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The Parliament of the Commonwealth of Australia

AUSTRALIA AND THE THIRD WORLD

Report of tbe Committee on Australia's Relations with the Third World

Apri11979

Presented by Command 18 September 1979 Ordered to be printed 11 October 1979

Parliamentary Paper No. 269/1979

Australia and the third vvorld REPORT OF THE

COMMITTEE ON AUSTRALIA'S

RELATIONS WITH THE THIRD WORLD

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.. .. .. . . . . . .. · ... ···: . . ·. . •. : ..... ·····:

REPORT OF THE COMMITTEE ON AUSTRALIA'S RELATIONS WITH THE THIRD WORLD

Australian Government Publishing Service Canberra September 1979

Printed by C. J. THOMPSON, Commonwealth Government Printer, Canberra

COMMITTEE ON AUSTRALIA'S RELATIONS WITH THE THIRD WORLD

My dear Minister,

C/- DEPARTMENT OF FOREIGN AFFAIRS CANBERRA, A .C .T. 2600 TEL. (062) 61 3678

10 April 1979

It is my pleasure, on behalf of the Committee on Australia's Relations with the Third World, to present to you the Committee's report.

I believe that the report complies with the task

given the Committee in its terms of reference.

Yours sincerely,

(Owen Harries) Chairman

The Honourable Andrew Peacock, M.P., Minister for Foreign Affairs, Parliament House, CANBERRA.

MEMBERS OF THE COMMITTEE

Professor 0. Harries Chairman University of New South Wales and Department of Foreign Affairs

Mr E. K. Fisk Research School of Pacific Studies

Australian National University

Mr A. T. Griffith, A.M. Special Adviser Department of the Prime Minister and Cabinet

Mr N.D. Mcinnes Deputy Director-General Office of National Assessments

Mr J. D. C. C. Moore First Assistant Secretary Department of the Treasury

Mr P. I. Nolan Secretary

Australian Council of Trade Unions

Mr A. R. Parsons Deputy Secretary

Department of Foreign Affairs

Dr B. W. Scott ·Managing Director

W. D. Scott & Co. Pty Ltd

Mr J. T. Smith, I.S.O. Canberra

Mr J. A. Uhrig Managing Director

Simpson Pope Ltd

Secretariat-from the Department of Foreign Affairs Mr P.M. Knight!Mr K. R. Fraser, Secretary Mr C. Conybeare, Writer Dr A. T. Calvert, Writer

Ms S. J. Minahan, Research Assistant Mrs M. E. Marginson, Research Assistant Ms R. M. Wittber, Secretary to the Chairman

Support Staff: Mr J. F. Stear/Miss K. M. McLaughlan Mrs J. C. Ware/Miss M. Klok

Mr J. A. Fraser and Mr M. A. Broughton of the De­ partment of the Treasury provided assistance to the Secretariat.

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Preface

The Prime Minister announced the establishment of a Committee to examine Australia's relations with the Third World on 6 Aprill978. The Prime Minister observed that Australia had always paid close attention to its bilateral relations with Third World countries and to the particular issues involving

them. However, the Government believed that recent developments required a more coordinated and comprehensive approach which recognised the existence of the Third World as a collective entity and took full account of the political significance and complexity of many of the issues which concerned it. The Prime Minister's press statement is included as Appendix A.

The terms of reference of the Committee were as follows: The general purpose of the inquiry will be to report on the nature of Australia's relationship 'Yith the Third World and to make proposals for the development of that relationship in ways which will serve Australia's national interests, in particular:

. To identify the salient features of the Third World as a factor in international affairs and to assess the ways in which these are likely to evolve; . To examine the relationships of the Third World with other countries and groups of countries and the way in which these are likely to evolve; . To identify and assess the possible impact of the Third World on existing inter­

national political and economic structures; . To identify what Australian national interests are, or are likely to be, affected by its relations with the Third World, and to analyse the problems these re­ lations present or are likely to present; and

. To identify and assess the policy options available to Australia in relation to the Third World and, taking account of Australian interests and commitments, to formulate appropriate policy recommendations. These terms of reference set the Committee an exceptionally wide-ranging task. The Third World itself embraces some 119 countries. In addition, the Committee was

required to look at the policies and activities of other countries as they affected, and were affected by, the Third World; to consider the impact of the Third World on international structures; and, in particular, to relate all these aspects to Australia's policies.

The task involved taking into account the strategic, political, economic, social and cultural dimensions involved, and thinking of these in terms of future prospects as well as present realities. Given the scope of its task and the time available to it-it was asked to report

within 12 months-the Committee decided that if the task was to be manageable it would have to identify and focus on central issues rather than to attempt to cover all aspects. The Committee understood that in making policy recommendations, it was not required to address itself to the questions of the administrative implementation of

policy. It was also the Committee's understanding that it was not expected to deal with details of bilateral relations with individual Third World countries, though it was expected to recognise the particular importance of the region in which Australia is situated.

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The breadth of the subject had two further consequences. First, in terms of the range of interests and experience which needed to be represented, it necessitated the Government's appointing a large committee. Even so, the need to restrict numbers to manageable proportions meant that some interests and viewpoints with a legitimate claim to representation could not be accommodated on the Committee. Secondly, it has meant that this Report has an unusually large number of recommendations.

Another problem the Committee faced was that it was in effect shooting at a mov­ ing target. The year in which it produced the Report saw many developments within the Third World and some important changes in Australia's policies as they related to the Third World. Some of the material contained in early drafts was very quickly confirmed or overtaken by events; some needed revision and expansion as new trends became more clearly defined. Generally, the Committee has attempted to maintain a perspective which distances the Report from very short-term developments.

The Committee held meetings in Canberra on 22 days between April 1978 and March 1979. It also conducted interviews in Melbourne, Sydney, Canberra and Perth on 9 days, where a total of36 interviews were held. ·

The Committee received 150 written submissions from individuals and organisations. In its work, the Committee was supported by a Secretariat provided by the De­ partment of Foreign Affairs. Additional assistance was provided by the Departments of the Treasury, Trade and Resources, Immigration and Ethnic Affairs, and Foreign Affairs (including the Australian Development Assistance Bureau); also by the Office ofNational Assessments and the Joint Intelligence Organis.ation.

The Chairman, who worked full-time on the inquiry, undertook two overseas visits to hold discussions with foreign government officials, the staffs of international institutions and members of academic and other research organisations. He visited Bangladesh, France, India, Indonesia, Kuwait, Malaysia, Mexico, the Philippines, Switzerland, Thailand, the United Kingdom and the United States. Mr A. R. Parsons held discussions on behalf of the Committee in various African capitals, during a visit in his capacity as Deputy Secretary of the Department of Foreign Affairs.

The members of the Committee were appointed to it in their individual capacities and they alone are responsible for the contents of the Report. It is a consensual Re­ port. While there was disagreement among members on some particular aspects of it, they were able to agree on the main thrust of the analysis and recommendations.

The structure of the Report follows closely the terms of reference. The first three Chapters give an assessment of the Third World as a factor in inter­ national affairs; examine the relationship of the Third World with Western countries and the major communist countries; and consider its impact on the international economic order and the United Nations system.

Chapters IV and V consider future prospects for the Third World's role and im­ pact in the political and economic spheres. The last three Chapters deal with Australia's relations with the Third World. Chapter VI considers Australia's interests in relation to the Third World, both overall and in regional terms. Chapter VII deals with selected policy issues of present or prospective importance.

Chapter VIII contains the conclusions about the Third World which the Com­ mittee is particularly concerned to register together with its recommendations to the Government. It may be regarded as a succinct statement of the Committee's findings.

BRIEF TABLE OF CONTENTS

Members of the Committee Preface . . . . . .

Map showing Third World countries Introduction

Chapter I Salient Features of the Third World as a Factor in Inter­ national Affairs . . . . . . . . . . . . . . .

II Third World Relations' with Other Countries and Groups of

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Page

Countries . . . . . . . . . . . . . . 21

III The Third World's Impact on International Structures 49

· IV · Political Prospects . . . . . . . . . 70

V The Economic Prospects of the Third World 89

VI · Australian Interests Involved m Relations with the Third World . . . . . . . . 103

VII Selected Policy Issues VIII Conclusions and Recommendations

124 174

Contents

Members of the Committee

Preface Map showing Third World Countries

Introduction . .

Chapter

Part A:

Part B:

Part C:

Part D:

Chapter

Part A:

I Salient Features of the Third World as a Factor in Inter­ national Affairs

General International Significance

Internal Features and Performance . Economic Features and Performance . (a) Attitudes, Beliefs and Traditions (b) Resource Endowment and Climate

(c) Population . (d) Trade and International Investment (e) Domestic Consumption and Savings (f) Social Welfare.

(g) Industry, Manufacturing and Agriculture. (h) Government Policies and Economic

Management .

Weight in the International System . Strategic Significance Political Significance Overall Economic Significance

Ideology.

II Third World Relations with Other Countries and Groups of Countries

Introduction

The Third World and the West 1. General Perspectives Managing and Adjusting to Decolonisation The Cold War.

The Politics of the Economic Relationship Developments in the Seventies . 2. Economic Relations between the Third World and the West.

The Trade Relationship

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1

3

5

7

7

7

8

9

10 10

12

13

13 15

15

16

21

21

22 22 23 25 25 27

29 29

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Part B:

Chapter

Part A:

Part B:

Page

Prominent Issues in the Economic Relationship 31 Commodities 31

Access for Manufactures . . . 31

Preferences . 32

Tourism and Migrant Workers. 32

Financial and Investment Relations 33

3. Harmony and Conflict of Interests between the Third World and the West . . . 34

4. The Strengths and Weaknesses of the Third World and the West in their Mutual Dealings 37

Third World Strengths 38

Western Strengths . . 39

The Weaknesses of the Third World and the West 41

The Third World and the Major Communist States 1. Soviet Union .

Current Soviet Interests . P erceptions and Judgments Advantages and Limitations. Conclusion 2. China

China's Identification with the Third World Objectives and Activities in the Third World Support for Insurgencies . . . . .

III The Third World's Impact on International Structures

Introduction

The Third World's Impact on Multilateral Institutions

The Third World's Claims on the International Econ­ omic System The NIEO Proposals Trade and Commodities

Industrialisation . . Transfer of Resources . International Monetary and Financial System Investment and Technology Food and Agriculture . . . . .

Auxiliary Aspects. . . . . .

How the NIEO Proposals Have Been Received Commodity Agreements . · Debt. International Financial Institutions. Industrialisation . Control of Transnational Corporations/Transfer of Technology . . . .

42 42 43 44 44 46

46 46 47 48

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58 59 59 59 60 60 60 61 62 65 65 66

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Chapter

Part A: .

Part B:

Part C:

Part D:

PartE:

Chapter

The Future of the NIEO The NIEO in Perspective

IV Political Prospects

Introduction

Internal Political Features . Political Style and Stability Political Effects of Economic Growth

The Third World and the West Militancy and Solidarity . Western Responses . . .

Unresolved Political Issues

The Third World and the Major Communist Powers The East-West Conflict and the Third World China's Future Relations with Third World

Neighbours . . . . . . . . . .

Impact of Chinese Industrialisation

Western Oil Supplies and Saudi Arabian Leverage The Oil Situation . . . . . . . .

Saudi Leverage . . . . . . . .

Nuclear Proliferation in the Third World .

V The Economic Prospects of the Third World

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Page 67 68

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70

70 71 72

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80 81

82 82 84

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89

Main Elements. . . 89

Population . . . 89

Economic Growth 90

International Trade . 93

Capital Flows and Debt · 94

Private Direct Investment . 95

Major Issues Affecting the Third World's Economic Prospects . . . . . . . . . . . . . . . . 9 5

(a) Interdependence in the International Economic System . . . . . . . . . . . 96

(b) Protectionism . . . . . . . . . 96

(c) Primary Commodities vs Manufactures 98

(d) Development Aid . . . . . . . . 99

(e) The Role of Transnational Corporations 100

( f) International Monetary Arrangements . 101

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Chapter VI Australian Interests Involved in Relations with the Third World 103

Introduction 103

Part A: General Perspectives. 104

Strategic Interests. 104

Political Interests . 105

Economic Interests 106

Part B: Australia's Third World Neighbours 108

South East Asia 109

North East Asia 115

South West Pacific 116

Part C: Other Third World Regions 117

SouthAsia. 117

Middle East 118

Africa 119

La tin America . 120

Part D: Multilateral Situations 120

PartE: Concluding Remarks. 121

Chapter VII Selected Policy Issues 124

A. Australia's Posture Towards South East Asia 124

B. Trade 130

C. Aid 135

D. Australia and the United Nations 140

E. Immigration and Refugees 144

F. Food and Agricultural Technology. 148

G. Human Rights. 154

H. Energy . . . 157

I. Cultural and Information Activities,. 160

J. Southern Africa 164

K. Antarctica . 166

L. Australia and the Commonwealth 169

M. Private International Capital Flows 171

Chapter VIII Conclusions and Recommendations 1.74

Part A: General Conclusions about the Third World. 174

Part B: Recommendations 177

Australia's General Posture 177

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Strategic-Geopolitical . . . . . . . . 179

Relations with the Region . . . . . . . 181

United Nations and Multilateral Diplomacy. 182 Commonwealth of Nations 184

Southern Africa . . . . . . 184

Immigration and Refugees . . 185

International Economic System and North-South Dialogue. . . . . . . . 185

International Trade and Protection Policy 186

Non-Discrimination 186

Preferences . . . . . . . 186

Commodity Trade . . . . . 187

Private International Capital Flows 187

International Debt Issues 188

Development Aid 189

Training. . . . . . 190

Dissenting Views: Mr J. T. Smith . 191

APPENDICES

Appendix A. Prime Minister's Statement of6 April 1978 193

Appendix B. The Meaning of' the Third World' 195

Appendix C. List of Third World Countries 197

Appendices D-N. Supporting Economic Data 200

AppendixO. The Third World in the United Nations 216

Appendix P. The Impact of the Third World in the United Nations Specialised Agencies . . . . . . . . . 236

AppendixQ. The Group of77 and the North-South Dialogue 240

Appendix R. The Non-Aligned Movement Since 1961 265

AppendixS. The Organisation of Petroleum Exporting Countries 283

Appendix T. The Organisation of African Unity 298

Appendix U. The Ideology of the Third World 313

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Appendix V.

Appendix W.

Appendix X.

Moral Ideas and Moral Issues in Relations Between De­ veloped and Developing Countries . . . . .

Transnational Corporations and the Third World

List of Submissions .

Page

328

338

364

Glossary . . . . . . . . . . . . . . . . . . . . . . . . 369

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Introduction

For the purpose of this inquiry the 'Third World' is taken to consist of all the coun­ tries of South and South East Asia; the countries of Africa which are not under white rule; all the countries of the Middle East and West Asia, except Turkey; all the coun­ tries of Latin America and the Caribbean; the new states of the Pacific and the Koreas. These countries, which number 119, are listed in Appendix C. For some pur­ poses of economic analysis, Taiwan and Hong Kong are treated as part of the Third World.

This concept of the Third World corresponds to general Western usage 1 and the Committee believes that it reflects the Government's intended scope for the inquiry. China is not included as part of the Third World, although it has many character­ istics in common with those countries which are, and although it regards itself as a

member. There are three reasons for not including it. First, it is a major communist country with a very distinctive position in international politics which sets it apart from Third World countries. Secondly, the conceptualisation of 'three worlds' on which China bases its claim to membership of the Third World differs markedly from that current in the West. 2 Thirdly, on practical grounds the inclusion of China would have made an already formidably large task almost unmanageable.

The Report does not follow some commentators in distinguishing a 'Fourth World', consisting of those countries which have very few resources and very poor prospects of development. This concept has limited acceptance and, unlike 'Third World', is not generally accepted by the countries involved as an acceptable term of self-definition. In fact, its introduction is often seen by them as an attempt to divide the Third World and is resisted as such.

It is easier to list Third World countries than to give a tight formal definition to jus­ tify that list. For like many other important political terms-' the West', 'democracy', 'nationalism', 'socialism' come readily to mind-it resists capture by a neat definition. The most that can be said is that in terms of the cluster of characteristics usually

associated with the Third World-a colonial or quasi-colonial past and opposition to the continuation of Western colonisation; relative poverty and the social conditions which accompany it; a concern not to become closely involved in the conflict between East and West; the aspiration to develop and modernise-the great majority of Third World countries have all these in common and all of them have some of them in com­ mon. In addition, all of them subjectively indentify to some extent with the Third World as a movement concerned to improve the economic conditions and inter­ national status of its members.

Unity and Diversity One of the themes of this Report is the tension between the political urge to soli­ darity and unity which characterises the members of the Third World at one level and the enormous diversity, together with the differences of outlook and interest to which this gives rise, at another.

The Committee has been conscious that this inquiry was initiated largely in re­ sponse to the assertiveness of the Third World as a political actor in recent years, and

l See Appendix B for some recent attempts at definition. 2 See page 46.

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that it was expected to make an assessment of the significance of the Third World as a collective entity in international relations. But, at the same time, it has had to recog­ nise that in terms of making sense of the problems, prospects and interests of the members of the Third World it is as necessary to make distinctions and recognise differences as it is to acknowledge similarities and solidarity. Indeed, an understand­ ing of the nature of Third World unity requires an appreciation of the elements of difference and conflict which exist within it and set its limits.

Maintaining a proper balance between these two aspects and working out how each affects the other have been among the Committee's central tasks.

Australia and the Third World It is worth recording at the beginning of this Report that Australia already has a substantial history of interaction with the Third World. The following list is indicative rather than exhaustive, but it does suggest a context in which the work of this Com­ mittee .may appropriately be seen:

. In the 1940s, Australia pioneered an approach to the United Nations (UN) which was very close to that subsequently taken by the Third World countries. We took a very active role, in collaboration with a newly independent India, in assisting the cause of the Indonesian nationalists. Australia was the only non­ Afro-Asian country to attend the New Delhi Conference on Indonesia in 1949, one of the first significant Third World diplomatic initiatives. . The Australian initiative which led to the setting up of the Colombo Plan

represented an early and imaginative response to the problems faced by the first group of Third World countries to gain independence, and our subsequent record of aid has been respectable by world standards. Our handling of the transition to independence of Papua New Guinea was affected by what was happening in the United Nations during the same period, and it was no accident that the basic decision to hasten independence occurred in the early 1960s, when the 'winds of change' in Africa radically altered the

balance of the UN General Assembly. On occasions, as during the Suez Crisis in 1956 and in the UN General Assem­ bly in 1960, we took initiatives-based essentially upon emotional attachment to the United Kingdom-which were deeply resented by most Afro-Asian countries.

