plementary-financing mechanisms (variants of which have been discussed for over a decade without any affirmative Northern action). In sum, the United States should be quite prepared to enter into a serious discussion of commodity issues. In such a discussion it should be prepared to recognize both the legitimacy of, and the limits to, the use of market power. It should seek a framework for continuing international discussions of commodity issues which represent the interests of sellers and buyers. And finally, it should continue to argue for the proposition that commodity arrangements may make little contribution to the development process in the longer run, particularly if one is considering the world's poorest countries. The necessary counterpoint to this argument must include active U.S. support of alternative approaches which do hold out the prospect for greater assistance to the development process. Finally, U.S. proposals related to the reform of existing international regimes can and should recognize the legitimacy of developing-country claims for a greater voice in the management of the world's major international economic institutions. Such reform measures already are taking place in the IMF, where the OPEC countries are in the process of doubling their voting power. It has yet to spread to other institutions. Along these lines, the recent recommendations of the Group of Experts on the Structure of the United Nations System deserve serious consideration.1 The ideas contained in the report are most interesting in their search for methods of negotiation on international developmental issues which do not involve the counting of votes on a one-country, one-vote basis or on a weighted voting basis (à la the IMF) but seek to substitute a negotiating structure which assures that all interested parties are present and that votes are less important than accommodative results. How far such structural reforms can be carried may well be a function of the entire September-December 1975 dialogue within the U.N. system. The United States need not enter this dialogue with its mind already made up. It should, however, begin to participate with an open mind, a desire to test the flexibility of other states on a broad range of issues, and a willingness to make decisions on the reform of institutional structures as a function of the negotiating process itself. IMPLICATIONS OF A PROLONGED NORTH-SOUTH DEADLOCK If the proposals put forward by the United States and other industrialized countries in the fall of 1975 are responsive to the legitimate international economic and political concerns of the less developed world, then confrontation may yield to the beginnings of a negotiating process in which new and mutually acceptable "rules of the game" emerge over the next several years. Should events evolve in this manner, during the remainder of 1975 U.S. statements concerning likely responses to international economic policies of other countries which are viewed as inimical to various U.S. interests and interest groups will not be needed. Nevertheless, it may well prove necessary for the United States to spell out in informal conversations what the possible and perhaps inevitable content of such responses will be if the Special Session and related meetings end in deadlock and exacerbate North-South economic friction. Such conversations should not be cast in terms of threats but rather in terms of the likelihood of intensified domestic pressures for foreign economic policies certain to limit any further U.S. contribution to Southern development efforts. Needless to say, any emphasis on this aspect at the start of the discussions in the fall of 1975 is literally guaranteed to produce a deadlock should it be anything more than counterpoint to the major constructive themes in a possible U.S. agenda discussed above. The most obvious of the issues which might be raised under this rubric concerns rules of the game on commodity trade. As C. Fred Bergsten has noted, "the United States and the other consuming countries are presently in a relatively weak bargaining position vis-à-vis the oil exporters and their emulators in other commodities." 15 In the absence of a successful negotiation on the "legitimate" uses of commodity power, many will view it to be in the interests of the United States to adopt a series of policies which limit present levels of U.S. vulnerability. Such policies may include major stockpiling efforts, research and development programs aimed at product substitution and recycling, and increased attempts to 14 Report of the Group of Experts on the Structure of the United Nations System, A New United Nations Structure for Global Economic Co-operation, U.N. Doc. E/AC.62/9, May 28, 1975. 