Finally, Mr. Chairman, we need to establish within the U.N. system an independent program evaluation mechanism, a long-standing U.S. proposal. This sort of mechanism reporting directly to member governments, including the United States, on the effectiveness of U.N. system operations should help to keep the U.N. system self-correcting and should suggest other structural changes as they become necessary. What do we expect from the seventh special session? On the one hand, we do not believe that the General Assembly can be the scene of detailed negotiations on specific economic issues. Therefore, we will continue to resist the efforts of the developing countries to legislate issues of economic importance on the basis of their numerical majority in a one-country, one-vote situation.

However, the General Assembly has two characteristics which distinguish it from other international economic institutions. First, it is the only body that can look at all economic issues in their broadest context.

Second, it is particularly a forum for the consideration of the problems of the have-not and weaker members of the world community.

Thus, we believe that the special session can provide an opportunity for the entire membership to identify problems, to discuss their priorities and interrelationships, to reveal where consensus exists and to stimulate it where it does not, and to point the way for implementation of agreed conclusions or to further negotiations in areas of disagree

ment.

The session in particular presents the challenge of reestablishing a more productive discourse with the developing countries. We will make every effort to keep the debate away from the level of ideology and empty exhortation. We will try to chart channels of common effort aimed at practicable and effective solutions.

This will not be easy, but we are going to try to create mutual understanding and to strengthen a common commitment to international cooperation, not confrontation, in meeting the urgent economic needs of both the developed and developing nations of the world. Thank you Mr. Chairman.

Mr. FRASER. Thank you very much, Dr. Morey. Mr. Boeker.

STATEMENT OF PAUL H. BOEKER, DEPUTY ASSISTANT SECRETARY OF STATE FOR ECONOMIC AND BUSINESS AFFAIRS

Mr. BOEKER. Thank you, Mr. Chairman.

At the seventh special session of the United Nations, the United States hopes to reassert its traditional role of leadership in addressing the economic problems besetting the developing countries.

However, at the present time, with the cumulative effects of the energy crisis, widespread recession, and changing relationships between rich and poor nations, the environment for international cooperation is under severe strain. This is particularly noted in multilateral forums such as the United Nations where the developing nations have banded together to achieve a dominant position in the deliberations on economic issues.

In essence, the developing nations are demanding the right to exercise greater influence in world affairs. In the economic field they are endeavoring to secure: first, special access to markets for their export

goods; second, integrated regulation of commodity markets; third, indexation of prices such that prices of raw materials are linked with those of manufactured goods; fourth, increased transfer of real financial resources to developing nations, preferably through automatic mechanisms; fifth, monetary reform, specifically including a greater voice by developing countries in the affairs of international financial institutions and lastly, greater access to control of technology as well as more rapid industrialization.

Although the United Nations General Assembly cannot be the forum for detailed negotiation of economic issues, the upcoming session does provide an important opportunity for the international community to discuss key problems, attempt to narrow differences of approach and to lay a basis for followup work in appropriate international bodies, including those of the United Nations itself.

There are indications that many of the developing nations are willing to use this special session for consideration of a limited list of economic problems as opposed to earlier instances when the primary objective seemed to be to cite a wide array of demands in an extreme posture.

Recently, the "Group of 77" nations, the U.N. caucus of developing countries, circulated a modified list of questions to be discussed. These were international trade, transfer of real resources for financing the growth of developing nations, monetary reform, science and technology, industrialization, and restructuring of the economic and social sectors of the U.N. system.

For our part, we are suggesting an agenda which would include international food needs, problems of poorer developing countries, transfer of financial resources including private investment, and financial arrangements to mitigate the plight of nations most affected by the current economic crisis plus international commodity trade.

In the area of food needs, the United States last November initiated a major international effort to eliminate the cycles of famine which periodically plague the developing nations.