Our concern with 'forward defence' in South East Asia and our membership of SEATO brought us into close working arrangements with some Third World countries and at the same time drew strong criticism from others. During the last years of Sukarno 's rule in Indonesia, Australia had to deal with what was one of the most militant Third World governments in the world at the time, a government which presented both the West Irian issue and the 'confron­ tation' with Malaysia as involving conflict between the 'new emerging forces' and the ' old established forces'. . In 1966, we modified significantly our discriminatory immigration policy partly

because it was recognised as a growing embarrassment in our relations with the Third World countries of Asia. Australia played an active role in the first meeting of the United Nations Con­ ference on Trade and Development (UNCTAD) in 1964 and at the time seriously considered becoming a membe:r of the Group )f77.

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In 1966, Australia pioneered a system of trade preferences to developing coun­ tries, an initiative not followed by other developed countries until several years later. . In the early 1970s, we joined four producers' associations set up at the insti­

gation of Third World countries and consisting mainly of Third World members. . Since the mid-1970s, Australia has played an active part in the North-South dialogue. We were one of the eight developed countries which took part in the

Conference on International Economic Cooperation and we have taken a pos­ ition well in advance of most other Western countries in the discussions relating to the establishment of a Common Fund. This list is meant to do no more than to recall that Australia has a history of sig­ nificant interaction with the Third World. Indeed, our place in the world has made this inevitable. Our regional environment is a Third World environment. Our basic strategic and foreign policy concerns centre largely on Third World countries. Some of the 'global' issues which most exercise the Third World are of immediate and di­

rect relevance to our interests, while others have important potential implications for us. And, even apart from these issues and the campaigns associated with them, the Third World's propensity for instability means that it can generate situations capable of affecting Australia's interests.

The setting up of this inquiry may be seen against this background, rather than as a sudden innovation or deviation. It is not neglect in the past but the fact that sig­ nificant changes are occurring in the Third World, and in its relationships with other groups of countries, which make it timely for us to examine our position and policies towards it.

CHAPTER I

Salient Features of the Third World as a Factor in International Affairs

A. Third World as a Real Phenomenon-Demonstrations of Third World Soli­ darity and its Achievements-Limits of Solidarity-Challenge to the Inter­ national Status Quo. B. Political and Economic Diversity in Third World Countries-Continuing Wide­

spread Poverty Despite Unprecedented Economic Growth in Recent Decades­ Some Reasons for Wide Differences in Economic Performance. C. Third World's Objective and Acquired Strategic Importance-'-Political Weight from Numbers and Solidarity and by Holding Initiative in Many Situations­

Limited Overall Economic Weight-Oil and Manufacturing. D. A Distinctive Third World Ideology-Neo-Colonialism as a Key Element­ Political Usefulness-Resistance to Power Politics-Radical and Moderate Ver­ sions of Demand for Change.

PART A: GENERAL INTERNATIONAL SIGNIFICANCE

There is much about the concept of a Third World which invites scepticism and dis­ missal. It is vague, imprecise and variously defined. The entity it is meant to describe is exceedingly diverse, loosely structured and internally divided in serious ways. The rhetoric and professed values of its members in their Third World capacity are often conspicuously at variance with their behaviour as individual states.

2. Nevertheless the term Third World does refer to something real and important in international affairs. It is used not only of a very large group of countries but by them to indicate what they perceive as a collective identity and shared interests in relation to certain situations and issues (mainly having to do with their relations with devel­

oped Western countries), and as an organising concept in international affairs.

3. The issues on which the Third World has shown a significant degree of solidarity and on which it has had influence are:

(a) Opposition to colonialism. The efforts of individual nationalist movements to gain independence have been greatly facilitated by the moral and practical aid provided by Third World countries already independent. This has in­ cluded diplomatic support in the United Nations and elsewhere, the recog­

nition and legitimati9n of national movements, the provision of sanctuaries, military and financial aid, sanctions against colonial powers, appeals to Wes­ tern opinion and generalised attacks aimed at discrediting colonialism as an acceptable political institution. In these ways the Third World has been an important force in hastening the dismantling of Western empires, particu­

larly in Africa and the Pacific, with the resultant trebling of the number of sovereign states in the world. It has thus contributed to a major structural change in the international system. (The colonialism that the Third World is

concerned about is white, European colonialism; that practised by its own members or by communist states receives little attention.) (b) The demand for a better deal for Third World countries in the international economic system. Despite the great divergences in their economic circum­

stances and interests and the fact that some of them have made great gains in recent years, Third World countries take the position that the present system is, in one respect or another, weighted against them and that changes should be made to end this state of affairs. They have advanced a set of proposals­ those constituting the New International Economic Order (NIEO)-as to how it should be changed and have succeeded in making these proposals a major item on the international agenda in this decade. (c) Opposition to racialism. It is the Third World (in tacit alliance with Western

liberal opinion) which has been principally responsible for making Caucasian racialism a major issue in international affairs. It has succeeded both in reducing the two white minority regimes in Africa to virtual pariah status and in sensitising all Western governments on racial matters, both domestically and internationally. (d) Non-alignment. The assertion of the existence of a third world is largely a re­

sponse to the existence of a first and a second world-that is, to the two bloc character which the Cold War imposed on international politics and which still substantially remains in the period of detente. One of the forms which the East-West conflict has taken has been a competition for influence in the rest of the world, and most Third World countries have been concerned to resist incorporation into the Cold War framework, to assert their independence

and freedom of action, to maximise their bargaining power in relation to the great powers, and to establish the recognition of North-South issues as being comparable in importance to East-West ones. They have achieved consider­ able success in these efforts. These concerns have sometimes conflicted with the desire of particular Third World states to engage the support of great powers to further their interests (as in southern Africa currently), and on occasion Third World countries have had to make a clear choice between the

West and the East. (e) The maximisation of the role of the United Nations system in international affairs. This system has provided Third World states with a forum which has allowed them to use limited diplomatic resources to the greatest effect and to

make effective use of numbers and solidarity. They have been able to com­ pensate their limited power with the 'moral' authority of the United Nations and the platform it has provided for propagating their views. Third World countries thus have a shared interest in increasing the importance and scope of this system, an interest which has already manifested itself in a number of initiatives taken in relation to 'global' issues. The interest taken in what are

becoming referred to as global 'commons', i.e. those resources not under the sovereign control of any one state, such as the deep sea-bed, space, radio frequencies and Antarctica and the assertion of the principle of the 'common heritage of mankind' in relation to them indicate scope for the extension of international institutions in ways which may have important practical consequences-as with the setting up of a proposed International Sea-Bed Authority, which would have policy-making, regulatory and taxing powers.

4. It is important that the solidarity and effectiveness of the Third World be neither exaggerated nor underestimated. Even on the issues listed above the unity of the

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Third World has been considerably less than complete; and even where there has been formal unity, its quality has been very variable. The private positions of individ­ ual Third World countries often differ from their public ones, and their particular interests and preoccupations often cut across and take precedence over their Third

World allegiance. They often go along with Third World positions not out of convic­ tion but out of tactical considerations or because of reluctance to stand out against pressure for solidarity. On issues other than those listed the Third World is not often a unified grouping.

5. The importance of the Third World, however, cannot be considered only in terms of a limited number of issues on which it can present a broad coalition or the many issues on which it is divided. Over and above particular issues, the Third World coun­ tries constitute a group of countries which are seeking not to be taken for granted be­

cause of their newness to the scene, or their comparative lack of power, and which are concerned to ensure that they have a real influence on affairs. While their immediate operational goals more often than not reflect their widely differing individual interests, most of them share broader aspirational goals which have an important

energising role in their affairs. One of the important ways in which this has manifested itself is in the creation of regional and functional organisations such as the Organis­ ation of African Unity (OAU), the Association of South East Asian Nations (ASEAN), the Group of 77, the Non-Aligned Movement and the Organisation of

Petroleum Exporting Countries (OPEC). The concern and capacity of such a large and diverse group of countries to move in this direction signifies both a recognition of differences, and a felt need to coordinate their international activities.

6. On occasions-as at the time of the closure of the Suez Canal by Egypt in 1956 and of the partial oil embargo by Arab oil exporters and subsequent OPEC price in­ creases in 1973-74-a common front has been maintained in the face of substantial costs to many Third World countries. As these examples and the sustained effort to link Zionism and racialism indicate, when a linkage can be established between the

particular interests of individual states or groups of states and the wider issues on which there is substantial Third World solidarity, that solidarity can become avail­ able as an important diplomatic asset to those states.

7. Intrinsically, the positions proclaimed on a range of issues by Third World coun­ tries constitute a significant challenge to the status quo, particularly insofar as it favours Western interests. What this challenge will amount to in practice will be de­ termined by a range of other factors including the limitations of the leverage available

to the Third World; the resources available to the Western countries in responding to them; the feasibility or otherwise of particular Third World proposals; the competing claims of other interests as diversity within the Third World increases; and the way in which the policies and actions of the Second World (the communist powers )-the other group concerned to alter the Western status quo-interact with them.

PART B: INTERNAL FEATURES AND PERFORMANCE

8. The political, economic and social attributes of the Third World are highly di­ verse and their performance as states as well as their prospects for future stability, and for improved prosperity and growth, vary widely.

4 Chapter I

9. Political systems and institutions reflect the full global spectrum of diversity, from socialist to capitalist, from parliamentary, multi-party democracy to highly totali­ tarian forms of control, and from traditional theocracy to secular rationalism. Dispari­ ties in geography, population size and resource endowments are vast. Their economic structures range from countries whose subsistance sectors are relatively large to coun­ tries which have fully developed monetised economies. The Third World includes states which are extremely rich, even by Western standards, and those which are utterly poor; and, most importantly, states which have every chance of making good progress with little if any outside concessional aid and those which it seems must re­ main wards of the international system for the foreseeable future if they are to survive.

10. The Third World overwhelmingly comprises new countries which have only re­ cently emerged from subordinate and dependent status as colonies of the indus­ trialised countries. Even in the case of the exceptions, mainly Latin American, a form of quasi-colonialism has often been experienced. While this shared experience has to some extent fostered broadly shared attitudes, the differences in colonial philosophies, administration, education and enculturation, as well as in the duration of the colonial period, adds yet a further dimension to the heterogeneity of the Third

World.

11. The transition to independent statehood undoubtedly influenced Third World perceptions of their position in the international scene. Both a sensitive awareness of their recent colonial past and a sense of their countries' 'newness' (or, for some, re­ incarnation) have been important factors in the internal behaviour of Third World governments.

12. The fact of having been colonised by the West led many Third World states to an economic and political condition in which, at independence, they had better prospects of viability than they would have had without colonial tutelage. But the col­ onial experience had a mixed impact beyond this. It left many ex-colonies with fissiparous, socially and politically disunited communities which were highly unlikely to have found a common destiny in one nation except for the exigencies of colonis­ ation and its demise. This contributed to a heavy emphasis on internal unity and nation-building after independence. It also had the effect of encouraging the false idea that political emancipation would mean rapid economic growth and take-off. While the colonial experience usually introduced Western democratic and liberal ideas, its forms also strengthened authoritarian conditions that had prevailed in pre­ colonial times.

13. The political domination inherent in colonial control has contributed to the cre­ ation of racial animus in Third World countries directed against the West. While the racial composition of the Third World is extreme in its diversity and is an important source of political tensions within it, apart from some of the Latin American countries, the peoples of the Third World are not white. As used in the Third World, racialism usually means white discrimination against and exploitation of non-whites.

14. Though collectively they exhibit wide diversity in the degree of their under­ development and in the paths they elect to follow to overcome it, most Third World countries are economically underdeveloped by Western standards. While many have attitudes and traditions that are inimical to material advancement none of them is un­ concerned about its backwardness and all are responsive, in their various ways, to the notion that development or' modernisation' should be accelerated. Indeed, for many

5

Third World countries development, in the economic field at least, has become a mat­ ter of urgency to the point almost of obsession.

15. Politically, the efforts of governing elites have been directed largely to overcom­ ing the divisive tendencies within their own societies by a process of'nation-building' and towards resisting challenges to their own position. While the results have varied from country to country, with few exceptions, including the important one of India,

they have so far proved incompatible with genuine multi-party democracy or a very sensitive regard for civil rights. The general tendency has been for states which began at independence as constitutional democracies to move away from that system, often in the direction of military rule. Very few, if any, have moved in the opposite direc­

tion. Compared with both Western and communist countries, the domestic politics of the Third World have tended to be characterised by a high level of instability, as measured, for example, by the incidence of coups, insurrections, assassinations and civil wars. Again, this is an aggregate comparison and there are notable exceptions.

ECONOMIC FEATURES AND PERFORMANCE

16. Widespread poverty is the major feature of the Third World which has com­ manded the attention of Western communities. Of the total Third World population of more than 2 billion, the World Bank has calculated that some 800 millions­ approximately 40 per cent-live in conditions of' absolute poverty', defined as lacking

the basic requirements for a decent life. These poor live mainly in rural areas where opportunities for employment other than in the production of food remain limited. Poverty prevails throughout the Third World although it is particularly concentrated in South and South East Asia and in sub-Saharan Africa.

17. Average per capita income levels vary greatly among Third World countries, ranging from low-income countries (where average incomes provide no more than a

Developing Countries: Income Levels

Based on 1976GNPpercapita(in 1976 US$)

Number Group

of Population Income average

I nco me groups (a) countries (millions) range in come

High income 21 66 over 2 500 2 879

Upper middle income 25 248 I 136-2 500 I 465

Intermediate 32 299 551-1 135 875

Lower middle income 28 249 281-550 404

Low income 41 I 194 280 or less 167

Developing countries (b) 147 2 056 542

Capital surplus oil exporters (c) 5 13 6 345

Source: International Bank for Reconstruction and Devel o pment ( IBRD), World Eco nomic and Socia/ Indicators, April 1978, Table vi , p. 15 . Note: The use of internationa l co mparisons o f avera ge inco mes per head in a co mmo n currency as a measure of li vin g standards suffers from many defects. Such comparisons fail to ta ke fully into co nsideratio n no n-market activities, and

differences in the internal purchasing power of national currencies, as well as interna l in co me distributio n. Recent studies suggest that ' real ' average income levels in de vel o ping countries, in terms of purchas ing power, may be co nsidera bl y higher than suggested by these figures. (a) Capital deficit oil exporters a re included in releva nt in co me groups.

( b) Some European countries, of which the la rge o nes a re Greece, Malt a, Portu ga l, Spain a nd Turkey, are in cl uded among developing countries although they a re no t included a mong Third Wo rld co untries. (c) These countries- Kuwait, Libya, Q ata r, Saudi Ara bia and the Uni te d Ara b Emira tes- a re usua ll y distin guis hed fr om the other develo ping countries, although they are, of course, included a mo ng Third World co untries.

6 Chapter I

subsistence existence), through middle-income countries (with less extensive prob­ lems of poverty), to some oil exporting countries which in fact have higher per capita incomes than many developed countries.

18. There is considerable diversity in income distribution among Third World coun­ tries, with no apparent correlation between the degree of income inequality and the country's average income level. Thus, growing economic strength and continuing acute poverty and vulnerability on a large scale often coexist in individual countries, even in those in the higher income bracket, indicating that economic growth in itself does not necessarily bring improvements in the distribution of income.

19. In the quarter century from 1950 to 1975, average real income levels in the Third World as a whole more than doubled. This rate of increase was about the same as that experienced in developed countries, and represented a sustained rise of a mag­ nitude never before experienced in human history within such a period. However, the base from which it proceeded was very low and individual countries had widely differing economic performances: ranging from a few where average real income levels appear to have declined, to a few with real increases in excess of 5 per cent per annum.

Developing Countries: Growth of GNP Per Capita 1950-75 (constant prices)

Average annual growth rate-per cent

Less than 0 0-2 2-4

Above 4 .

Number of

countries

3

25 33 II

Percentage of

population (a)

I

48 35 15

(a) Shares of the total population in 72 developing countries covered, accounting for 88 per cent of the total population of developing countries in 1976. Source: IBRD, World Development Report, 1978, p. I.

20. The experience of this period has thus resulted in the emergence of some Third World countries which have per capita income levels close to or higher than those of the poorer Western countries. 1 In particular, the newly industrialising countries (NICs) have experienced very rapid economic growth. Such growth is leading some commentators to question whether these countries should any longer be regarded as

underdeveloped. It is important to note, however, that rapid growth does not in most cases denote balanced development and that, by Western standards, most of these countries are still underdeveloped in important respects. Moreover, average per capita income levels represent only one of a number of measures of development and reflect physical conditions only.

21. Aggregate food production growth in the Third World has stayed ahead of population increases, but the 'calorie deficit' (shortfall of supply below minimum nu­ tritional needs) represents some 25 million tonnes, 2 per cent of current world pro­ duction of food grains. The burden of the shortfall is most heavily borne by poorest

A number of the low-income countries in Europe are regarded by some international aid agencies, e.g. the World Bank, as 'developing' countries and most oil producing countries have higher per capita incomes.

7

countries where agricultural production and productivity increases have lagged be­ hind population growth. In these countries, consumption in 1970 was estimated to be only 93 per cent of absolute minimum nutritional requirements. One of the main difficulties is that price levels necessary to encourage increased food output would be

too high to enable large groups of the population to achieve adequate food intake levels. In addition, insufficient agricultural research directed to local conditions has meant that productivity increases have been delayed. 1

22. The reasons for the wide differences in levels and rates of growth of average in­ come in the Third World are complex. Attempts to identify them and to rank them in importance are controversial, not only because of different theoretical perspectives from which development problems are analysed but also because proposed solutions

to the problems facing Third World countries in their attempts to improve levels of economic development naturally have a measure of political content. Among the key issues of significance here, which will be discussed below, are:

(a) Attitudes, beliefs and traditions (b) Resource endowment and climate (c) Population (d) Trade and international investment

(e) Domestic consumption and savings (f) Social welfare (g) Industry, manufacturing and agriculture (h) Government policies and economic management

(a) Attitudes, Beliefs and Traditions 23. Third World countries with long-standing attitudes, beliefs and cultural tradi­ tions which have been uncongenial to the pursuit of material advancement, and to forms of economic organisation encouraging the division of labour on an economic

basis, appear generally to have been slowest to adopt or allow such' modern' forms of economic organisation.

(b) Resource Endowment and Climate 24. Some Third World countries have benefitted particularly from the possession of one or more natural resources which have been in strong demand in industrialised countries. In some cases (such as oil) this factor has been a vital one in economic

progress. Since a number of fast growing Third World countries have been able to manage without a favourable endowment of natural resources, this would not appear to be a necessary factor in determining the pace of economic advance. However, cli­ mate does appear to have been a significant factor inhibiting economic development. Extremes of heat and humidity have adverse effects on production as well as on pro­ ductivity of the labour force, while fluctuations in weather can significantly affect agri­ cultural output.

(c) Population 25. At an average annual population growth rate of 2.4 per cent since 1945 , more people were added to the population of the developing world than the developed world's present total of about one billion. This rapid rise to the present level of well

I See Chapter VIII, Part F : Food and Agricultural Technology, paragraphs 115-143.

