be a member, but I think it would be of interest to your committee to look at the latest report of the Committee.

It has just met. It is a Committee not of Government representatives, but economists of both developing countries and developed. It meets once a year and has been discussing these questions in a general way for a number of years, but in the latest session it has addressed exactly the issues that your subcommittee is considering.

Mr. FRASER. The last time I saw you, you were running the AID program in India.

Mr. LEWIS. That is right. We have a couple of ex-AID mission directors here.

These hearings, together with the stirrings of preparatory activity that one senses in the executive branch are encouraging evidence that the United States means to do a workmanlike job of getting ready for a happening the General Assembly's September special session on development that probably most Americans at this point, if they are aware of it at all, regard with a mixture of uneasiness and distaste.

It is necessary for me to confess in the statement, I am rather different in that respect. I tend to look forward to this special session with some anticipation because I, like some others, including Jim Grant, have been preoccupied with problems of overseas development for many years and these last dozen years have been tough years for people in that business, even more so for people in developing coun

tries in the business.

And then the worst of the experience has been that in the most recent periods since 1970 the subject of development has almost gotten pushed off the table. We have been preoccupied with everything else but. Some of the other international issues that have been preoccupying us are not particularly development oriented. The ones that involve accommodations among the great powers. Others indeed are development oriented, but nevertheless in their cases too the development aspect has been lost in the turbulence of the industrialized countries' attention to other things like environment and population and scarcity and the dislocation of the monetary and trading systems in their own individual situations and to relations among the industrialized countries.

Thus I look forward to the special session, first, because it does put development, I think, back on the global agenda in a position of some prominence. Also, it seems to me that at this particular time in many poor countries there is a wider awareness than ever before of the need for genuine internal reform-for example, for according a higher priority to agriculture and a broad base of rural development, for launching direct attacks on mass poverty and unemployment, and for promoting efficient labor-intensive modes of production.

Third, I am encouraged because the renewal of attention comes under conditions which, via the mechanism of OPEC, may for a limited period, involve the greatest incremental deployment of fresh external resources into the poor countries including even some of the poorestthat we have seen for some time.

On balance, therefore, although some of the new rhetoric is hard to take and although the special session itself could well be a bad scene, I view the forces that have occasioned the special session expectantly and hopefully.

But, as I say, this is not yet the standard American perception. Therefore, let me try to explain a little more systematically what I think a responsible general approach on the part of the U.S. Government to the so-called "New International Economic Order" might be.

The first need is to accept the paradox that in the realm of international development policy things are at once very much the same and quite radically different than they were a couple of years ago. It is perfectly true that the policy content-the variety of suggested measures that is being read into the New International Economic Order consists mostly of the same old proposals that we have been talking about and doing less about, for years. But to leap to the conclusion that therefore all that is new about the new international economic order is its level of rhetoric is to miss the main point, which is that a fairly profound realinement of power in the world has occurred in the past 2 years.

Superficially, this can be seen in the concerting of Third World majorities in the General Assembly and other U.N. bodies. Practically, of course, the realinement pivots on the phenomenon of OPEC. To recognize the historical significance of the oil-price revolution is not to argue that the move necessarily was just, or that present oil prices have no give in them, or that major transfers of resources to oil exporters via the price mechanism can or will persist for more than a few years, or that the oil exporters will never break ranks.

But during a critical time being, the OPEC phenomenon has revolutionized the behavior of the less developed countries in ways that probably are irreversible.

For one thing, certainly, OPEC has taught the other developing countries the potentialities of market power. Probably it has overtaught them. But in any event, it is clear that all kinds of particular commodity groupings have been sensitized to the possibilities of exercising power and transferring resources through the price mechanism. A second OPEC effect is less certain but more interesting and potentially important. This is the likelihood that the oil-price revolution, instead of fragmenting the politicoeconomic solidarity of the Third World, has caused it to solidify further.

This last is not what most of us Western devotees of development expected 15 months ago. However, at that time, even though mean

while the World Bank and the International Monetary Fund, the two major multilateral agencies that are dominated by the advanced economies, have been imaginative and resourceful in their responses to the cruel impact of the oil, food, and fertilizer price crises on the poorest, "most seriously affected" countries, we overestimated the degree to which governments like our own, amidst all of their domestic and other distractions, would find the will to lead a response to the emergency problems of the poorest countries.

We badly undergaged the quickness and scale on which the new oil-rich OPEC countries would address the needs of their Third World colleagues, including the most seriously affected countries. We did not allow for the tactical energy that some of the middle-level oil-importing countries would expend on sustaining the Third World coalition. And we grossly underestimated the depth of the shared frustrations with the shortfalls of recent international development efforts, with advanced economy dominance of international decisionmaking, and with the poor countries' longstanding dependence on the rich that bind the Third World emotionally.

The wisest premise for American policy. I think, is that the reaffirmed solidarity of the Third World, while by no means complete or unexceptional, will prove fairly tough and enduring. If so, two trends are probable.

One is toward what is being called collective self-reliance. To some degree, if the solidarity is for real, a portion of the unprecedented volume of savings that now is accruing to the oil exporters will serve as internal resources available to the developing countries collectively. In company with the deployment of those resources we can expect a push, not overwhelming but stepped up, toward greater trade, technical, and industrial cooperation within the Third World group itself. But the second trend, which is what the new international order is more particularly about, concerns transactions between the developing and the advanced economies. The predominant theory of the new order is not that the poor countries together with their oil exporting members who have struck it rich should become independent of the OECD and the Socialist countries.

It is rather a theory of mutual interdependence in which the augmented power of the developing countries collectively is used to bargain for a better set of developmental outcomes.

How should the United States respond to all of this? Let me, in the balance of this statement, hurriedly sketch a number of points.

First, certain matters of style. No. 1, the United States can either fight the New International Economic Order or try to make it work, sensibly, without self flagellation or softheadedness. My preference for the second course is not only because in terms of broad equities and planetary interests-in which Americans also have a stake-I think it is the right course.

In any event, a negative blocking strategy probably could not prevail; it would serve only to isolate us, even from many of our OECD colleagues. And it would not serve the very substantial selfish interests, for example, as to regularizing raw material supplies, that we have in a more buoyant and equitable pattern of development overseas.

No. 2, we no longer can dominate international development policy to the degree we have become accustomed. We must be ready to share