15 C. Fred Bergsten, "The Response to the Third World," Foreign Policy, No. 17 (Winter 1974-75), pp. 14-15. undermine developing-country solidarity, thereby increasing assured access to crucial raw materials located in the South. Should the fall 1975 discussions end in failure and North-South confrontations become more intense, the same logic of self-protection is more than likely to spread to other segments of U.S. foreign economic policy, although there the specific policy reformulations are less predictable. Among the more probable developments would be an increasing U.S. indifference to the U.N. system and an even less responsive attitude toward the financing of its major development-oriented institutions than have characterized U.S. policy in recent years; an attempt to reconstitute and reinvigorate exclusively Northern international economic institutions (for example the Group of Ten in monetary affairs); a general unresponsiveness to the developing-country issues being raised at the GATT negotiations in Geneva; a restrictive approach to the granting of generalized tariff preferences; a rigorous application of the U.S. countervailing-duty statute in cases involving developing-country export subsidy programs; and a rather precipitous decline in almost all forms of foreign aid. A realistic exercise in projecting the probable U.S. policy implications of a failure to initiate a constructive dialogue this September should be a sobering exercise for all parties to the negotiation. The short-term economic costs to both the United States and the developing countries would be of sizable magnitude; the costs measured in terms of foregone opportunities for positive-sum approaches to a host of global political economy problems of growing importance would be far greater. Many of the short-term (and some potentially long-term) economic costs have been referred to in differing sections of this essay. The major costs to the United States of the "defensive" or "reactive" policies noted above would arise from more limited consumer choice, a limitation on competitive pressures within the U.S. market, the use of higher-cost raw materials and raw-material substitutes, and perhaps the stagnation of some of the faster-growing U.S. markets within the South. If Southern initiatives or responses to Northern initiatives lead to debt default, expropriation, and a further use of cartel pricing and embargoes, the costs to the United States could multiply rapidly. The potential costs to the South can best be illustrated by comparing the likely U.S. policy implications noted above with the list of demands prepared by the Group of 77 in its Second Ministerial Meeting in Algiers in February of 1975. The list includes the following among many others: (1) Application, expansion and improvement of the generalized system of preferences; (2) Multilateral trade negotiations granting the developing countries nondiscriminatory preferential treatment without the requirement of reciprocal concessions; (3) Recognition by the developed countries of the right of developing countries to apply incentives to industrial production earmarked for export; (4) Continuous negotiations and consultations, based on the concept of shared development, designed to ensure redeployment of industries to developing countries; (5) Major increases in North-South aid flows; and (6) The generous rescheduling of debt-servicing of long-outstanding debts and their conversion, if possible, into grants. Optimists will argue that these potential costs to both North and South will never be realized because a continuation of the present deadlock need not lead either party to the dispute to adopt extreme policies. They are right in arguing that a lack of any progress in North-South negotiations beginning with the U.N. General Assembly's September 1975 Special Session need not produce such a result. However, the relevant issue would seem to lie in the realm of probabilities, not necessities, and in this realm the results of a failure to begin serious negotiations this fall are, at best, highly ambiguous. Costs measured by foregone opportunities to achieve longer-term efficient and equitable management regimes in such diverse areas as the oceans and ocean resources, environmental problems, energy resources, and food production could prove to be extremely high. The need for a more comprehensive and consistent approach to this broad set of issues goes well beyond the problems considered in this essay. Nevertheless, the probability must be recognized that failure to achieve some mutually acceptable international economic reforms of the type discussed in this essay over the next year may substantially impede the emergence of international systems of management in broader areas of mutual concern-areas and problems necessitating global cooperation to achieve stipulated goals. Any calculation of the stakes involved in the present North-South confrontation which measures those stakes solely in terms of Southern "demands" and Northern "concessions" runs the risk of overly discounting the longer-term cooperative patterns which might well result from a constructive handling of the upcoming dialogue. If an exercise in measuring the probable costs of U.S. policy responses to continued deadlock is undertaken, the results may do more to deflate the rhetoric presently characterizing the approaches of both the U.S. and the Group of 77 than any other form of preparation. And that might not be a bad prelude to a constructive negotiation. For while neither the United States nor the Group of 77 can guarantee the success of the upcoming conferences which will begin in New York in September of 1975, either party can guarantee a failure if it so chooses. Given the potential costs of continued deadlock, that is both a sobering thought and a heavy responsibility. STATEMENT BY THE HON. EDWARD G. BIESTER, JR., "THE SEVENTH SPECIAL SESSION OF THE U.N. GENERAL ASSEMBLY", CONGRESSIONAL RECORD, AUGUST 1, 1975 Mr. BIESTER. Mr. Speaker, in September the Seventh Special Session of the United Nations General Assembly will be convened "to examine the political