8 Chapter I

over 2 billion is explained largely by declining mortality rates in the absence of com­ pensating decreases in fertility. Total fertility rates are still over 6 in developing coun­ tries, compared with about 2.3 in industrialised countries, the latter being close to levels associated with a stationary population.'

26. The interaction between population growth and economic development is an issue which generates considerable controversy among those addressing the problems of poverty and underdevelopment in various Third World countries. Analyses of data published by the World Bank establish that there is no significant correlation among Third World countries either between population density and GNP per capita or be­ tween population growth and growth in GNP per capita. 2 Neither of these findings is particularly surprising in the sense that it is well known, for example, that densely populated Singapcre and Hong Kong have much higher GNP per capita than rela­ tively sparsely populated areas of Africa and that high population growth rates in Brazil and the Philippines have not prevented them from achieving impressive growth rates in GNP per capita in recent years.

27. If other circumstances such as the availability of land, food and capital are favourable, an expanding population can be a considerable asset to a country attempting to develop its economy and raise its general standard of living. However, this observation offers little solace to some low-income Asian countries such as Indonesia and those of the Indian sub-continent for which over-population and high population growth rates constitute formidable obstacles to substantial improvement of general living standards. Similarly, in sub-Saharan Africa, the prospect of rising population growth rates, brought about by improving health conditions, makes progress in agricultural and industrial development even more uncertain.

28. If and when it is achieved, sustained economic development is likely to reduce fertility and slow down the pace of population growth in low-income countries, as it already has in some of the rriore prosperous Third World countries. But, as pointed out by the World Bank, this process will not take effect quickly particularly in the poorest countries. The pressure that rapid population growth exerts on resources, and the difficulties it imposes for raising income and employment levels, make the spread of effective family planning programs an urgent matter. 3

(d) Trade and International Investment 2 9. The extent of international trade and investment seems also to have contributed to differences in Third World economic development, centring as it has done on middle and upper income countries. In contrast to the rest of the Third World, foreign trade sectors in the lower income countries appear if anything to have declined. While it is difficult to gauge the importance of the degree of external contact to devel­ opment there is evidence that foreign trade has been more significant in improving the allocation of domestic resources than in providing net increases in external re­ sources. (It seems, for example, that net capital inflow may not have increased as a

I The United Nations defines the total fertility rate as the number of children that hypothetically would be born per woman, if she were to live to the end of her child-bearing years.

2 See Appendix D.

3 IBRD, World Development Report, 1978, p. 5.

9

proportion ofGDP. 1 ) In fact, most capital resources in developing countries have con­ tinued to be supplied by domestic savings. Overseas capital has, however, played an important 'energising' role in Third World economic development. Overseas inputs have been especially significant in the introduction of technology and managerial skills.

External Trade of Developing Countries: Goods and Non Factor Services

Exports per cent ofGDP Imports per cent ofGDP

I nco me group 1955 1973 1955 1973

Higher 12 .6 16.1 13.6 18.4

Middle 12.1 21.1 14.7 22 .0

Lower 10.2 9. 1 11.1 11.5

Oil producing 25.4 37.4 22.5 22 .2

All developing countries 13.3 18.5 14.3 18 . 1

Source: IBRD, World Tables 19 76, Comparative Economic Data, Table 3, p. 409.

(e) Domestic Consumption and Savings 30 . Another important factor in Third World economic development has been the significant real increase in both consumption levels and domestic savings. Domestic investment has also grown (in real terms and as a proportion of GOP) providing a

base in terms of social and physical infrastructure (schools, ports, roads, railways and power stations) which should contribute to future growth in Third World countries.

Gross Domestic Investment as Percentage of GDP

Higher income Middle income Lower income <;>it producing

All developing countries

1955 19 73

18 .3 14.2 14.6 17.8

16 .8

21.9 19.6 15.6

21.1

20.3

Source: IBRD, World Tables 1976, Comparative Economic Data , Tabl e 3, p. 408 .

31 . The improved framework of financial and development institutions is al so rel­ evant in this context. In a recent report the World Bank describes the prolifera tion of in stitutions such as 'industrial development banks, agricultural credit institutions,

extension agencies, vocational training institutes, research centres, central banks and economic planning agencies '. 2 Developments such as these have been of particul ar importance in improving the entrepreneural skills and capacities avail a ble in developing countries.

The avail a ble balance of payments d ata suggests this. Series III tabl e II o f th e IBRD 's World Ta bles 1976, (pp. 472-9 ) gives d ata on countries' deficits o n current account as perce ntages of GOP fo r th e years 1960, 1965 , 1970 and 1973. Two summa ry sections of th at ta bl e, grouping developing co untries by income and by region, are reproduced in Appe nd ix E.

2 IBRD, World Development Report, 1978, p. 4.

10 Chapter I

(f) Social Welfare 32. Investment in the development of human skills and capacities has also resulted in significant improvements in life expectancy (and a consequent population in­ crease), in general health and food intake per head and in a wider spread of edu­ cation in most Third World countries. Social Indicators

(Adjusted Country Group Averages)

Low income

Lower middle income

Intermediate middle income

Upper middle income

High income

1960 1970

Most recent estimate

1960 1970

Most recent estimate

1960 1970

Most recent estimate

1960 1970

Most recent estimate

1960 1970

Most recent estimate

Health and nutrition

(a) (b) (c)

43.6 129.0 39.2

33.0 121.3 43.8

33.0 102.8 46.0

9.3 84.6 45.0

6.8 79.9 50.8

7.5 58.4 53.2

8.5 88.6 5l.l

3.6 65.8 57.0

2.7 55.0 59.1

4.8 74.4 64.6

2.9 51.3 67.3

1.9 37.9 68.4

44.9 66.2

1.3 27.8 64.0

23.2 68.2

Education

(d) (e) (j) (g) (h)

89.8 50.5 37.4 4.8 24.4

91.5 51.6 48.4 10.3 32.0

94.5 53.9 59.0 13.9 33.8

85.1 47.4 60.7 4.8 41.0

93 .3 53.0 74.0 12.7 60.0

102.3 56.9 92.7 22.6 63 .0

94.4 54.4 77.8 14.5 49.8

101.8 58.7 95.3 26.7 57.8

103.9 60.6 99.9 29.4 62.3

104.5 75 .5 94.6 22.7 51.4

114.4 84.9 97.9 36.6 67.8

111.5 77.8 95.7 46.7 66 . 1

106.3 78.5 104.4 18.1 81.8

107.2 79.2 120.1 40.1 86.2

107.6 46.2 87.2

(a) Death rate (per I 000) ages l-4 years (suggested indicator of malnutrition). (b) Infant mortality rate (per I 000). (c) Life expectancy at birth years). (d) Per capita per day supply of calories (percentage of reguirements ). (e) Per capita per day supply of protein (grms ). (f) Adjusted enrolment ratio-Primary School. (g) Adjusted enrolment ratio-Secondary School. (h) Adult literacy rate (percentage).

Source: IBRD, World Economic and Social Indicators, April 1978, Table X, pp. 36-37.

General Government Consumption Expenditures as Percentage ofGDP

1955 1973

Higher income 10.5 12.2

Middle income 10.9 13.9

Lower income 7.2 15 .7

Oil producing 11.5 14.5

All developing countries 10.0 13 .2

Source: IBRD, World Tables 1976, Comparative Economic Data, Table 3, p. 408. Note: The table shows figures for government consumption expendi­ ture which include defence outlays. Since these are often of significant proportions, the figures shown should only be interpreted as indicating rough orders ofmagrutude of investments in social welfare.

11

33. Such investments in social welfare have involved Third World governments (particularly a number oflow-income countries) in considerably increased 'consump­ tion' expenditure which has grown significantly relative to GOP (although it is still lower than industrialised countries) as indicated in the above table.

(g) Industry, Manufacturing and Agriculture

34. The Third World still accounts for only a small proportion of world industrial production, around 7 per cent. However, the industry sector has contributed to econ­ omic growth in both low and middle-income Third World countries, especially for the latter. Its share of total output has increased in both groups relative to agriculture, from 23 per cent to 38 per cent of GNP of middle-income countries over 1960-7 5 and from 12 per cent to 23 per cent in the case of the low-income countries. The share of agriculture for the two groups declined from 26 per cent to 15 per cent and 52 per cent

to 43 per cent respectively.

35. Manufacturing has been an area of especially rapid growth, reflecting much increased investment in manufacturing industries over the past 20 years. Manufactur­ ing sectors exist in all but the least developed countries, with the more advanced countries producing capital as well as consumption and intermediate goods.

Manufactured exports of non oil exporting countries, when aggregated, are now almost equal to their combined agricultural product exports and the range of manufactured products which are competitive internationally is widening. A large part of Third World participation in international exports of manufactures is, how­ ever, accounted for by a relatively small group of countries: in 1975 six Third World countries and territories exported 52 per cent ofThird World manufactured exports.

Manufacturing Production as Percentage of GDP

1960 1973

Higher income Middle income Lower income Oil producing

All developing countries

23.7 14.4 11.9 10 .9

17 .9

26.2 20.1 12.5 10.6

20.4

Source: IBRD, World Tables 1976, Comparative Economic Data, Table 4, p. 416.

36. The investment in manufacturing, especially when it has not been accompanied by policies designed to encourage the establishment of internationally competitive in­ dustries, may not always have had optimum results in terms of all-round economic performance. Manufacturing investment has often been too capital-intensive in re­

lation to local circumstances of labour surplus. It may often have occurred at the ex­ pense of desirable investment in agriculture, especially in those countries whose populations are relatively highly dependent on agriculture or where food supplies are finely matched with demand. While manufacturing has often been highly protected, agriculture has tended to be discouraged by pricing policies directed at keeping food

12 Chapter I

prices low. Rural infrastructure has usually been neglected, often because of the special attention given to urban areas, and agricultural research has not been given sufficiently high priority in institutional development. Thus the Third World is no longer self-sufficient in food, as it was in the early 1950s. It now has to import 5 per cent of its consumption of major staple foods, principally from developed countries, and this at a time when developed countries have been modernising their agriculture. The imbalace in investment between rural and urban development and between in­ comes has also been a major cause of heavy population shifts to urban areas, aggra­ vating problems of urban infrastructure and housing and changing the locus of unem­ ployment and underemployment from the rural to the urban sectors.

(h) Government Policies and Economic Management 37. The nature of government policies, particularly those bearing on the manage­ ment of the national economies of Third World countries, has played an important role in determining rates of growth and the directions which growth has taken. Pri­ vate investment in particular has been greatly influenced by government policies con­ trolling or influencing prices, or through other restrictions and controls. The coordi­ nation and reconciliation of private and public investment to ensure efficient resource use have become an increasingly important policy issue.

38. The economic and political circumstances of Third World countries impose sharper management imperatives upon their governments than is probably the case for governments of developed countries. Among such circumstances are the com­ pression of rapid economic, social and even political change into relatively brief time spans; the need to meet expectations raised so much more quickly by the revolution in communications taking place simultaneously; the implications of most often rapidly growing populations. Third World governments are required to take account of these dimensions of policy over and above the tasks of provision ofwelfare, law and order and defence facilities normal to government performance.

39. The response to these imperatives has led to the adoption by Third World governments of a more pronounced role in many areas of national activity than might otherwise be the case. The expansion of the development role of government has matched the growth of international aid, which is principally based on intergovern­ mental arrangements. Development has placed a premium on economic planning, target setting and coordination. Even the governments of such market-oriented coun­ tries as South Korea, Singapore and Brazil, follow similar procedures and maintain a high degree of coordination between government and private sectors, and of super­ vision of the latter, not often matched in many Western countries and especially in Australia.

40. From what has been said under the headings (a) to (h) above it should be clear that in the aggregate the Third World countries have in many respects performed very well economically over the last three decades. However, good performance and favourable aggregate trends should not obscure the magnitude of the problems which still face most of them.

41. If many have ac.hieved good growth rates, the fact that they started from a very low base means mcome per capita is still in the majority of cases very low com­ pared not only with Western standards but with what is required in order to meet

13

basic needs.' It is also important to note that many have not achieved growth rates which could be described as good. The 34low-income Third World countries attained per capita annual income increases of less than 1 per cent in 1960-7 6. One and a half billion people, or well over half of the Third World's population, live in these coun­ tries. Even if present growth rates are maintained, given the projected increases in population, in many Third World countries the improvements are unlikely to go far to relieve absolute poverty through the rest of the century.

42. Again, while there does not appear to be a necessary connection between rapid population growth and failu.re to achieve economic growth, where there is such fail­ ure, for whatever cause, rapid population growth exacerbates the resulting problems very greatly. Even if the rate of population growth continues to decline in most Third World countries, the burden of extra population to which they are already committed will present them with the most formidable tasks in providing basic requirements.

43. And again, in reading the table on social indicators it is necessary to contemplate not only the trends but the absolute position. Even given the improvements, the infant mortality rate in the low-income countries (which include 53 per cent of the Third World's total population) is still over four times higher than that of the high-income countries, and life expectancy at birth is only two-thirds as high.

44. If the economic record does not justify unrelieved gloom, neither do the econ­ omic and social conditions and prospects of the hundreds of millions of the people of the Third World justify much optimism.

PART C: WEIGHT IN THE INTERNATIONAL SYSTEM

45. The aggregate weight of the Third World in international affairs may be con­ sidered under the three headings, strategic, political and economic. There will necess­ arily be some overlap between the three sections as some factors are considered in different contexts.

STRATEGIC SIGNIFICANCE

46. The strategic importance of the Third World derives both from: . objective factors such as the geographical location and resources of various Third World countries; and . the significance the Third World acquires as a group of largely uncommitted

countries in the context of East-West confrontation and, to a lesser extent, of Sino-Soviet rivalry.

47. At the height of the Cold War, the acquired strategic significance of the Third World took clear precedence over the objective. For several years it was seen as one of the few areas where gains could be made and became a primary battleground for glo­ bal competition between the United States and the Soviet Union. As the process of

detente gathered momentum, as the impact of the Sino-Soviet split became more evi­ dent, and as both superpowers came to reassess the indifferent results of attempts to establish predominant influence in Third World countries, perceptions of the Third World's strategic significance became more qualified and discerning.

48. Nevertheless, its acquired strategic value is still considerable. The possibility re­ mains that virtually any Third World country or group of co untries could become the

14 Chapter I

arena for a test of strength and will between the superpowers or between the Soviet Union and China, regardless of whether the objective strategic value of the particular area warranted such a struggle. Moreover, the fact that several Third World countries have defence (or cooperation and friendship) treaties with one or other of the super­ powers or with China allows the possibility that one of these great powers might find its overall prestige and authority tested by whether or not it honours the commitments these entail.

49. Measured in aggregate terms, the strategic weight of the Third World in the in­ ternational system is obviously very considerable. Taken together, Third World coun­ tries account for about half the world's land area, about half its total population and around 17 per cent of its total production. They supply approximately 90 per cent of world oil exports and 32 per cent of world exports in non-fuel ores and minerals. They include in their number countries such as North and South Korea, Vietnam, India and Iran which are middle-ranking military powers, possessing substantial and in some cases very sophisticated arsenals. If determined to do so, some Third World countries would be able to deploy nuclear weapons within a few years.

50. Third World countries control access to canals, straits, waterways, bases, ports, airspace and airports, which if denied could weaken the defences of the Western powers and affect adversely their economic prosperity. In some instances, such action by one or several Third World countries would produce an unfavourable and direct effect on Australia's strategic environment and economic prosperity. Third World countries are in a position to force issues in such a way as virtually to demand a degree of superpower involvement in tension-points such as the Korean Peninsula, the Middle East and southern Africa. Leaving aside the question of whether they would have any incentive for doing so, relatively small groups of Third World countries have the capacity, through changes in their international alignment, to alter pro­ foundly the strategic balance between the West and the Soviet Union and its allies.

51. The strategic significance of particular Third World areas should also be noted:

Mexico, the Caribbean and Latin America, where the United States would probably firmly resist any significant extension of Soviet or Cuban influence;

the Gulf oilfields and the Straits of Hormuz, through which passes ap­ proximately half the oil imported by the United States, Japan and Western Europe;

. the periphery of the Asian continent containing several points which are amen­ able to the outward projection or containment of both Soviet and Chinese power;

the Korean Peninsula, which lies at the intersection of the strategic interests of four great powers, where the United States is committed to defend South Korea, and whose unification under Pyongyang might cause significant changes in Japan's foreign and defence policies; and

the Indian Ocean littoral containing several potential bases for the extension of Soviet naval power.

Untoward developments in at least the last three areas named above might directly affect Australia's strategic environment.

15

POLITICAL SIGNIFICANCE

52. The political weight of the Third World derives, inter alia, from: (a) The numerical supremacy of Third World states in an international system which, by proliferation of multilateral institutions and forums, gives more weight than ever before to numbers. The influence this yields is circumscribed

by the fact that there remain many situations where numbers alone are not a decisive advantage and where any country prepared to withstand Third World hostility is free to ignore majority decisions. Moreover, in institutions such as the World Bank and the International Monetary Fund not only do Western countries supply the bulk of the funds but also weighted voting gives

them greater than their number would otherwise allow. (b) Its ability, despite great diversity in national circumstances, to maintain soli­ darity on various issues. This is demonstrated most clearly on what are 'low­ cost' issues for many of them such as condemnation of Israel and the white

minority regimes in southern Africa, but is also evident on at least the level of general principles in pressing demands for a new international economic order. (c) Its resourcefulness, not only in using to its advantage established multilateral

institutions such as the United Nations system, but in establishing 'universal' coalitions such as the Group of77 and the Non-Aligned Movement; regional coalitions such as the OA U; and smaller groupings such as ASEAN and the Andean Pact. The regional and sub-regional groupings have strengthened

their members' position in dealing with stronger external powers. (d) Its role as a force for change in the international system-in many inter­ national situations the Third World holds the initiative as the main chal­ lenger of the status quo. Whereas it is the Third World which often decides

which issues should be brought forward, the West, the Soviet Union and China are left to react in whatever way best protects their interests. (e) The general sympathy of Western societies for the plight of the large numbers of poor in the Third World and the receptiveness of parts of Wes­

tern societies to Third World claims that its members are the victims of dis­ crimination and inequity in the international system. (f) The ability of the majority of Third World countries, which are largely un­ committed towards both East-West confrontation and Sino-Soviet rivalry, to

the position of the disputants by shifts in their own stances on particular

Issues.

OVERALL ECONOMIC SIGNIFICANCE

53. The Third World's combined economic weight in the international system re­ mains limited despite its having achieved faster overall growth than the West during the past two decades. Whereas in 1958 developing countries and territories accounted for 12.6 per cent of measured world output, in 1975 their share was 17.6 per cent. During the same period, the share of the developed market economies declined from

64.3 per cent to 62.2 per cent and that of the centrally planned economies from 23.1 per cent to 20.1 per cent.