At the World Food Conference in Rome we reached agreement with other nations to expand food production in traditional food exporting countries, promote greatly expanded production in developing countries, develop a system of food reserves to be used for emergencies. We will affirm those goals at the special session.

In the short-run, however, many nations will continue to rely on food aid from the United States and other donor nations. We perceive this as the responsibility of all well-to-do countries, including major oil exporting countries whose income has increased dramatically in the past 2 years.

In his May 13 speech in Kansas City, Secretary Kissinger called attention to the fact that the United States has provided more than 4 million tons of food aid in all but 1 of the past 20 years and he reaffirmed that we will do our utmost to maintain this high standard. This year's bilateral food aid program is nearly $1.5 billion.

Some of the best prospects for increased food output are in developing nations. Increased production by these nations decreases their reliance on food aid and can lead to increased exports.

The administration is endeavoring to concentrate U.S. aid capital in this sector in LDC's with the best potential. The World Bank, with U.S. support, also is taking steps to double its lending to agricultural development.

Increasingly, American assistance, both bilateral and multilateral forums, will place emphasis on research, fertilizer supply, pest control, and storage of food grains.

For the past 3 years, there has been a shortage of some grains in international trade despite the all-out efforts of production in this country. This year the outlook for such crops is promising.

To take advantage of this situation, the United States is proposing a comprehensive international system of grain reserves. Secretary Kissinger recently advocated that a reserve system be created based on the following principles: agreed rules to engender stockpiling of grain in time of good harvests; fair allocation of the cost of such reserves by both grain importers as well as exporters; determination by each participant of how its reserve portion will be maintained; agreed guidelines for the use of the reserves so that the grain is available when needed but does not unnecessarily depress market prices; special provision to meet the needs of poorest developing nations; and lastly, a more liberalized trade in grains.

We recognize the special developmental problems of poorer nations and support the view that special measures are needed. This has been reflected in the modification of AID allocations and procedures which are designed to serve the unique and differing needs of the poorer of the poor wherever they live.

Although we continue to be flexible and forthcoming with regard to emergency needs of LCD's, we still need to emphasize that external assistance to LCD's must be coupled with self-help policies in recipient nations which are aimed at increasing production, not just redistributing it.

Many developing countries, particularly those characterized as the most severely affected by the current economic crisis are facing urgent balance-of-payments problems arising out of increased oil prices, higher food import requirements, and the recession in industrial countries.

These countries require an infusion of balance-of-payments assistance on highly concessional terms if they are to maintain even minimum acceptable rates of growth without incurring nonsustainable burdens of external debt. An international framework is needed within which this additional assistance can be provided. The U.S. Government has proposed that the framework best suited for this need would be a trust fund under the International Monetary Fund, the IMF.

The fund we propose would be legally separated from, but administered by the IMF. It would obtain its resources in part by direct contributions from countries in a position to contribute, particularly the major oil exporting countries, and in part from the use of a portion of IMF holdings of gold, which are currently valued by the IMF at about one-fourth the market price.

The fund as conceived would provide balance-of-payments loans to needy low income countries at highly concessional rates, with a maturity of perhaps 10 years and a substantial grace period. The United States has suggested that trust fund start with a lending capacity of $1.5 billion to $2 billion per year.

We are pursuing vigorously our efforts to establish this loan facility, in consultations initially with other OECD nations. The subject also

is being discussed in the IMF Interim Committee of 20 and the Joint IMF World Bank Development Committee.

The developing nations are well represented in these negotiations, holding 9 of the 20 seats on the Committee. After the next Development Committee meeting on June 12 and 13, we should have a clearer idea of the prospects for implementation of this proposal. We may, at that time, wish to discuss it further in the course of the U.N. special session.

In the light of global attention currently focused on commodity problems, commodity trade will be a major issue at the seventh special session. We are aware of the dependence of countries on internationally traded commodities and recognize their interests in seeking steady supplies of internationally traded materials.