implications of world development and international economic cooperation." Much of the discussion at that session will center on the demands of third world countries for creation of a "new international economic order." Last Sunday's Washington Post contained a well-written and informative overview of the questions at issue in those discussions and of the background against which they will take place. For the benefit of my colleagues and others who may have missed it over the weekend, I submit for the Record an article by Dr. Lincoln Gordon, "Third World's Rights and Ours." THIRD WORLD'S RIGHTS AND OURS (By Lincoln Gordon) (NOTE. Dr. Gordon, former ambassador to Brazil and assistant secretary of state for Inter-American affairs, is now senior research fellow at Resources for the Future.) During the last two years, representatives of the "Third World” have launched an immense verbal barrage under the banner of a "New International Economic Order" (NIEO). It has dominated specialized world conferences, so that the recent international meetings in Bucharest, Rome and Mexico City sometimes seemed more preoccupied with debates on NIEO than with their assigned and critical topics of population, food and woman's status. The Chinese have given this cause unrestrained rhetorical support. The Russians are more cooly supportive. The industrialized West and Japan have been divided and nonplussed. A conditioned reflex reinforced over three decades makes the others look to the United States for a prompt response. In this field, however, the trumpets of Washington have given a very uncertain sound. It would be hard to imagine a less propitious time for new American initiatives in a peculiarly baffling area of foreign policy, where neither dangers nor opportunities are sharply defined. Even the diagnosis is confused. Witness the shift in perceptions from spring of 1974 to summer of 1975: from "permanent scarcity" for raw materials to glutted markets and depressed prices for most; from "intolerable" oil prices and "unmanageable" petro dollar accumulations to difficult economic phenomena with which, nonetheless, the ongoing international order has been coping with unexpected resilience. In these circumstances, it is certainly wise to avoid a panicked response to Third World demands. There is neither need nor possibility to jettison the entire structure of international economic institutions, rules and practices built up since the end of World War II. But there are serious issues in this domain which call for serious reassessment of policies. Interdependence is not a mere rhetorical shibboleth. Each nation's economic welfare is increasingly dependent on decisions made outside its jurisdiction. There are some kinds of economic cooperation which can create benefits for all parties involved. Moreover, parts of the post-war structure have broken down since 1971, notably the dollar exchange standard with fixed currency relationships. A major new round of international trade negotiations is just getting under way. A larger voice for Third World representatives is both legitimate and indispensable to the evolution of workable new arrangements. Whatever happens to the near-term price of oil, the actions of OPEC (the Organization of Petroleum Exporting Countries) since 1973 have altered the balance of world economic power, requiring adjustments at least in relation to that part of the Third World. Other Third World nations warrant attention as sources of non-fuel raw materials; still others as growing participants in the world's industry, especially for labor-intensive manufacturing; others for their destabilizing political potential; and a few almost wholly for compassionate humanitarian reasons. The Seventh Special Session of the UN. General Assembly, called for the frat two weeks of September "to examine the political implications of world dersingment and international economic cooperation." provides a convenient opportunity for the United States to present the essential elements of a modernized ver of policies for economic relations with the Third World. The problem calls for a four-fold approach: diagnosis and detoxification; definition of negotiating phle osophy; identification of polley issues ripe for negotiation; and the reformation of institutions and procedures to enable them to deal with additional james 24 they arise in the years ahead. The campaign for NIEO refers a radical change in Third World wrle and tactics. Instead of seeking incremental reforms, designed to raise growth rates in developing countries, the tex drive begins with generalized denunciation of the present international evormie order and a call for its total replacement. In some versions, all disparities in iter me and wealth are attributed to Inter national economie relations. In the name of equity and justice, Third World spokesmen clamor for a restmented order to eliminate those disparities, Mines the present affinene of the deneloped anntries is said to be based on colonial or neo-colonial exploitation. Indinding cheap raw materials drawn from the Third World, compensatory retirada la demanded. The inspiration for the new Third Wond style and tactics is evidently the success of OPEC in aging Ter a few months. Even old hande among Westem thseman CTN afalne bate teen wurprised at the wildar*** with their OPEC are cons 17 barely Third World oil-import countries. 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