54. A particularly significant feature of developing countries' growth in this period is the rapid development of manufacturing industries. Although developing countries still account for only about 7 per cent of world industrial output, all but the least de­ veloped have established manufacturing sectors which now contribute about the

16 Chapter I

same share as agriculture to developing countries' total output. Similarly, manufac­ tured exports from developing countries account for only 7 per cent of world manufactured exports, but are now worth almost as much as agricultural exports from developing countries. As mentioned above, however, the spread of manufacturing throughout the Third World has been very uneven: in 1975, six countries and terri­ tories accounted for approximately 52 per cent of the manufactures exported by all developing countries and territories.

55. Almost half the Third World's exports are oil and other fuels. Third World countries' share of world non-fuel exports has declined from about 22 per cent in 1955 to about 14 per cent in 1974. On the other hand, their share of world fuel exports has increased during the same period from just over 60 per cent to almost 80 per cent and now accounts for about 60 per cent of petroleum consumed by the West. As re­ gards exports of non-fuel minerals, over 90 per cent of Western tin supplies comes from developing countries, but for most others less than half of the developed coun­ tries' requirements are met from developing countries.

56. The Third World is gradually becoming more important as a market for some Western countries. Between 1971 and 1977, the shares ofUnited States and Japanese exports purchased by the Third World increased from 30.4 per cent to 36.0 per cent and from 36.1 per cent to 43 .1 per cent respectively. However, between 1955 and

197 5 the overall share of the developed market economies' exports purchased by developing countries and territories declined from 2 7. 7 per cent to 23.9 per cent. 1

57. Whereas the strategic and political significance of many Third World countries is of direct interest to both the West and the major communist powers, their external economic relations are heavily biased towards the West. In 1975 1 all communist coun­ tries accounted for only 5. 7 per cent of the total trade of non-communist developing countries and territories compared with the developed market economies' share of 70.2 per cent.

PART D: IDEOLOGY

58. When the Third World, or a substantial part of it, is acting as a loosely­ structured co alition facing Western countries- either in the United Nations system or in some other context-it tends to act in terms of a set of assumptions, values and goals which taken together reflect a distinctive ideological position. Recognition of the existence of such a position may be difficult because it has not been formalised and given definite expression, but a study of the speeches of Third World leaders and of resolutions of meetings dominated by the Third World leaves no doubt of an i.deo­ logical underlay. It is true that this position is general enough to allow for consider­ able variations in conclusions about what particular measures should be pressed for and how they should be sought; that it only constitutes one element in the foreign pol­ icy of any particular Third World country; and that its importance as an influence on policy varies greatly from country to country, from issue to issue and from time to time. But it is also true that an understanding of it is essential for an appreciation of the Third World's sense of itself as a collectivity and of the set of mind with which its

I The Third World is al so an important investment outlet- see Chapter II, paragraphs 56-62.

I I

I

17

members approach many questions, particularly m the context of multilateral diplomacy. 1

59. The key concept in the ideology is ' neo-colonialism' or ' neo-imperialism '. This is derived from an economic interpretation of imperialism -originally formulated by the English liberal, Hobson, at the beginning of the century and subsequently devel­ oped by Lenin-which regards the distinction between' formal' and ' informal' empire

as of secondary importance. It maintains that capitalism in its mature phase has increasingly depended on the exploitation of the underdeveloped parts of the world-as investment outlets for surplus capital, as markets and as cheap sources of raw material and labour. The wealth and power of the First World are seen as largely, if not essentially, the product of such exploitation.

60. The need for this exploitative relationship, it is maintained, led to the creation of the great Western empires at the end of the nineteenth and beginning of the twentieth centuries, but it did not end with their formal dissolution. It finds expression in the contemporary world in the form of' neo-colonialism', defined by Nkrumah, one of

the first Third World leaders to give the term currency, as 'an oblique attempt of a foreign power to thwart, balk, corrupt or otherwise prevent the true independence of a sovereign people. It is neo-colonialist because it seeks, notwithstanding the acknowledged sovereignty of a people, to subordinate their interests to those of a

foreign power'.

61. Neo-colonialism is held to take various forms - political influence, the use of economic leverage, occasional military intervention, cultural and intellectual domi­ nation and manipulation, the bribing and corrupting oflocal officials. It is also held to have various agents-including, conspicuously, multinational companies, the Western

news and entertainment media, intelligence agencies, some Western controlled inter­ national economic and aid agencies, and local placemen ('comprador adminis­ trators'). Most importantly, it is also claimed to manifest itself in a rigging of the inter­ national economic system in favour of the developed capitalist states. It is they who established and who control the key international economic institutions and it is their interests which are served by the rules and mechanisms of these institutions.

62 . The poverty, backwardness and weakness of Third World countries are thus explained to a significant extent in terms of the consequences of colonialism and the continuing effects of neo-colonialism. The relationship between them and the devel­ oped capitalist states tends to be seen as approximating a zero sum game, in which

nearly all the benefits have accrued to the West and nearly all the costs to the Third World, rather than a mixed experience involving mutual co sts and benefit s. The de­ velopment of one group and the underdevelopment of the other are seen as dialec­ tically linked.

63. A recent RAND report maintains that 'the Third World is proba bl y wron g in its interpretation of the causes of its economic backwardness ', but th at ' most leaders of the Third World seem to believe this thesis or at least end orse it for politica l re aso ns '.2 The last qualification is important as it is often observed th at Third World leaders

The Appendix papers U and V -'The Ideology o f th e T hird Wo rl d ' by Owe n Harrie s and ' Moral Ideas and Moral Issues in Rel ations between Developed and Developing Countries' by Keith Campbell ­ contain materi a l relevant to this se ction.

2 Guy J. Pauker, Military Implications of a Possible World Order Crisis in the 1980s, R-2003 -AF, RA N D, 1977, p. l7.

18 Chapter I

speak differently in private bilateral situations from the way they do in public', multi­ lateral ones. Whether or not they are sincere in their support for the ideology, Third World leaders undoubtedly often use it according to circumstances as a means of try­ ing to maximise political advantage internationally. The fact that they feel it prudent to give public endorsement to the neo-colonialist thesis seems to indicate that they recognise a genuine and significant pressure within the Third World to which it is necessary to respond in order to gain political advantages or avoid political penalties in certain situations.

64. The neo-colonialist thesis, whatever its merits and de-merits, is politically useful to Third World governments in several ways:

. it absolves those of them which have disappointing development records from blame for continuing poverty and backwardness (the increasing number of governments which are achieving significant success obviously have a diminish­ ing need for such an explanation);

. it justifies the need to keep alive the active anti-colonialism which originally provided the dynamic for their nationalist movements and which in many cases is still needed in the absence of other bases for national unity;

. by asserting that the prosperity of the West is dependent crucially on its exploi­ tation, it claims a major importance for the Third World in the international scheme of things; and

. as the theory of imperialism on which it is based is Western in origin and still commands significant support there, it provides a moral and intellectual lever in dealing with the West.

65. The fact that the neo-colonialist thesis has had such prominence in Third World ideology has not been without its consequences for the general outlook of many Third World leaders towards development and international trade. It has tended to encour­ age the extreme view that participation in economic intercourse with other countries is

not necessarily a desirable way to hasten economic advance. In the most extreme case, such participation may even be seen as incompatible with development itself if the exchanges are regarded as requiring always that more powerful countries benefit at the expense of the weaker ones.

66. The view of the world based on the notion of capitalist neo-colonialism is supplemented, and to s me extent complicated by, a view of international power poli­ tics derived from a traditional rather than an economic version of imperialism and from a Western critique of the doctrine of power politics. In this case, the crucial fac­ tor is not capitalism but power and the crucial distinction is between big and small states. The familiar Western notion that it is power that corrupts provided the basic assumption, and predatory and aggressive behaviour is seen as a function of size and weight.

67. It is maintained that super and great powers of all ideological persuasions, com­ munist as well as capitalist, are by their nature concerned to try to extend their power and influence over weaker countries and that their competitive efforts to this end threaten the independence and integrity of the Third World, as well as of other weaker states. The corollary is that small and middle powers are more moral, peace­ ful and objective in their approach to international politics. It follows also that too in­ timate a relationship with great powers is inherently dangerous for smaller powers in

19

that, given the nature of the powerful, it is bound to result in attempts to compromise their independence and integrity.

68. Those who hold these views-and in this century they have included Western liberals and the spokesmen of other middle and smaller states, as well as the Third World-see the United Nations as a structure which has the potential of providing a genuine alternative international system ofpower politics, a system characterised by egalitarianism, democracy and justice! In the case of the Third World this view has

the added attraction that it enchances the structure of the organisation in which they wield the greatest influence.

69. The economic formulation of the theory of imperialism, in that it explains the phenomenon in terms of the needs of capitalism in its monopoly phase, tends to work particularly against the West, while absolving communist countries from blame by definition. The power political formulation, on the other hand, points the finger at

great powers from both blocs. Both have the attraction for Third World countries that they provide a moral basis for the demand that the international system be changed to accommodate countries which have come to independence late and which, because of a lack of power, wealth and experience, feel at a disadvantage.

70 . There are radical and moderate versions of this demand. In the first it takes the form of a demand for a basic restructuring of the international political and economic systems which, in the words of the late President Boumedienne of Algeria, would 'radically alter the present historical circumstances'. It is advanced in confronta­

tionalist terms of protracted political struggle, since it is considered futile to expect the status quo states to surrender voluntarily the advantages they enjoy. The weapons advocated by the radicals in this struggle include the aggressive use of political soli­ darity and commodity power, collective self-help on the part of Third World coun­

tries, and a strategy of threatening to de-link or dissociate Third World economies from the Western-controlled international system.

71. In the moderate version what is sought is not a basic restructuring but a better deal within the existing system in terms of access to markets, capital and technology, improved terms of trade for Third World commodities, and increased participation in decision making at all levels, political as well as economic. The moderates depend on

moral suasion-stressing the obligations of Western societies and governments in terms of their own professed moral and economic values and principles, pragmatic appeals to the possibility of reciprocal benefits through reform, and warnings that their continuing moderation depends on progress being made. Recently, the more

moderate version has embraced concepts like the ' common heritage of mankind' which contrast with older and more negative concepts such as neo-colonialism and poverty.

72. How radical or moderate a particular government is at any particular time de­ pends on a complex of factors including its own recent history, its ass ess ments of its economic prospects in the existing system, its relations with important We stern coun­ tries, its ambitions in terms of Third World politics, and the ideological position of its

rulers. Changes ofleadership-as in the cases of Indonesia, Libya and Ethiopia-can sometimes cause countries to change their positions very significantly in a short time. On issues which affect them directly, both typically radical and typically moderate

I It is worth recalling that this was a view adva nced very forcefull y by Australian spokes men in the United Nations in the 1940s.

20 Chapter I

countries can sometimes act out of character. Whatever the particular distribution of countries along the radical-moderate spectrum at any given moment, and however sharp the difference between them, each group needs and uses the other: the radicals' claim to articulate Third World demands requires at least the formal support of the moderates; the moderates only appear moderate as long as there are radicals in the field and their ability to wrest concessions is enhanced if they can present themselves as advocates of compromise positions.

73. It is true that future relations between the Third World and the West will de­ pend to a large extent on the relative strength of the radicals and moderates. But it is also true that the relative strength of the radicals and moderates will depend largely on the evolution of relations with the West.

74. From the events of the last thirty years has come a quality among Third World countries to which all will feel bound-whether radical or moderate-and which will rest on the ideology they share, namely a 'Third World-ness', a membership of the club, something they all went through together. If this judgment is correct, whatever the changes that occur in the next decade or two-changes that may, for example, move some of these countries into firmer ties with First World economies-this quality will still link them to the Third World.

21

CHAPTER II

Third. World Relations with Other Countries and Groups of Countries

Qualitative Difference between Third World Relations with the West and Major Communist Powers. A. Relations with the West-Decolonisation, the Cold War and Politics of Post­ Colonial Economic Relations-North-South Dialogue-Detente and a Less As­

sertive United States-Diversity and Varying Patterns of Interdependence in Economic Relations-Trade-Commodities-Access for Manufactures­ Preferences-Capital Flows-Third World and the West as both Partners and Competitors-Situations where Interests are in Harmony and Conflict-Nature of Third World Challenge-Third World and Western Sources of Power and Influence- Their Weaknesses. B. Relations with Major Communist States-Long-Standing Soviet Attention to

Third World-Current Soviet Interests-Seeking Geopolitical Gains-Soviet Advantages and Limitations-China,s Identification with Third World­ Chinese Objectives-Support for Insurgencies.

This Chapter discusses the general character of the Third World's relations with the West (including Japan) and with the major communist states-the 'First ' and 'Sec­ ond' worlds respectively. Relations with Australia will be dealt with separately.

2. There is a qualitative difference between these two sets of relations. The interac­ tion between what is now known as the Third World and most Western countries has been long, complex and intimate. On both sides it has involved and engendered deep and conflicting feelings, as well as calculations of interest. For the Third World the outward projection of Western power over several centuries and the diffusion of Western goods, money, technology, religions, ideas and institutions which has

resulted from it have been at the centre of its historical experience. Most of the Third World's members were once part of Western colonial empires and as such were incor­ porated into an international economic 'system' under which trade and capital flowed, and still flow, between Third World and Western countries on a basis that reflected the basically 'market-oriented' economies in each group. On the Western side, competition for control and influence over the rest of the world has provided one of the dominant themes of European power politics. For several European states, re­ lations with the non-Western world have profoundly affected their perspectives of in­

ternational affairs, their priorities in allocating resources and deploying manpower, the development and character of their economies, and their image of themselves and of the peoples over whom they once ruled . While the influence of the contact and interchange has been great on both sides, however, it has not been symmetrical: the

22 Chapter II

Western countries concerned have been the dominant partners in the relationship and the Third World has experienced the more profound changes as a consequence of it.

3. The relationship between the Soviet Union and the Third Worldhas been much shorter and less complicated. Prior to 1917, Russia, as a 'heart-land' power, was little concerned in overseas expansion and its contact with non-Europeans in Central and East Asia resulted in a pattern of relationships essentially different from that estab­ lished between Western countries and their overseas possessions. The peoples then colonised by Russia are now part of the Soviet Union, not of the Third World. Since

1917 the Soviet Union has consistently taken a serious interest in what is now the Third World, but it has been a political, ideological and strategic interest involving limited contact.

4. China's interest in the Third World has also been political and strategic. But in its case its long history as a dominant regional power exercising considerable influence over the smaller countries adjacent to it, and the fact that in the nineteenth and early twentieth centuries it shared much of the experience of the rest of the Third World in its contact with the West add other dimensions to the relationship.

5. In the case of the major Western powers, the Soviet Union and China, there­ lationships developed with the Third World since the Second World War have been influenced in large part by the relationships they have had, and sought to have, with each other. They have approached the Third World not merely in its own terms but in

terms of important gains to be made and losses to be avoided in great power relationships.

PART A: THE THIRD WORLD AND THE WEST

1. GENERAL PERSPECTIVES

6. As recently as forty years ago, nearly all of what now constitutes the Third World was either directly under Western control or subject to dominant Western influence. This system of relationship was irreparably disrupted by the Second World War, dur­ ing which the European imperial powers lost not only control of many of their col­ onial possessions but the aura of invincibility and superiority they had previously In the post-war period the process of decolonisation gathered an extraordi­

nary momentum, with the major Western power, the United States, giving it encour­ agement and support, particularly in the early years. In the course of a single gener­ ation a major restructuring of the international system has been effected and there remain only the scattered remnants of Western empires.

7. Quring this period relations between the Third World and Western countries have been dominated by three interacting processes: the management of and adjust­ ment to decolonisation; the Cold War; and the development of an increasingly inter­ dependent economic relationship.

8. Before considering these processes and their consequences at the collective level, it is important to note that there is considerable variation between individual Western and Third World countries in the extent of their political and economic relationships.

23

9. The United States conducts about 42 per cent of its total trade with the Third World and imports from Third World countries roughly 40 per cent of its total oil re­ quirements. Geographical proximity and long-standing commercial relations mean that the United States continues to pay close attention to Latin America, but its over­ all influence there is now less pervasive than before. Compared with the Middle East

and Asia, where important security and economic interests have required the commit­ ment of considerable resources, the United States has been slow in developing sub­ stantive relations with Black African countries.

10. Among the major industrialised powers, Japan is the most dependent on the maintenance of orderly relations with the Third World. Approximately 50 per cent of its total trade takes place with Third World countries and imports from the Third World account for virtually all Japan's oil requirements and significant shares of various essential industrial raw materials. Japanese direct investment in developing countries, especially some of those in non-communist Asia, is growing steadily.

11. For their part, the countries of the European Economic Community (EEC) con­ duct only 20 per cent of their total trade with the Third World, but even when the North Sea oil fields reach peak production, they will still depend as a group on Middle East and African suppliers for something like three-quarters of their total oil require­

ments. The influence in Asia of Britain, France and the Netherlands has declined markedly since the dismantling of their extensive colonies there and is now much less than that of the United States and Japan. On the other hand, the EEC countries have chosen to formalise under the Lome Convention a special relationship with develop­ ing countries in Africa, the South Pacific and the Caribbean, most of which are former

British or French colonies. In addition, France has been particularly active in main­ taining close defence relations with some of its former African colonies.

12. Within the Third World, economic relationships with the West tend to be most highly developed among those countries with the highest income levels. These coun­ tries generally have larger foreign trade sectors and rely on importing substantial amounts of foreign capital for their development programs. Low-income Third

World countries depend on Western aid to a significant extent. Members of the Or­ ganisation of Petroleum Exporting Countries (OPEC) are in a special position, in that they dispose of almost all their oil production to Western countries and depend heavily on the West as an investment outlet for their massive surplus funds.

Managing and Adjusting to Decolonisation 13. The process of decolonisation, combined with the effects of the Second World War, has affected the international ranking and prestige of many Western states, altered the focus and range of their interests and changed their self-image. Stripped of their empires; Britain, France, the Netherlands, Belgium and Portugal have lost much of their stature and become more parochial and limited in their outlook. As this has

occurred while other Western powers were increasing in power and in fl. uence, it has contributed significantly to a reordering of positions within the West.

14. While the process of decolonisation has been rapid it has not always been smooth. In some cases-the French experience in Vietnam and Algeria; the Dutch in Indonesia; the Portuguese in Mozambique and Angola; the Anglo-French fiasco in Suez-it has involved episodes which have had traumatic and divisive domestic im­

pact. Problems involving ex-colonies controlled by white minorities continue to be intractible and a source of friction between the Third World and the West. Much of

24 Chapter II

Europe's diplomatic and military resources have been-and some of them still are­ absorbed by the problems and consequences of decolonisation.

15. Dean Acheson's much quoted remark that Britain had 'lost an empire and not found a role' applies to some extent to all these countries (as well as to Japan). One response to the problem it indicates has been a concentration on European affairs and on the reorganising of relationships among themselves. This represents a reaction to

the growth of United States and Soviet power as well as to decolonisation, but the latter has probably made it more inward-turning and introspective than it would otherwise have been.