A number of measures have been proposed in various forums to address commodity problems, including price-fixing arrangements, centrally managed stocks, indexation, endorsement of the formation of producer associations, compensatory financing schemes, and integrated approaches using a combination of these mechanisms.

The United States recognizes that excessive shifts in commodity prices can entail unjustifiably heavy costs and uncertainties. During periods of slack demand, the maintenance of excess capacity is costly in terms of investment and employment. When the demand cycle soars, rapid price hikes can be equally disruptive to orderly market. operations and to the management of the problems of inflation.

To deal with these issues, Secretary Kissinger has presented the main elements of a U.S. approach. First, the multilateral trade negotiations (MTN), now underway in Geneva should develop new rules and procedures on issues such as freer access of nations to supplies and markets, promoting of mining and processing industries vital to commodity trade and settlement of international disputes in this field.

Second, he noted the United States is prepared to discuss new arrangements for marketing of commodities on a case-by-case basis. Presently, for example, we are discussing marketing arrangements for tin, coffee, and rubber, and discussions on other commodities may be initiated later.

Third, we will propose that the World Bank investigate ways to finance investment in raw material production in developing countries. The United States is especially interested in mobilizing new capital for commodity production and combining it with private management and technology.

Both producers and consumers have much to gain in settling differences and cooperating to assure adequate supplies at remunerative prices for commodities traded internationally. The United States is prepared to respond to legitimate concerns of developing countries in this regard.

Overall, the US. objectives at the seventh special session are to engage in a cooperative, positive dialog with the develop nations and to be responsive to legitimate economic objectives, consistent with our own economic and political interests. We enter into the preparatory phase of these meetings with the best of good will.

We will not shy away from a general discussion of the broad principles of development cooperation. We also wish, however, to have the discussions at this special session contribute to a record of specific accomplishments in north-south issues.

The United States, for example, already has initiated a major proposal to alleviate world hunger. The United States continues to support the establishment of a major capital fund through the IMF which would help meet the immediate balance-of-payments needs of poorest nations.

We are now engaged in international discussions designed to assure both adequate supplies and fair prices for particular commodities. At the U.N. special session, we would hope to lay the basis for further action on such specific initiatives.

Thank you, Mr. Chairman.

Mr. FRASER. Thank you very much, Mr. Boeker. Ambassador Ferguson.

STATEMENT OF HON. CLARENCE CLYDE FERGUSON, JR., U.S. REPRESENTATIVE TO THE U.N. ON THE ECONOMIC AND SOCIAL

COUNCIL

Mr. FERGUSON. Thank you. I am pleased to have this opportunity of appearing before your committee, which is considering the matter of the upcoming seventh special session of the General Assembly. I should like to focus my testimony on the state of preparations for the seventh special session in New York.

Understanding the preparatory phase, the aims and objectives of the various groups, and the likely outcome of processes now entrain requires some understanding of the groups which have emerged and evolved in the United Nations, particularly on economic issues.

We have heard much of such broad-scaled descriptions as the Third World, the nonalined, the least developed, the developing, the developed, and the Group of 77.

The so-called Third World is not a monolithic entity despite the impression created by the admittedly monolithic voting techniques applied recently in the General Assembly. The present Third World groupings in the U.N. evolved from two separate sources.

As you will recall, the nonalined movement was formed over a decade ago, principally under the leadership of Prime Minister Nehru of India and President Tito of Yugoslavia. It was conceived principally as a political alinement of developing, non-Western countries to stake out an independent position between the Western countries and the Socialist countries.

The emphasis, to repeat, was on political alinement or, as the title implies, political nonalinement as between the two super blocs of the world. On the other hand, the Group of 77, now numbering well over 90, originated as a grouping of developing countries designed to deal almost exclusively with economic problems.

As a result of the sixth special session, and, in particular, certain attributes of the leadership of Algeria in that session, there has been a very substantial, but yet still not complete, merger of the Group of 77 and the nonalined on economic issues.