16. For their part, the Third World countries have also faced the problems of adjustment resulting from the rapid success of the anti-colonial movement. In react­ ing to these they have shown a high degree of ambivalence towards the West.

17. For a complex of reasons-including the still fresh memories of colonialism and the struggle for independence; disappointment with the results of independence; re­ sentment at being manipulated for Cold War purposes; and the conclusion drawn from their recent experience with decolonisation that, pushed hard enough, Western countries are likely to yield-many Third World countries, particularly when acting collectively, have taken positions which are highly critical of the West and which de­ mand more concessions of it. They tend to see the decolonising process as unfinished, requiring structural changes in economic and cultural relationships to supplement political independence for its completion.

18. At the same time, the goals of development and modernisation which they set themselves are characteristically defined in terms of Western models and examples, and the arguments they use in relation to the West generally appeal to Western values.

19. Post-colonial bilateral relationships between European and Third World coun­ tries do not correspond closely to either the earlier colonial pattern or the current pub­ lic rhetoric. Political relations between Western countries and their former colonies vary greatly, with the historical relationship being important but not usually decisive. They are often much closer than declared positions would indicate.

20. Generally, even when trade fevels have been maintained or increased, the ex­ clusive character of the trade links established during the colonial period has been replaced by greater diversity. The historical trade preferences have helped maintain trade links. And some devices like the Lome Convention have enlarged these preferences and strengthened the links. In spite of this, however, between 1960 and

1970 the share of ex-colonies in the total exports and imports of their former metro­ politan powers fell on average by 52 and 29 per cent respectively. Here, as with other dimensions of the relationship, bilateral contacts have been affected greatly by the displacement effect resulting from a more active involvement by the United States in the Third World and the effect which its great weight has on other relationships. Thus, even though aid tends to flow along old imperial channels- with most British aid going to Commonwealth countries ( 66 per cent in 1976 ), most French aid to its former and current dependencies ( 81 per cent), the largest chunk of Belgian aid to Zaire ( 41 per cent)- it is often of secondary importance in comparison with United States' aid. One respect in which the old connections have continued to be important is in the movement of people from ex-colonies to ex-metropolitan centres-Pakistanis,

Indians and West Indians to Britain; North Africans to France; Ambonese to the Netherlands- often resulting in serious social and, in some cases, political problems.

25

21. In the first generation of independence, 'cultural' ties (using that term in its widest sense) between metropolitan states and their former colonies have remained strong. If those diminish with time it is again likely to be because of the diffusion, rather than the overall decline, of Western cultural influences, with American weight again being decisive. Allegations of cultural dominance form a significant part of the Third World's complaints about' neo-colonialism'.

The Cold War 22. The fact that the Cold War was the central international preoccupation of Wes­ tern countries as the Third World was coming into existence has profoundly affected Western perceptions of and behaviour towards the Third World. As the First and Sec­

ond Worlds were rigidly organised along Cold War lines from the late 1940s on, allowing virtually no room for manoeuvre, a largely uncommitted Third World be­ came by default the arena in which much of the Cold War was contested. The Wes­ tern policy of 'containment', and the creation of security pacts which it entailed, di­ rectly affected Third World countries along the rim of Asia, and, indeed, Australia itself.

23. More generally; Third World countries, movements and demands have been assessed by the Western powers not simply in their own right but as potential counters in the Cold War, with varying results. In some cases, concern to succeed in the compe­ tition to 'win hearts and minds' has caused the West to be more forthcoming in re­ sponse to demands and more generous with its aid. In others, concern with strategic

advantage in the global conflict or uncertainty resulting from the sometimes ambigu­ ous relationship between nationalist and communjst movements has led to a greater Western resistance to them than might otherwise have been shown. The belief that turmoil and instability favour communism has often led Western governments to sup­

port the status quo, even on occasions when this has involved supporting unrepresen­ tative or repressive regimes.

24. From the point of view of the Third World countries, the Cold War has sub­ jected them to attention and pressure they would otherwise have avoided and has been seen as representing a threat to their newly won independence. A widely shared concern not to become a Cold War battleground or to be dominated by either side,

and to assert the importance of'North-South' issues as opposed to 'East-West' ones, has contributed to their sense of solidarity and provided one of the main themes of intra-Third World politics.

25. But the Cold War has also given them an importance and relevance to the great powers which they would not otherwise have had and has increased their bargaining strength. Western-Third World relations (and for that matter Soviet-Third World re­ lations) have been characterised by a series of complicated games between patrons

and clients, with each side attempting to exploit the relationship to its advantage. The quantity of aid and the level of political and military support received by individual Third World countries have often reflected their skill at playing these games rather than their needs, intrinsic importance or commitment to the donors.

The Politics of the Economic Relationship 26 . The emergence of the Third World has coincided with a period of unpre­ cedented economic growth both in the West and the Third World itself, growth which

26 Chapter II

was sustained in part by an even more rapid expansion in international trade. Some of the features of this period of unprecedented economic growth which have carried im­ portant political implications are:

Increasing economic interdependence between the West and large parts of the Third World has, in some ways, strengthened the incentives for both sides to maintain relations on a stable and orderly basis in order to enjoy the con­ tinuation of mutual benefit. At the same time, it has increased the potential economic effects of any conflict that should occur, and has sharpened questions regarding the extent and symmetry of the interdependence, which are them­ selves a source of dispute and disagreement.

. The fact that growth in average per capita incomes in the Third World was only about the same as in the West meant that there was a substantial increase in the · absolute disparity in wealth and living standards between the West and the Third World. This disparity became more conspicuous as a result of improved

communications and transport, though the question of its significance in the context of a general increase in incomes is open to debate.

. In view of Third World claims about inequities in the prevailing international economic system, it should be noted that, while many Third World countries re­ main on the poverty line, the aggregate growth of the Third World during this period is without historic precendent and several of its members have achieved exceptionally high levels of growth.

. Rapid economic growth has made it much easier for Western countries to sus­ tain a substantial and unprecedented program of aid to Third World countries over the last thirty years (over $200 billion between 1950 and 1978 ). 1 The fact that this has fallen short of both Third World demands and Western promises should not obscure its uniqueness in international relations and significance in absolute terms.

. Within Western societies unprecendented affluence has been accompanied by challenges to values, attitudes and lifestyles which have implications for re­ lations with the Third World. There has been evidence of a diminishing ac­ ceptance of the legitimacy and authority of Western governments; an increasing reluctance to resort to the use of force to settle disputes which in turn affects the confidence and performance of those governments in their relations with Third World countries; increased focus on human rights and political principles ap­ plied in Third World countries; and acceptance in some influential quarters that the West is guilty of having treated the Third World unfairly.

One particularly important consequence of rapid, sustained growth, as far as Western-Third World relations are concerned, has been the enormous increase in the West's oil consumption (roughly doubling every 15 years), leading to a crucial dependence on supplies from Third World OPEC countries. While this dependence has been accompanied by a reciprocal dependence of the OPEC countries on the West, it makes the future behaviour of the OPEC group of countries one of the crucial variables in Western-Third World relations.

Figures for 1950-60: Partners in Development: The Pearson Report, Praeger, 1969, .pp. 3 78 - 80; for 1961-70: UNCTAD, Handbook on International Trade and Statistics, Supplement 1977, pp. 180 - 81 ; and 1977 and 1978: IBRD, World Development Report, 1978, pp. 98-99 ( 1978 figure is an estimate only).

27

Developments in the Seventies 27. In 1973-74, against a background of serious inflation in Western countries, three currents of Third World concern converged to precipitate a major confrontation be­ tween the Third World and the West. The Arab-Israeli conflict in the Middle East

flared into another war; the Arab countries of OPEC reacted by using the occasion to impose a partial embargo on oil to the West and OPEC raised oil prices steeply; and the Group of 77 (which in fact includes 117 countries) in turn used the oil crisis to press its demands for a reordering of economic relations between the Third World and the West. Although these demands had been hammered out in the Third World over the previous decade, until this time they had attracted limited attention in the West. Suddenly, with the Sixth (1974) and Seventh (1975) Special Sessions of the

United Nations General Assembly, held at the instigation of the Third World, they became a major item on the international agenda.

28. The crisis in relations was marked by:

. The decision of the OPEC countries to keep discussion of oil supplies linked with the discussion of the issues represented by the demands for a New Inter­ national Economic Order (NIEO) advanced by the Third World at the Sixth Special Session. (The content and significance of the NIEO proposals are dealt

with in detail in Chapter III.)

. The willingness of the oil importing countries of the Third World to reciprocate by accepting and even supporting the OPEC oil price rise, although it involved direct and indirect costs to many of them.

. The ascendancy of the radical element in the Third World during 197 4-7 5 and the generally assertive and confident mood in which its claims were pressed.

. The extension of Third World demands to embrace not only the redistribution of those resources already existing and exploited but those as yet unexploited, unclaimed or disputed, such as those of the deep sea-bed and parts of Antarctica.

. The uncertainty and division which characterised the initial Western response to the combined action of OPEC and the Group of77.

29. The very difficult economic circumstances in Western countries in the mid-1970s significantly influenced the intensity of the crisis. In particular:

Inflation in Western countries, the result largely of expansionist economic poli­ cies earlier pursued by major Western governments, made it possible for the OPEC countries to effect and sustain virtually the first rise in oil prices for 20 years. This rise, following relatively quickly on the assumption by OPEC

governments of control over the oil companies' pricing arrangements in the early 1970s, suggested that nationalisation and politically orchestrated cartel­ type operations could secure increased incomes for commodity producing nations.

The onset in 197 4 of the deepest economic recession since the 1930s induced a sharp deterioration in the terms of trade of non-oil developing countries. This lent credence to the views of those who saw a secular shift in the terms of trade of developing countries; it strengthened the positions of those who had been ar­

guing that developing countries bore a greater burden than industrialised coun­ tries in times of world economic difficulty.

28 Chapter II

The period of inflation coupled with the recession experienced by the Western countries raised widespread doubts as to the continued viability of the market­ oriented economic system and, combined with theories of rapidly depleting natural resources, lent support to arguments for radical changes to economic arrangements.

30. After some complicated manoeuvring, the Conference on International Econ­ omic Cooperation (CIEC) was set up on Western initiative to provide a forum for broad-based discussion. It met from December 1975 to June 1977. At CIEC Western countries agreed in principle to establish a Common Fund to finance buffer stocks and to provide 'additional' aid of $1 billion on highly concessional terms. However, these constituted little in the way of substantive concessions to Third World proposals. The deliberations of CIEC concentrated more on 'practical' modifications of existing ar­ rangements than on radical reform of the economic system. Despite this, the Con­ ference, combined with partial economic recovery, took much of the immediate heat out of the confrontation and contributed to the less polemical atmosphere which has subsequently prevailed.

31. Important issues left unresolved at CIEC were arrangements to continue a dia­ logue between energy producers and consumers, maintenance of the purchasing power of primary commodities exported by developing countries, and measures for immediate and generalised debt relief for developing countries most seriously affected by oil price rises (though further discussion took place on this last issue early in the following year).

32. Assessments of the significance of the confrontation of the mid-1970s and of its implications for the future of Western-Third World relations have varied greatly. While some have seen it as a major historical turning-point and an indication of things to come, others maintain that it depended on a very special, and probably unrepeatable, combination of circumstances. Differences turn largely on assessments of the leverage which will be available to the Third World in future and on the effect which increasing internal diversity will have on its ability to maintain an effective level of political solidarity in relation to the West. These questions will be discussed later in this Chapter and in Chapter IV.

33. Leaving aside questions of prediction, as of now it can be said that the confron­ tation has certainly had one important effect on the current situation. It has raised Western consciousness of Third World problems and their significance, and given them a considerably higher salience in the calculations of Western governments.

34. While the North-South dialogue on the NIEO has held centre stage in relations between the Third World and the West through most of the 1970s, there have also been important geopolitical developments during the same period. The Vietnam War and its domestic consequences in the United States had a profound effect on American perceptions of what role it was possible or desirable for their country to play in the Third World. As early as 1969 President Nixon enunciated the 'Guam Doctrine' which envisaged a·less interventionist role for the United States and laid down limiting conditions for its involvement in the security affairs of other (mainly Third World) countries. ·

35. In the mid-1970s the formalisation of the concept of detente; and the interpret­ ation widely given to it in the West, led to expectations that the rivalry which had characterised the approach of the superpowers to the Third World during the Cold War would now diminish and that more restraint would be shown in reacting to its

29

local crises. Such expectations reflected a longing to be relieved of the burdens of the Cold War and disillusionment with the policies which had led to involvement in Indo­ China more than they did an objective appraisal of what was likely in terms of

interests and power. At the same time, the reaction which had been building up against executive power in the United States since the mid-1960s was enormously strengthened by Watergate and a series of sensational revelations about the role of the Central Intelligence Agency.

36. The combined effect of these developments was that, by the mid-1970s, the United States was operating terms of a more restricted concept of its role in the Third World than at any time during the previous quarter century. Partly as a result of this, and partly because the decline in the effective application of American power coincided with an extension of the reach of its own power, the Soviet Union became more assertive in Third World matters than it had previously been. Its successful in­ tervention, together with its Cuban surrogate, in the Angolan crisis of 1975 marked

the beginning of a period of intense activity in African affairs, one which still con­ tinues. After a few years of comparative inactivity following the break with Egypt, it again became heavily involved with Middle Eastern affairs. In South East Asia, the end of the Vietnam War in the same year left the Soviet Union as Hanoi's chief inter­ national support. 37. At the end of the 1970s there is less symmetry and certainty about the political­ strategic role of the two superpowers in relation to the Third World than there was during the Cold War period. It is difficult to predict both the limits of the United States' restraint and the limits of the Soviet Union's assertiveness. This unpredic­ tability and its effect on the calculations of the actors are the most significant aspects of the present strategic situation.

2: ECONOMIC RELATIONS BETWEEN THE THIRD WORLD AND THE WEST 38. The economic diversity, in terms of income levels and the degree of economic development, of both the Third World and the West makes it difficult to generalise about economic relationships. The relative importance of international trade varies considerably within both the Third World and the West, as does the extent to which countries in both groups depend on the international flow of capital. Varied resource endowments are reflected in differing compositions of exports and imports. Again,

there is much variation in the extent to which government policies are market­ oriented or interventionist.

39. During the last two decades, the absolute volume of economic transactions be­ tween the two groups of countries has grown steadily and, at least in aggregate terms, the flows of goods and capital between the two groups seem to have grown more quickly than either side's national economies. In this sense, we can say that economic interdependence between the Third World and the West has increased. However, the

diversity described above and the different economic weights of the Third World and the West mean that the patterns of interdependence between Third World and Wes­ tern countries are rather uneven. 1

The Trade Relationship 40. The Third World trades with the West much more than with itself or with the communist world. Exchanges with the West account for over 70 per cent of Third

I See Chapter I, paragraph 53.

30 Chapter II

World trade, whereas mutual trade within the Third World accounts for about 22 per cent. In contrast, the developed countries trade much more among themselves, partly because they .a greater variety of specialties to exchange and partly because they are less follows that trade with the Third World is less important for

the West-and yet 1t 1s by no means negligible, since Third World countries take about one quarter of Western exports.

41. These aggregates are not very informative, however. How important foreign trade (whether it be with developed or developing partners) is to a nation will depend on what proportion of its GNP is traded, what particular goods are traded (notably whether they are capital or consumer goods) and the marginal value of exports (or imports). These criteria do not support arguments to the effect that Third World nations get less, or more, out of international trade than Western nations. What mat­ ters is that for both groups, the size of the foreign trade sector has been growing constantly:

Shares of Exports and Imports of Goods and Services in GDP 1961-75

Developed Developing

Exports Imports Exports Imports

1961-65 11.7 11.5 15.6(13.2) 15.7(15.1)

1966-70 12.7 12.4 16.1 ( 13.6) 16.2(15.2)

1971-75 16.4 16.4 22.8 ( 15.7) 20.5 ( 19.2)

Figures in brackets exclude OPEC countries. Source: UN Commission on Transnational Corporations, Transnational Corporations in World Development: a Re-Examination, Table 111-4, p. 207.

42. Third World exports, other than oil, have been growing fast: plus 5. 9 per cent a year in real terms in the period 1960-75. World trade has been growing faster still (plus 7.1 per cent a year), largely because of trade liberalisation in the developed world (both liberalisation within groupings such as the European Common Market, and overallliberalisation under the General Agreement on Tariffs and Trade). It fol­ lows that the Third World's share of global trade, not counting oil, declined (counting oil, its share rose slightly). That statistical trend does not signify that the Third World has been suffering from discrimination, from unfavourable terms of trade or from concentration on declining export lines, but largely that Western countries have been trading more freely. It is a trend that will be reversed as soon as Third World nations begin to trade more freely in turn. That may have begun to happen already, to judge from the increase in exports of Third World manufactures, whether these be reckoned as a percentage of Third World merchandise exports, as a percentage ofThird World GNP, or as a percentage of world merchandise exports. Manufactures comprised 10 per cent of developing countries' non-oil exports in 1955 and 41 per cent (estimated) in 1977. Third World·manufactures were 4 per cent of global exports in 1955, and 7 per cent in 1974.

43. As a proportion of total Third World exports, minerals (again excluding oil) held steady over this period 1, while manufactures rose strongly and agricultural exports declined 2 • In absolute terms, the developed world's exports of primary prod­ ucts, excluding oil, greatly exceed those of the Third World 3• The relative decline of

I See Table I Appendix F. 2 See Table 2 Appendix F. 3 See Table 3 Appendix F.

31

Third World agricultural exports was due in part to deliberate policies that neglected agricultural production in favour of industrialisation, in part to the special difficulties of a few products such as jute and in part, finally, to the welcome fact that Third World countries were able to consume more of their own primary produce, both food

and industrial raw materials.

Prominent Issues in the Economic Relationship Commodities 44. Despite the relative decline of agricultural exports from the Third World as a whole, they remain of vital importance to certain Third World countries. Indeed, some rely upon a few commodities, or even a single one, for all their external earnings

and much of their budget revenues. If that one or few commodities are among those that have experienced special difficulties (cocoa and rubber may be cited as well as jute), individual Third World countries can face real problems. Developed countries are much bigger producers of many commodities, but they are seldom (in recent

times, at least) dependent to a comparable extent on particular commodity markets. That is why the question of international trade in commodities has loomed so large in the Third World's relations with the West, although the bare statistics quoted in the previous section would suggest the contrary.

45. The developing countries' approach to commodity trade reflects, among other things, a widely felt concern about the effect of variability of commodity prices on de­ velopment programs and a belief that there is a long-term trend for such prices to fall relative to prices of manufactures. If such a trend were real it would have implications

for the effectiveness of developing countries' growth efforts. The evidence does not support the existence of a general decline in the barter terms of trade of developing countries. Indeed, if the effects of the oil price increases of 1973-7 4 are taken into calculation, the overall terms of trade of developing countries have increased very sig­

nificantli. An underlying difficulty is that relative price movements indicate nothing of the volume of sales involved, and therefore provide a partial account of the in­ comes received by producers. A further factor which is not captured by terms of trade indices is the increase in productive capacity of capital equipment and other

manufactures.

46. Again, attempts at excessive aggregation account for some of the

methodological difficulties which have complicated the terms of trade controversy. The measure is only a fully reliable one in the theoretical comparison between two products in two countries. It is true that, whatever the situation in the aggregate sense, unfavourable long-term movements in relative prices, for individual commodities

and for individual developing countries, have taken place. Products such as tea, ba­ nanas, rubber, iron ore and manganese appear to have experienced a similar decline in their real price level over the past 25-30 years. Movements were severe for the poorest countries and helped to limit their participation in the expansion of world

trade.

Access for Manufactures 47. The growth of Third World exports of manufactures noted above has given rise to a new subject of contention in relations with the West.

I See Appendix G.

32 Chapter II

48. With manufactures now accounting for more than 40 per cent of non-oil developing countries' exports, there is increasing pressure for improved access to Western markets and for the restructuring of Western industry needed to accom­ modate increased Third World exports. To be sure, as indicated in paragraph 42 above, the actual volumes are still limited. Within a total expansion of world manufactured exports between 1955 and 1976 of$525 billion, those manufactured in oil importing developing countries accounted for only $40 billion.

49. Here again, economic aggregates conceal the politically significant facts. First, the growth of manufacturing in the Third World is concentrated in a small group of countries: 80 per cent of manufactures exports of developing countries come from 12 countries (including four European countries that the World Bank counts as 'develop­ ing ' 1 ). Secondly, these exports are concentrated on particular products, and thus can cause delicate problems for whole Western industries.

50. A study by the General Agreement on Tariffs and Trade (GATT) in 1978 ofthe Third World's penetration of developed countries' markets in particular commodity groups where Third World competitiveness has been high, provided an indication of the extent of adjustment in these countries which Third World competition has stimulated. The ratios of Third World-sourced imports to domestic consumption in the advanced countries, though increasing since the late 1950s, could be described as 'still generally very low' in 1975, with the significant exception of clothing. For all manufactures the percentage increased from 1.2 to 2.0 in the 15 years, whereas for clothing the increase was from 1.0 to 8.6 (the GATT analysts cautioned, however, that a more disaggregated level of examination is necessary to avoid the risk of such figures obscuring important developments in particular industries ). 2 Even within in­ dustry sectors it is necessary to keep the 'Third World factor' in perspective in relation to other influences such as technological change. A study on West German industry found that productivity growth over 1962-75 in the clothing industry displaced three workers for every one displaced by imports from developing countries.

Preferences 51. Western countries have offered various concessions on manufactures to Third World countries (such as the Generalised System ofPreferences) or to certain ofthem (such as the European Economic Community's Lome Convention with 56 former col­ onies). None of these schemes has given the Third World exporters the gains they could have hoped for if they had obtained across-the-board tariff and quota relief from the developed countries. To obtain that, of course, they might have had to offer t? reduce their own protectionism; several Western governments would ask that, par­ ticularly of the advanced developing countries like Mexico and Brazil.

Tourism and Migrant Workers 52. It was the Spaniards who first said wryly that they 'exported poor men and imported rich men', but today temporary emigrant labour and the tourist industry are important aspects of much of the Third World's relations with the West.

53. Tourism today has an immense turnover but, contrary to appearances, its net contribution to Third World revenues is small. Revenues from tourism represented

I IBRD, World Development R eport, 1978 , p. I 0. 2 GA TI, Adjustment, Trade and Growth in Developed and Developing Countries, Trade Studies No. 6, Geneva, 19 78, pp. 36-7.

33

about 1 per cent of the total income of developing countries in 1975 . Some individual countries earn much more than that (Morocco and Mexico for example) but once tourism attains considerable proportions, it brings cultural (even political ) strains as well as commercial gain.

54. Temporary migration of workers to developed countries has been a massive phenomenon for the past 30 years.

55 . A considerable part of this migration is accounted for by ' guest worker ' mi­ gration from Mediterranean regions such as North Africa to Western Europe and from Latin America to the United States. There are also substantial fl ows of tempor­ ary migrant labour from the countries of the Indian sub-continent to the labour­ deficient oil producing countries around the Persian Gulf. Such migration has gener­ ally resulted in improved living standards for the migrants and has provided ve ry substantial home remittances which have assisted developing country growth. The value of such remittances is at least comparable to aid flow s to the Third World.

Financial and Investment Relations 56. The historic pattern of economic development, as set by the United States and the rest of the New World in the eighteenth and nineteenth centuries, is that the developing country runs a trade deficit which it covers by importing foreign capital. That is, it buys more abroad than it sells, and that excess consisits of capital goods and

related services, which are financed by foreign investors. Those goods and services are put to productive use developing the resources and building up the industries and national income of the capital importing nation, though the foreign investor some­ times has to wait years, or even decades, for a return. Australia still illustrates this pat­

tern and is, to that extent, a developing country.

57. As much of the Third World as is willing to participate in these capital flo ws il­ lustrates the phenomenon, too. Developed countries are normally net exporters of capital, and developing countries usually net importers. An exce ption to that rule is that since the 1973-74 oil price rise, a few sparsely populated OPEC countries have

been large exporters of capital. Apart from some direct grants (mostly to Islamic countries), this export of capital has gone via Western capital markets. The OPEC nations accumulated assets in Western banks, and Western bankers lent the money to developing countries to buy capital goods and services in the Wes t. Although it pro­

vided the channel, the West itself ceased to be a net supplier of capital in 1973-74.

58. Foreign capital inflows into developing countries have provid ed 15-20 per ce nt of the resources available for investment there in recent years.' Since th at capital ca me in the shape of foreign machinery and skills, it has contributed powerfully to th e eco n­ omic development of the Third World.

59. The modalities of the capital flow have , howeve r, changed radica ll y from the classic nineteenth century pattern. Whereas the United Sta tes and other devel oping countries in the period imported large amounts of equity, the Third Worl d has bee n suspicious of foreign risk capital. Hence the indigenisa tion ca mpaigns (Indianisa tion,

Moroccanisation) which gave majority or even outright ow nership of local bu iness to local investors, hence, too, the campaigns against the tr ansnational co rporations. Thi partial refusal to accept equity could have reduced th e total ca pital available to the Third World.

I See Appendix H .

34 Chapter II

60. It was offset, in part, by an historically new form of capital transfer: outright grants and official aid offered at concessional rates of interest (and often converted into grants retrospectively). Concessional aid flows from member countries of the Or­ ganisation for Economic Cooperation and Development (OECD) rose from $7.8

billion in 1965 to $13.6 billion in 1975. Given that the GNP of those nations rose even faster, official development aid (ODA) actually declined as a percentage of their GNP, from 0.42 per cent in 1966 to 0.33 per cent in 1976, notwithstanding a stated commitment to provide 0. 7 per cent of GNP.

61. These capital flows would have been inadequate to the Third World's demands were it not for the rise of yet another new form of capital movements: the Eurocur­ rency and (less important for the Third World) the Eurobond markets. These inter­ national capital markets have provided loans to a growing number of Third World countries. Most, it is true, have gone to such advanced nations as Mexico and Brazil,

but significant amounts have also gone to less favoured countries, such as Malawi. Well over half the money owed by the Third World today is due to the private inter­ national capital market.

62. This reliance on foreign borrowing has aroused fears that some Third World nations may have gone too deeply into debt, bringing dangers of default and conse­ quent disturbance of Western credit systems. It has led, too, to demands from some Third World countries for generalised debt relief, or even debt forgiveness. In fact, the Third World's aggregate debts, when corrected for inflation and related to export earnings, are not alarming. 1 Western lenders have, at the prodding of their banking authorities, become more cautious of late, and anxieties about default have subsided, for the time being at least. The campaign for debt forgiveness has similarly subsided. Some small, hard-pressed debtors have had loans converted into outright grants by certain developed countries, but the biggest debtors have seen that Third World cam­ paigns for debt relief were damaging to their own credit worthiness.

3. HARMONY AND CONFLICT OF INTERESTS BETWEEN THE THIRD WORLD AND THE WEST 63. The Third World and the West are at once partners engaged in a range of mutu­ ally beneficial relations and competitors in a confused struggle over the international distribution of power and wealth.

64. The extent of compatibility or harmony of interests between the Third World and the West is indicated by the following examples:

(a) Some Third World countries identify closely with the West in its confron­ tation with the Soviet Union and some others are involved in more limited defence relationships with Western powers.

(b) Many Third World countries, including the bulk of the Non-Aligned Move­ ment, are far less concerned than the West would wish them to be about Soviet efforts to expand its influence in the Third World. At the same time, Third World countries' concern that their own political independence and territorial integrity should not be compromised by external pressures is com­ patible with a Western interest in avoiding situations where the Soviet Union exerts decisive influence over Third World countries.

I See Appendix I.

35

(c) The interest of each Third World government in maintaining stability within and around its own country's borders is compatible with a Western interest in the international stability of the Third World as a whole.

(d) Western countries as a group are vitally dependent on continued oil supplies from OPEC countries. At the same time, these oil sales are the OPEC coun­ tries' main source of income and international influence.

(e) The investment of surplus OPEC oil income in Western countries, which has now accumulated to very substantial levels, generates an important interest for OPEC countries in the continued economic well-being of the West.

(f) Many Third World countries rdy on the private sector as the main com­ ponent of their national economies and, in common with the West, support the basic principles of a market-oriented economic system.

(g) Third World countries' interest in developing economically-to raise their standards of living, to consolidate their independence and to enhance their national status and power-accords broadly with a Western interest in expanding trade and other commercial dealings with a more prosperous Third World and in reducing the need for international aid programs.

(h) Trade between the Third World and the West is of great value to both sides. In 1975, its two-way total was $288 billion, accounting for over 70 per cent of the Third World's total trade and 25 per cent of that of the West. While ulti­ mately the continuation of this trade matters more for the Third World than the West, it should be noted that steady expansion in trade with Third World countries has helped to mitigate the effects on some Western industries of economic downturn during the last three years.

(i) Capital flows from the West in the form of direct investment, commercial loans and official aid, together with related transfers of technology, make an important contribution to the economic development of many Third World countries. At the same time, Western direct investment in the Third World

(whose book value was approximately $67 billion at the end of 1975) and outstanding Western loans to the Third World (worth approximately $154 billion at the end of 1975) represent a considerable and profitable stake on behalf of Western governments and corporations in orderly relations with the

Third World.

(j) Newly industrialising Third World countries share a broad interest with the West in promoting a liberal trading regime which encourages the efficient use of resources in accordance with the principle of comparative advantage. This shared interest is qualified considerably by the preference of governments on

both sides to protect certain inefficient industries against foreign competition.

65. The above list points to a very substantial harmony of interests between the Third World and the West, which cannot be lost sight of in any balanced perspective of their relations. Notwithstanding this, the two groups also conflict in significant ways, as evidenced by the intensity of confrontation which has developed on various occasions during the last decade.

66. The most prominent issues of contention in Third World relations with the We st have been Third World demands for:

. measures to achieve a more even distribution of the benefits of economic development;

36 Chapter 1/

increased Third World participation in decisions on international economic questions; removal of the white minority regimes in southern Africa; and the settlement of the Arab-Israeli conflict on terms acceptable to the Arab Palestinians. Taken one at a time, each se t of demands is extremely serious and none, least of all the first, is amenable to easy accommodation. But there are more serious aspects of the Third World challenge which are often overlooked in the West. One is that the above demands are all linked by a distinctive Third World ideology which, at the level of general claims and demands, imparts to each of them an intense emotional coherence. Another is that each of the various campaigns pursued by the Third World represents, at least in part, a challenge against the West for a greater share of inter­ national power. A well-conceived response to the Third World challenge should take account of both these aspects.

67. The challenge is directed primarily at the West simply because Western coun­ tries are seen to exert decisive influence on the affairs of the Third World. As regards external economic relations, virtually all Third World countries are engaged to some extent in the market-oriented international system within which the Western econom­ ies remain of predominant importance. Thus, even after formal independence has

been achieved , Third World elites see their own countries' economic destinies still subject to strong influence by the former colonial powers through the latter group's domination of world trade and control of investment, technology and aid flows . In the political sphere, Arab countries attribute what they see as Israeli intransigence partly to the firm support Israel receives from the United States. Black African countries

blame Western prevarication for a situation where white minority regimes are able to remain in power in southern Africa. There is now a widely-shared belief by Third World leaders that, through solidarity, and skilful use of what combined leverage is available, they can actually achieve some measure of influence and respect in inter­ national affairs.

68. In fact, to an important extent the proposals for an NIEO may be seen as a quest for a greater share of international power. Most Third World leaders appreciate, often through direct and bitter experience, that wealth and industrial development are measures of national power. They see economic development as , in part, a means

by which their countries might achieve equal status with Western nations, acquired not as a courtesy but as a matter of course. Even pragmatic Third World leaders attach symbolic importance to the NIEO in this respect.

69. There has been a tendency on the Western side to regard Third World solidarity as something which, if it exists at all , must be generated by a broad compatibility of interests among Third World states. In economic terms alone, the Third World rep­ resents such a disarray of circumstances and stages of development that a Western 'realist' is inclined to view Third World solidarity as something very flimsy indeed.

But this is to misunderstand the sources of that solidarity. It derives not so much from a similarity of Third World interests across the board as from a similarity in the way Third World countries perceive their interests with respect to the West. Serious dis­ agreements and disputes among Third World countries in other contexts do not pre­ vent the majority of them from sharing a sense of frustration and resentment over their inferior position in the international system, or from lending combined support to campaigns designed to enhance Third World power and influence at Western expense.

37

70. Third World solidarity works mainly at the general level and, given the diversity within the Third World, necessarily rarely extends to points of detail. But the fact that it exists at this level should not disguise the sense of frustration and resentment that is widely felt among Third World governments and their leaders, a general feeling that

Western power is holding back their political and economic advancement.

71. Apart from the major areas where conflict occurs between the Third World and the West, there are subsidiary issues which give rise to conflict:

Many governments of poor and over-populated Third World countries are reg­ ular recipients of aid , but resent any Western suggestion that they should do more to control population growth or to reduce material inequalities in their societies.

Third World governments are critical of the inherent discrimination involved in the prevailing nuclear non-proliferation regime. The West and the Third World each accuse the other of wasting on arms money which could be better used for economic devel0pment in the Third World.

Third World and Western governments frequently differ-often sharply-on the obligations involved in paying compensation for the expropriation of foreign property. Western criticism of blatant violations of human rights in so me Third World countries often meets the reply that Western societies have no right to impose

their values on others. Third World assertions that the principle of one country-one vote should apply in existing and prospective multilateral institutions (such as the International Sea-Bed Authority) run directly counter to Western interests .

72 . Given that the Third World challenge involves at least in part a quest for greater international power and influence, this is basically so mething which Third World countries will have to acquire for themse lves. An increase in their power, which must by definition detract from the hitherto dominant position of the West and the Soviet

Union, is not normally so mething to be acquired through negotia tion, or through con­ cluding some grand global bargain. But, given the diversity within the Third World , and the certainty that there will co ntinue to be wide differences in stages of economic development between many Third World a nd Western co untries, it would be

unrealistic to expect the cessation of conflict. Whether acco mmodated or not, the pr:!sent political and economic demands of the Third World are lik ely to be suc­ ceeded by others. Continuing competition between the Wes t and the Third World for power and wealth seems inevitable, but so too does its limitation by processes of co­ operation and consultation from which neither side can easil y withdraw.

4. THE STRENGTHS AND WEAKNESSES OF THE THIRD WORLD AND THE WEST IN THEIR MUTUAL DEALINGS

73. The success or otherwise of Third World co untries in pursuin g va ri0us demands for changes to the international sys tem depends as much as a nythin g else o n the so urces of power and influence th ey ca n invoke against the We st. This is not to suggest that every strength or weakness of the two sid es is brought directly into play whenever

they negotiate on a collective basis or th at Third World relations with th e We st mu st inevitably degenerate into so me final tes t of strength. It is worthwhile co mparin g th e main respective strengths and weaknesses , because , regardless of whether or not th ey are invoked directl y, they form part of the background against which ca lcul ations are

38 Chapter II

made by both sides about when to stand firm and when to make the greater effort towards conciliation.

74. Before listing some of the main strengths and weaknesses of the Third World and the West, it should be noted that one of the most important restraints against ar­ bitrary action by either side is the condition of significant economic interdependence existing between many (though not all) Third World countries and the West. Although the steadily expanding flow of goods, services, capital and technology be­ tween the Third World and the West involves many asymmetries and can itself be­ come a new source of international friction, its disruption, by whatever means, would cause serious losses to both sides. This does not mean that the two sides are always equally restrained against avoiding such losses-their perceived vulnerabilities need not be symmetrical.

Third World Strengths 75. A number of features of Third World countries' circumstances have been skil­ fully turned to positive effect by them. (a) Numbers. The Third World has been quick to exploit the significant source of

strength offered to it by the unprecedented weight some parts of the contemporary international system give to numbers. Subject to maintaining solidarity, sheer numerical strength can be an important political resource in certain situations and can increase the confidence of those who enjoy it. It can also increase the stature of otherwise unrealistic and counterproductive pro­ posals or demands.

(b) Solidarity. Third World countries have consciously exploited their numbers at both the global and regional levels, mainly in relation to the West. Third World countries have shown a propensity to caucus in global forums as well as to combine into their own regional and functional bodies. The effectiveness of solidarity in numbers is limited by the general nature of most of the issues on which solidarity can be maintained, by the extent to which the major industrialised countries have been willing to cede authority to supranational

bodies and by the degree of respect accorded to these bodies' decisions in the industrialised countries.

(c) Righteousness of cause. The comparatively recent advent of most Third World countries on the international scene and their relative political and economic backwardness have been turned to moral and political advantage by appealing to the Western values of equality, justice, welfare and redistri­

bution. The sense of righteousness and will to act are reinforced by the exist­ ence of vocal pro-Third World constituencies within the industrialised democracies. Third World countries have made effective use of Western guilt feelings, opposition in Western countries to the use of force to uphold their interests, and the weakened legitimacy of Western governments, leadership and values.

(d) East- West conflict. The exploitation of East-West rivalries and the fact that both sides have seen the Third World as important ground to fight for.

(e) Oil. Control of nearly all the non-communist world's oil exports is an import­ ant source of power for a handful of Third World countries. While operating essentially in terms of self-interest, this group has demonstrated a willingness and ability to link power over oil prices with Third World goals and have increased their own influence within the Third World by doing so. An even

39

smaller group-the Arab surplus oil producers (principally Saudi Arabia, Kuwait, the United Arab Emirates and Libya)-possess most of this power in that they possess some discretion over their production levels. Because of the relatively low absorptive capacity of their economies for revenues from oil

sales, the decision whether to increase production in tune with growth in Western demand is to a considerable extent a political one. The financial di­ mension of oil power has also contributed to the change in the objective power relationships between Western consumer countries and the oil states. The latter have acquired considerable investments in Western countries and the disposition of these investments as between Western countries gives them

an important influence on international monetary developments. By 1976, Saudi Arabia, Libya and Kuwait had accumulated some $32 billion in gross international reserves.

(f) Government involvement in economic matters. The involvement of govern­ ments in business transactions hitherto normally effected by non­ governmental interests has resulted in the politicisation of international econ­ omic relations. Operating in more centralised political systems, Third World countries sometimes enjoy a power of initiative, particularly in international

forums, in the establishment of linkages between economic and political issues which is unmatched in Western countries, with their more complex domestic structures and political restraints.

(g) Control of foreign private capital. Although heavily qualified by a concern to maximise inflows of capital, the influence of host countries over terms on which foreign private capital may be admitted and its operations regulated, and under which multinational corporations may function in their territories is considerable.

(h) Likelihood of cartel action. Although there has been considera ble specu­ lation over the possibility of cartel action by Third World countries in respect of commodities other than oil, the likelihood of such action being effective is slight in view of alternative sources of supply, demand elasticities, which

reflect a potential for short-term substitution, and the importance to pro­ ducers of maintaining current earnings.

Western Strengths

76 . Despite these Third World strengths, Western countries enj oy the overwhelm­ ing predominance of bargaining power in international dealings with Third World countries. Western power derives not only from its very great industrial, te chnologi­ cal, military and financial capacity compared with that of the Third World but also

from the almost universal desire of Third World countries to obtain increased qu anti­ ties of these goods and services from the industrialised countries and access to their affluent markets.

77 . The chief sources of Western strength in dealings with th e Third World are thu :

(a) Control of capital flows, technology and manage ment skills. Wes tern gove rn­ ments and private companies exert influence (alb eit not unqu a lifi ed ) ove r th e direction and flow of capital , technology and manage ment kill s so ught by Third World countries for their economic development. (b) Dependence on Western military equipment and techn ology. Many Third

World governments depend on continuing fl ow fr om We tern ource of

40 Chapter II

military hardware, military technology and matched support systems. Wes­ tern countries supplied 69 per cent of total arms exports to developing coun­ tries in 1976 and 73 per cent of the cumulative total from 1955. 1

(c) Domination of financial markets. Middle-income developing countries have an interest in Western financial markets for new capital requirements, refinancing and for servicing debt already contracted. The fact that OPEC's surplus oil revenues must largely, of necessity, be invested in Western coun­ tries means that OPEC has a vested interest in not disrupting Western economies.

(d) Aid. Civil aid flows from OECD countries and even from multilateral aid institutions are a source of specific leverage for Western countries to apply over those Third World countries where aid inputs are of significant pro­ portions and where strategic considerations are not of major importance. Indonesia, for example, received official aid in 1973-75 amounting to 3 per cent of its GNP and 17.1 per cent of its imports. In 1976, the OECD countries provided over 70 per cent of all official aid disbursements while OPEC's share was 2 7 per cent and the communist countries' was only about 3 per cent. 2

(e) Services. Maintenance and specialist engineering support industries and ser­ vice for sophisticated equipment are predominantly under the control of Western countries. Their provision to foreign countries are, at least theore­ tically, open to government interdiction.

(f) Food staples. Western countries (especially the United States) have a com­ manding influence over the external supply of food staples, especially grains, to Third World countries. This external supply constitutes only 5 per cent of the Third World's total consumption, but, given the fact that in many Third World countries supply and demand are very finely balanced, its importance is greater than that figure would indicate. The use of food as an instrument of negative and positive leverage is fraught with difficulties. Not the least of these are the uncertain grain stock situations of both the Soviet Union and China and the domestic political problems attendant on Western govern­ mental interference in the marketing activities of powerful rural producer groups.

(g) Bilateral arrangements. The predominant economic and political weight of the major industrialised countries provides continuing incentives for particu­ lar Third World countries and groups of countries to come to terms or under­ standings with individual major powers. Examples of such relationships, which, though falling short of client-patron intimacy, may include political and even security guarantees as well as economic linkages, are Brazil's re­ lations with the United States; the African, Caribbean and Pacific (ACP) states' relations with the EEC; some of the franco phone African states' re­ lations with France; and, closer to home, Papua New Guinea's relations with Australia.

Central Intelligence Agency of the United States (CIA), Handbook of Economic Statistics, 1977, p. 71 . 2 OECD, 1977 Review, Development Co-operation- Efforts and Policies of the Members of the Develop­ ment Assistance Committee, p. 64.

41

The Weaknesses of the Third World and the West

78. Some weaknesses are implicit as counterparts of each side's strengths and have accordingly been traversed above. Others are fundamental · and need only brief mention.

79. The Third World's weaknesses lie principally in its place in global political and economic structures. It is heterogeneous in the extreme and riven to a greater extent than the Western group by internal disputes. Even on the few issues of common con­ cern it maintains solidarity only with difficulty. The durability of coalitions involving Third World countries is thus questionable, especially under stress.

80. As well, there is the overall weakness of the Third World in its dependence on Western markets and supplies and on both the West and communist countries for arms and political support.

81. Western countries' weaknesses, both individually and collectively, are cor­ respondingly fewer.

82. There is, however, a passive sense in w.hich the Western group is at a compara­ tive disadvantage in dealings with the Third World. Having more at stake, Western countries are in a sense politically and strategically more vulnerable than Third World countries to the consequences of international disorder, or its threat. The ability of Third World countries, especially those strategically placed, to threaten col­ lapse, chaos or extreme radicalisation functions as an incentive for Western countries,

more than for Third World countries, to do something to avert it. An example is Egypt, whose precarious economic and political situation has on occasions compelled the leading countries of the West to afford it careful attention and to make concessions to it. The same has applied to Bangladesh.

83. Notwithstanding the existence in Western countries of alternative sources of supply of many natural resources, the West's concern to maintain access to the cheapest sources of supply and to protect foreign investments may also be seen as something of a weakness, even though disruptive action by Third World countries

would be against their own economic interests. Whether there is a significant weak­ ness or not, there can be little doubt that the West's increased exposure to risk, com­ pared with, say, 20 years ago, has added a new dimension to Western-Third World relations, even if of a somewhat intangible nature. This is reflected in the fact that one of the Western responses in the North-South dialogue has been to seek guaranteed

access to supplies of commodities and certain guarantees of treatment of foreign investment.

84. An old ingredient forms an important part of this new dimension in relations be­ tween the West and the Third World, and contributes to Western weaknesses. Com­ petition between OECD countries for economic or political influence in parts of the Third World has, on occasion, made it difficult for Western countries to reach agree­

ment on which strategies to pursue, and Third World countries and groups have been able to exploit differences within the Western group to their advantage. Western disunity has been clearly evident, for example, in the tensions which arose between the Netherlands and other members of the European Communities at the time of the

1973 Middle East War and the Arab oil embargo, and in the differences between France and Belgium during the rebel invasion of Shaba Province in Zaire. The dis­ parate positions of developed countries in Group Bin UNCTAD, and in the Group of 8 in CIEC, notably the gap between those members pursuing a conciliatory line on

42 Chapter II

Third World demands and those advocating a firm position, have made it difficult for Western countries to caucus effectively and to adopt other than negative stances.

85. Whether it is real vulnerability or not, such a sense of increased exposure on the part of Western governments and economic interests exists as a source of Third World pressure on the West, albeit pressure of a negative, indiscriminate and uncontrolled kind.

PART B: THE THIRD WORLD AND THE MAJOR COMMUNIST STATES

1. SOVIET UNION

86. Since its inception, the Soviet Union has taken a close interest in what is now the Third World. In its earlier decades this interest was associated with a strategy of in­ direct approach, whereby capitalism, too formidable to be attacked head-on, would be weakened by undermining it at what was assumed to be its most vulnerable point, its colonial possessions. Since the mid-1950s the basic Soviet aim has been to enlist the support of an independent and revisionist Third World against the First World and the status quo it represents-an aim which has been described as 'comparable in scope with Canning's calling in the New World to redress the balance of the Old'.' Support for national liberation movements and the effecting of an all-round cooper­

ation with the young, developing countries are officially described as one of the four basic tasks of Soviet foreign policy. 2

87. From the beginning the Soviet Union enjoyed the advantages that (a) the thrust of anti-colonialism was against Western countries and that the Soviet Union itself was widely seen and admired as an underdeveloped country effectively coping with the problems of modernisation; (b) certain parts of its ideology-notably its analysis of imperialism- were attractive to anti-colonial movements; and (c) it had the persist­ ence, patience and staying-power which flowed from long-term strategic and ideo­ logical perspectives and objectives and the belief that history was on its side.

88 . It also suffered from two very serious handicaps. First, both as an ideology and as a movement communism inevitably came into conflict with nationalism, the most powerful force at work in the Third World. Externally controlled communist move­ ments, required to toe lines determined by Soviet interests, found it difficult to retain their nationalist credentials. The Soviet Union pursued various strategies in relation to the nationalist movements, but the basic conflict of interest involved in competition for the same power base made chronic friction inevitable. Secondly, until the last two decades the limited strategic reach of the Soviet Union and its comparative economic we akness made it impossible for it to project its power effectively into most of the Third World. Of necessity, it depended chiefly on the instruments of the weak ­ propaganda, agitation and clandestine organisations.

89. When the decolonising revolution took place it owed little to Soviet efforts, even in those few instances where communists gained power. Initially, in the period 1945 -52, Stalinist suspicions of what could not be controlled, and a Cold War ' two

I Ro bin Edmonds, Soviet Foreign Policy 1962-1973, OUP, 1975 , p. 53. Edmonds is a senior British diplo ma t. 2 History of Soviet Foreign Policy, Vol. 2, Moscow, 1971 , p. 486.

43

camp' model of the world which made it necessary to regard the new states as part of the 'imperialist' world, combined to produce a hostile Soviet attitude towards the emerging Third World. Gradual awareness that the new states were not in fact the 'tools' of Western countries and that opportunities were being missed by treating

them as such led to a reassessment and an active policy of competing with the West­ and particularly the United States-for influence and support. Under Khrushchev this policy was sometimes pursued in a more adventurist manner than the Soviet Union's military strength and reach at that time justified and it suffered some serious setbacks. Subsequently, the approach has become more pragmatic, systematic and related to

the ability to project power.

Current Soviet Interests 90. The Soviet Union's current interests in relation to the Third World are:

(a) To strengthen its influence in those Third World regions of direct strategic importance to it. The Middle East, South Asia and the Koreas, the three Third World areas which rim the Soviet controlled' heart-land', have been overwhelmingly the principal foci of Soviet interest in the Third World. The oil resources of the Middle East increase its strategic importance enormously.

The bulk of Soviet economic and military aid has gone to these regions.

(b) To improve its comparative position in relation to the West in general and the United States in particular throughout the Third World. To this end, the Soviet Union seeks both to acquire positive influence, with individual Third World countries and in the Non-Aligned Movement, and to undermine Wes­

tern influence. As well as offering political, military and economic aid, it seeks to exploit anti-Western sentiments in the Third World and the relationships of Western governments with states such as Israel and South Africa. It has an interest in convincing Third World countries that being a client of the Soviet

Union is more profitable than being a client of the United States.

(c) To improve its comparative position in relation to China throughout the Third World. In practice this means competing with China in South and South East Asia, which are strategically important for China; in sub-Saharan Africa, where the Chinese aid effort has been concentrated; and in multilat­

eral forums. In South East Asia at least, China probably looms larger in Soviet calculations than does the United States.

(d) To assert itself and gain acceptance as an authentic global superpower with a legitimate interest in all regions of the world and the strategic reach to give that interest effect. 1 The Soviet Union has a general interest in ensuring that its prestige reflects its recently achieved military parity with the United States. Extending its presence and the range of its interests into parts of the Third

World where it has previously not been very active-e.g. by deploying its re­ cently acquired naval power-is one way of doing this.

I ' The Soviet Union is a great power situated on two continents, Europe and Asia , but the range of our country's international interests is not determined by its geographical position alone ... The Soviet people do not plead with anybody to be allowed to have their say in the solutio n of a ny question involv­ ing the maintenance of international peace, concerning the freedom a nd independence o f the peoples

and our country's extensive interests. This is our right, due to the Soviet Union's position as a great power. During any acute situation, however far away it appears from our country, the So viet Union 's re­ action is to be expected in all capitals of the world . ' Foreign Minister Gromyko to the Supreme Soviet, 1968.

44 Chapter II

(e) In order to further all these interests, to make incremental gains in the Third World wherever reasonably low-risk, low-cost opportunities for doing so occur. The Soviet decision to establish a strong presence in southern Africa probably reflects a perception on their part that such opportunities exist in that region, rather than a re-evaluation of the region's strategic importance. (This judgment does not apply to the Horn of Africa whose intrinsic strategic importance is much greater.) At a different level, the South West Pacific may also be seen as an area which could be probed for such opportunities.

Perceptions and Judgments 91. The Soviet pursuit of these interests in the current situation is conditioned by sev­ eral key perceptions, interpretations and judgments. First, confidence that the 'world correlation of forces' has shifted decisively in its favour appears strong. It is based on its own increased military strength and on the belief that Western power and will have been eroded by events over the last decade. Secondly, the Soviet view of detente refers to direct super and great power relations and is understood as a concept provid­ ing for limited spheres of cooperation and relaxation of tensions within a larger con­ text of continued competition. It in no way involves a renunciation of Soviet support for and assistance to 'progressive forces' in the Third World. Thirdly, while the first two points do not mean that the Soviet Union is prepared to precipitate a direct con­ frontation with the West where Western vital interests are at stake, it seems to be set on a course of deliberately but cautiously testing Western will-power in peripheral areas, which are mainly in the Third World. Fourth, in this process of testing, it seems clear from its behaviour that tactically the Soviet Union is prepared to proceed largely in a pragmatic way determined by power considerations and opportunity rather than ideological considerations. It has been as prepared to maintain friendly relations with

Uganda under Amin and to supply large quantities of military equipment to Colonel Qadhafi (Libya is believed to have received more Soviet arms than any other Third World state in 1975 and 1976) as it has been to support Marxist movements in southern Africa. This does not, of course, establish that ideology plays no part in Soviet foreign policy.

Advantages and Limitations 92. The Soviet Union's major political advantage in relation to the Third World is that in certain respects it provides Third World countries with an alternative to depen­ dence on the West and with a means of exerting leverage on the West. To the extent that Third World countries see such dependence as a major threat to their indepen­ dence and are concerned to avoid or reduce it, and insofar as they continue to want to exert leverage on the West, the Soviet Union will continue to enjoy this advantage.

93 . In itself, this does not necessarily reflect a belief that the Soviet Union has disin­ terested motives or intentions. But in fact Third World countries are often less suspicious of Soviet involvement than they are of Western involvement. This is true even of some moderate governments. At the Organisation of African Unity's Summit in Khartoum in July 1978, for example, General Obasanjo, the Nigerian Head of State, expressed such a view:

'The fact of the matter is that Africa was colonised by Western power and not the Soviets. In the struggle for independence and freedom, the only source of effective support was the Eastern Bloc countries. The Soviets were therefore invited into Africa for a purpose and that purpose was to liberate the countries to which they were invited from centuries of cruelty, degradation, oppression and exploitation. '

45

94. The major source of influence in the Third World which the Soviet Union pos­ sesses is its capacity and willingness to provide military equipment and training to Third World clients on a large scale. Between 1955 and 1976 the Soviet Union sup­ plied the Third World with military equipment worth $17 billion, $12 billion worth of which was delivered after 1970.1 In 197 6, its arms exports to the Third World

amounted to $2.2 billion, approximately 55 per cent of the value of United States exports in the same year. 2 This difference is partly compensated for by the fact that the Soviet Union operates under- fewer restrictions or inhibitions than any Western country as a supplier of arms. The major recipient of Soviet arms has been the Middle East, but the amount going to sub-Saharan Africa has increased very rapidly in the last few years.

95. Given the number of military regimes and militant radical movements which exist in the Third World, the number of disputes between its members, the concern with both internal and external security, the prestige attached to military strength and the increasing constraints to which Western arms supplies are subjected, the Soviet

Union's willingness and capacity to supply arms is a major source of strength.

96. Another advantage which the Soviet Union enjoys is the availability, certainly in Africa but potentially elsewhere, of surrogate Cuban forces to intervene in Third World conflicts. These have enabled the Soviet Union to exert a decisive military influence on events in Angola and Ethiopia without running the (probably unaccept­

able) risks involved in the use of Soviet ground troops in significant numbers.

97. As against these advantages the Soviet Union also suffers from so me very im­ portant limitations. While it is an authentic global power, it is an extremely lopsided one, with its economic strength being in no way comparable to its military strength. As far as the economic problems of the Third World are concerned , the co ntribution it can and does make in terms of both aid and trade is a marginal one co mpared with

that of the West. In 1976, it contributed only 3.6 per cent of total bilateral aid to the Third World (if multilateral aid is included, the percentage falls to 2.9 per ce nt) .3 In 1975, it accounted for only 2. 7 per cent of Third World exports and 3. 1 per ce nt of its imports. 4 Given the weight attached by the Third World to the so lution of its eco n­ omic problems, this represents a severe limitation of Soviet influence.

98. Apart from this, the Soviet Union shares many of the disadvantages experienced by Western governments in dealing with the Third World. The basic force of nationalism and the sensitivities re sulting from it are re sistant to all outside attempts at domination, and the more any country succeeds in accumulating power the more it is likely to become an object of suspicion. In the speech quoted a bove, General Obasanjo went on to say:

'We need in Africa massive economic assistance to make up for the lost ground of the co l­ onial era and not military hardware for self-destruction and sterile id eo logical slogans which have no relevance to African society ... The Soviets should therefore see it to be in their interest not to seek to perpetually maintain their prese nce in Africa even after the purpose for which they were invited has been achie ve d . This way th ey run the risk of being

I CIA, Handbook of Economic Statistics, 1977, p. 69. 2 CIA, ibid., pp. 68-9. 3 CIA, ibid., p. 69. (The CIA estimates that Soviet bil ateral aid disbursements in 1976 amounte d to $ 420 million. The OECD estimate for the same period is lower at $365.9 mil lion.) 4 UNCTAD, Handbook of International Trade and Development Statistics, Supplement 1977, pp. 72 and

74.

46 Chapter II

dubbed a new imperial power as indeed they already are being called even by those with whom they have had long association'.

The Soviets are also as vulnerable as the West to the vicissitudes and instabilities of Third World politics. Changes in domestic regimes and reversals in the attitudes of local leaders can wipe out accumulated political credit overnight, as the Soviet Union's experience in Indonesia, Egypt, Somalia and elsewhere has demonstrated. In the opinion of many observers, the diplomatic heavy-handedness of the Soviet

Union, and its racialism, add significantly to its problems in this respect.

Conclusion 99. The conclusion which the above leads to is not that the Soviet Union has a fixed 'grand design' in relation to the Third World but that it has a serious and long-term interest in extending its influence in it. The focus of its interests will be determined partly by the intrinsic strategic importance of particular Third World regions (the Middle East and South Asia), partly in terms of the perception of opportunity (cur­ rently sub-Saharan Africa) and partly in terms of the means available to it. In the last respect, its military strength and limited ability to provide economic assistance sug­ gest that it has a vested interest in the continuation of conflict both between Third World countries and the West and among Third World countries. In conditions of harmony where economic development takes precedence its relevance diminishes substantially.

100. The Third World and the Soviet Union have it in common that they are both concerned to alter the status quo which the West is concerned to preserve. It is in the interest of the Soviet Union to stress this while obscuring the fact that the changes it and the Third World wish to bring about are different and ultimately incompatible.

2. CHINA

China's Identification with the Third World 101. In the Chinese leadership's conceptualisation of the international system, the 'First World' comprises the two superpowers, the 'Second World' comprises the other developed countries, and the 'Third World' comprises all the developing countries, including China. The difference between this schema and the one accepted in the

West is to be explained by China's interest in separating the Soviet Union both from other communist countries and the Third World, while linking itself firmly with the latter.

102. An explicit statement of the Chinese 'three-world' view was given by Vice Premier Deng Xiaoping at the United Nations in April1974. He declared, inter alia:

(a) 'the numerous developing countries . . . constitute a revolutionary force propelling the wheel of history and are the main forces combating colonialism, imperialism and in particular the superpowers;' and (b) 'China is a socialist country, and a developing country as well. China belongs

to the Third World.'

103. China's aspirations for leadership of the Third World have been a consistent theme of its foreign policy, but its identification with the Third World is less complete than the above formulation might suggest:

China differs from Third World countries by its possession of nuclear weapons and by the claim that it could defend itself from attack by either superpower;

47

. its autarkic tendencies have meant that, at least so far, it has not been involved in the kind of interdependencies which exist among most Third World and Western countries; and

. while giving support to the NIEO demands and other typical Third World cam­ paigns, China does not caucus with the Third World in the United Nations sys­ tem or in other multilateral forums.

Objectives and Activities in the Third World 104. China's main foreign policy preoccupation is countering the threat it sees as posed to its national security by the superior military power and material resources of the United States and the Soviet Union. Of the two superpowers, the Soviet Union is considered to pose the more serious and immediate threat.

105. China's policies towards the Third World, including decisions about the extent of support to be given insurgency movements, appear to be very much subordinate to these central security concerns. For example, pragmatic judgments about the value of cooperative relations with Japan and other developed countries, both to encourage their resistance against the Soviet Union and to help China's process of industrialis­

ation, seem to qualify in practice the great emphasis given to the Third World in China's public statements. Nevertheless, relations with the Third World, especially with that part of it lying in Asia, have their own relevance to China's security and an­ tagonism towards the Soviet Union.

106. China's main objectives in the Third World appear to be:

to counter or minimise Soviet influence throughout the Third World, but especially in Asian countries on or near China's borders;

to cultivate China's own political influence in the Third World, partly as a means of improving its standing vis-a-vis the superpowers; and

to maintain as effectively as possible the international isolation of theN ational­ ist regime in Taiwan.

107. China lacks the resources to project power on a global scale and, beyond Asia, its influence in the Third World is not particularly profound. It maintains diplomatic relations with the bulk of Third World countries and disburses to many of them fairly modest amounts of economic and military aid. Between 197 4 and 197 6, China's total

economic aid disbursed to the Third World was worth $610 million, compared with $1,595 million from the Soviet Union. 1 During the same period, China supplied Third World countries with military equipment, including both sales and aid, worth $170 million, compared with $6,125 million from the Soviet Union. 2 In terms of total

Chinese aid committed over this period, rather than actual disbursements, 41 per cent was directed to Africa, 58 per cent to Asia, and 1 per cent to Latin America.

108. Events in sub-Saharan Africa have exposed the limitation of China's capabili­ ties in the Third World beyond its own region. For a number of years it made a major aid effort in East Africa and the Tanzam Railway represented its single largest aid project. As long as the Soviet Union was inactive in Africa, this gave the Chinese some importance in the region. Once the Soviet Union turned its attention there, however, China was unable to compete and its present influence is very small.

I CIA, op. cit., p. 69. 2 CIA, ibid.

48 Chapter II

109. Sino-Soviet rivalry in Asia is most intense in Indo-China where it has become interwoven with traditional rivalries and suspicion among the local states. China's continuing concern is to resist further consolidation of influence by either the Soviet Union or Vietnam. 1 In non-communist South East Asia, China's general standing is

better than that of the Soviet Union, though it is handicapped by suspicions enter­ tained by local governments over the loyalties of Overseas Chinese and over China's support for insurgency movements.

Support for Insurgencies 110. Although China currently places greater pnonty on relations with non­ communist Third World governments than with insurgency movements seeking their overthrow, it still gives support for revolutionary activity in several countries.

Whereas nearly all leftist insurgency movements outside Asia are aligned with the Soviet Union, those in non-communist South East Asia are Maoist in orientation. China's press and radio continue to give moral support to revolutionary insurgents in Malaysia and Thailand and China provides material support to the communists in Burma.

Ill. It seems unlikely that China will abandon completely its support for these movements. Despite the apparent contradiction with China's official relations withes­ tablished governments, support for revolutionaries provides a special sort ofleverage. China has the unique ability to influence the general atmosphere of international re­ lations in South East Asia, simply by the extent to which it chooses to support local governments and their domestic oppositions.

I See also paragraphs 48 and 49 of Ch apter IV.

CHAPTER Ill

The Third World's Impact on International Structures

49

A. Third World's Impact on the United Nations System and the Specialised Agencies­ Constraints on Third World Influence-Changing Tenor of North-South Dialogue­ Prospects for Future Global Negotiations-Gradual Acceptance of Certain New Prin­ ciples in International Politics. B. Claims on the International Economic System-Changes in the System Already Made­

Rationale of the NIEO- The Proposals: trade and commodities; industrialisation; transfer of resources; debt; international monetary and financial system; investment and technology; food and agriculture-Auxiliary Aspects-How the NIEO Proposals have been Received-The Future of theN lEO-TheN lEO in Perspective.

This Chapter considers the Third World's impact on the international sys tem in terms of: (a) Third World activity and influence on multilateral institutions, especially the United Nations system; and

(b) concerted attempts to alter, through negotiation among governments, certain features of the prevailing international economic system.

2. Obviously, the Third World's impact extends well beyond the two aspects men­ tioned above. Political instability in Third World countries, whether spontaneous or induced from outside, and disputes or hostilities among Third World countries ca n affect seriously the interests of other nations. Similarly, in the economic sphere, the re­

percussions for international relations of sustained economic growth in certain Third World countries or of chronic economic failure in others are likely to be ultim ately more profound than the impact of concerted campaigns to alter intergovernmental arrangements. These sorts of issues are addressed in Chapters IV and V, which deal

respectively with the political and economic prospects of the Third World .

PART A: THE THIRD WORLD 'S IMPACT ON MULTILATERAL INSTITUTIONS

3. The establishment after the Second World War of the intern ational political structure commonly referred to as the United N ations sys tem wa made possible by a spe cial situation which applied temporarily in international affairs - th e unchall enge d he gemony of the United States at the end of hos tilities. Its es ta blishment also refl ected

50 Chapter III

widely held expectations and aspirations in Western countries which have been simi­ larly altered by subsequent events. On his return from the 1943 Moscow Conference where agreement had been reached on the foundation of the United Nations (UN), Cordell Hull, the then US Secretary of State, expressed these aspirations when he declared that the new international organisation would mean the end of power poli­ tics and usher in a new era of international cooperation. Three years later, a British Minister of State told the House of Commons that his Government was 'determined to use the institutions of the United Nations to kill power politics in order that, by the methods of diplomacy, the will of the people shall prevail'.

4. It was intended that the centre-piece of the· new political structure would be the United Nations Security Council whose permanent members-the victorious great powers-were meant to collaborate to preserve international peace and order, as they had collaborated in the War. Events determined that the assumed unity of the great powers hardly outlasted its birth, with the result that the Security Council became largely ineffective. During the 1950s the United States and its allies were sometimes able to sidestep the Security Council when it was deadlocked by a Soviet veto, by ini­ tiating peace-keeping action in the General Assembly where they could muster a two­ thirds majority. In resorting to such a course they enhanced the Assembly's authority in a way which had not originally been intended. It is ironic that an American com­ mentator was able to report approvingly in 1954 that the Western-dominated Gen­ eral Assembly had become the 'politically dominant organ of the United Nations', for ten years later the Third World's control of the General Assembly would become a source of increasing Western dissatisfaction with the United Nations system. 1

5. Initially, the main achievement of the handful of Afro-Asian countries in the United Nations was to use the General Assembly as a platform from which to de­ nounce colonialism. From the late 1950s onwards, however, Third World influence in the United Nations system grew steadily as more and more countries achieved independence and as the Afro-Asian group began to find common cause with Latin American countries on an expanding range of issues.

6. Considered in broadest terms, the impact of the Third World on the United Nations system has been profound and has involved the following main elements:

(a) dilution of Western great power influence in the Security Council by an expansion of non-permanent membership in 1965 with the result that Third World states now command a bare majority of votes. (The Permanent Members still retain their veto power; but whereas before the early 1960s it was the Soviet Union which usually had to exercise that power, since then the Western powers have had increasing resort to it.);

(b) forcing the Western powers on to the defensive in an institution which they had created and causing Western public opinion to become increasingly disillusioned with an institution which was thought to embody many of the West's political ideals and aspirations;

(c) making effective use of the General Assembly and the Security Council as arenas in which to advance Third World political causes such as anti­ colonialism, self-determination and anti-racialism and to apply these prin­ ciples in specific areas of international disputation such as the Middle East and southern Africa;

Hans J. Morgenthau, Politics in the 20th Century, Vol. II, University of Chicago Press, 1962, p. 125 .

51

(d) focusing international attention on global economic questions, particularly as they relate to the problems of poverty and international development, win­ ning acceptance of the notion that developed countries are obliged to help developing countries in some way, and establishing new economic in­ stitutions such as the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Program (UNDP) and the

United Nations Industrial Development Organisation (UNIDO); (e) establishing group confrontation and group negotiation between Third World and Western states as a normal aspect of multilateral diplomacy as practised in forums such as the United Nations General Assembly,

UNCTAD, the United Nations Educational Scientific and Cultural Organis­ ation (UNESCO), the International Labour Organisation (ILO), and increasingly in various other more technical organisations. In some bodies (for example, UNCTAD) the groupings such as the West and the Third

World have becomed institutionalised; and (f) taking full advantage of the services of secretariats of multilateral institutions (many ofwhose members come from or sympathetic to the Third World) to advance Third World causes. 7. The Third World's overall impact on the various United Nations specialised agencies has been less clear-cut than in the General Assembly or its directly subsidi­ ary organs such as UNCTAD. 1 This has been partly because most of the specialised agencies are designed to deal with inherently technical subjects, and partly because in many of them the Third World 's numerical supremacy is not the same source of influence that it is in the General Assembly. Even so, there are few specialised agen­ cies whose activities have been immune from concerted Third World pressure and the

following trends have been particularly noteworthy: . Third World countries have pressed vigorously for specialised agencies to be more responsive to their development needs. For example, Third World press­ ure resulted in a Food and Agricultural Organisation decision in 1976 to spend

a proportion of regular budget funds on technical assistance to developing countries and similar pressure has been evident in other agencies. In the World Intellectual Property Organisation, which deals with copyrights and patents, Third World countries have been demanding, so far with no success, that the

Paris Convention of 1883 for the Protection of Industrial Property be revised to accord them preferential treatment in the transfer of technology. Third World countries have sought to introduce contentious political issues into the proceedings of the specialised agencies, sometimes on very contrived grounds. Thus, Israel's intransigence in relinquishing occupied Arab territory is

taken up directly as an issue in ostensibly technical agencies. On other occasions, there are protracted arguments about the right to membership of countries such as the two Koreas, South Africa and Chile, even when a particu­ lar ageccy's constitution does not provide for suspension or expulsion of

members.

8. While it can be fairly said that during the past two deca des th e Third World has substantially transformed the character of the United Nations sys tem, some ca ution is necessary in assessing what effective power or other benefits these changes have generated for Third World countries. The United N ations has authority by virtue of

I Appendix P contains information on the Third World 's activities in specialised age ncies .

52 Chapter III

its role as the central institution of multilateral diplomacy. It also has some influence in its own right on the course of international affairs by virtue of its members' collective capacity to embrace, legitimise or denounce all manner of political causes. But it is im­ portant to bear in mind that, at least in conventional terms, the United Nations has no power of its own, except that exercised on its behalf by national governments which

are both able and willing to act on its various resolutions. 9. In the General Assembly, the situation has now developed where a group of small states representing 10 per cent of the population of the United Nations' mem­ bership and paying less than 5 per cent of the budget are able to provide a two-thirds majority. It is clear, therefore, that the system can easily become unworkable unless the countries controlling a majority are prepared to engage in meaningful nego­ tiations with the small group of more powerful countries whose cooperation is essen­ tial to the implementation of many United Nations resolutions. Should Third World countries prefer instead to persist in the practice of adopting resolutions without thought to implementation, for consciousness-raising or whatever other purpose, they will ultimately drive Western countries out of the United Nations and, as once warned by Kissinger, inherit no more than an 'empty shell'. That is to say, the United Nations can serve Third World interests only so long as the United Nations' legit­ imacy and authority are recognised by those the Third World wants to influence.

10. There have been various signs during the last two or three years that the con­ tinuing assertiveness of the Third World in several multilateral forums has come close to producing a serious backlash from Western countries. One indication of this was the appointment of Patrick Moynihan as United States Ambassador to the United Nations in 1975, where his robust style in confronting the Third World on various issues at least succeeded in making him something of a folk-hero among his coun­ trymen, regardless of whether or not it advanced United States interests vis-a-vis the Third World. A similar pattern of reaction against excessive Third World asser­ tiveness is shown by the United States withdrawal from the ILO, the firm stand taken recently by Western countries in UNESCO on press freedom, and the continuing deadlock in the Law of the Sea negotiations.

11. Overall, the tenor of the North-South dialogue in multilateral forums seems to have changed considerably since the tense period during 1974 and 1975. For the most part, Western countries now appear to be less high-handed, more willing to negotiate, but not much more willing to make concessions. In short, they seem to be pursuing the objective of 'talking them to death'. Third World countries, perhaps sensing the risk of provoking an angry reaction from the West, are, at least for the moment, far less strident in pressing demands and seem to be resolved to pursue their goals by tactics of attrition over the long term.

12. The Third World's impact on the course of multilateral diplomacy over the next decade or so will depend to an important degree on whether or not global solutions to various problems will continue to be attempted through multilateral negotiations with almost universal representation, for it is in such negotiations that Third World numbers are most telling. The recent record of global negotiations such as the Confer­ ence on International Economic Cooperation (CIEC), those on the Law of the Sea and discussions in the United Nations Committeee of the Whole has not been especially encouraging for either Third World countries or anyone else concerned. A perceptive South East Asian observer has suggested that the current Law of the Sea

negotiations may be the last great global attempt at adjustment of relations between the Third World and the West. In a similar vein, Geoffrey Barraclough notes in a re­ cent article that ' the focus of North-South relations has moved away from high-level

53

confrontations, such as the Conference on International Economic Cooperation in Paris, to direct bargaining between particular countries or groups of countries '.1

13. One of the main reasons why global negotiations have tended to be protracted and unproductive is the constrained negotiationg style of the Third World itself. Be­ cause the starting position of Third World countries typically involves a delicate bal­ ance of disparate interests, arrived at often with great difficulty and after multiple compromises, and because they are concerned to maintain unanimity, they have little

flexibility in developing new positions in response to the cut and thrust of serious negotiations. As described by Darman in the context of the Law of the Sea nego­ tiations, 'they enforce a kind of rule of unanimity among themselves ... which gives veto power to a relatively small number of extremists. The problem is com­ pounded by the fact that many states, believing they have no interest higher than Group of77 solidarity, instruct their delegations simply to vote with " the 77" '. 2

14. Many less developed Third World countries do not have the administrative re­ sources to support the analysis required in fluid negotiating situations. This, to some extent, explains the heavy reliance on secretariat resources, and as a consequence, the tendency of secretariats' to carry the flag for Third World clients. By contrast, the ad­ ·ministrative resources of Western countries tend to be built up effectively to service an

interest being exposed in a multilateral forum. The emergence of technically complex negotiations, however, often leaves Western political leadership heavily dependent on the judgments formed by the specialist representatives, with the consequence that they may be slow to react to the international political momentum which develops in

relation to an issue. Efforts by heads of government to break through the inertia caused by these problems have become a feature of international diplomacy and may be a continuing requirement as the range of iss ues claiming multilateral solutions proliferates.

15. Despite these difficulties, and whatever the prospects of a productive outcome, it seems likely that the Third World will want to persevere with global negotiations in some situations. They might be important, for example, in advancing Third World claims in relation to new global 'commons' such as Antarctica, space and the air waves and perhaps for establishing new institutions modelled on the International Sea-Bed Authority. 3 Global negotiations might also be important for ensuring Third

World participation and influence in multilateral regimes to protect the environment, to supervise satellite telecommunication and, as technology advances further, to con­ trol the weather. Regardless of whether a Law of the Sea Convention is concluded, the Third World has already achieved something quite important during the nego­ tiations that have taken place so far. Even without a treaty being signed, there is now

general commitment to the idea of an international regime for the sea-bed with some revenues being provided for developing countries. 4 This co ncept will surely be ap­ plied again to other non-national resources which beco me exploitable through tech­ nological advances.

I Geoffrey Barraclo ugh, ' The Struggle for th e T hird World ', The New Yo rk R eview of Books, 9 ove mber, 1978, p. 54. 2 Richard G . Darman, ' The Law of the Sea: Rethinking US Interests', Fo reign Affairs, Janu ary 1978 , p. 389.

3 Darman, ibid, p. 387. 4 Evan Luard, International Agencies: Th e E merging Framework of In terdependence, MacMillan, 1977 , p. 30.

54 Chapter III

16. As well as the novel areas mentioned above, some more familiar issues will probably acquire new prominence as subjects of multilateral negotiations during the next decade. Among the most controversial will certainly be the demand for increasingly widening sanctions against South Africa, as that country becomes the last

remnant of white rule in the African continent following the inevitable establishment of black majority rule in Southern Rhodesia and Namibia. Some timeduring the next decade there is virtually certain to be a concerted and sustained Third World demand through the United Nations system that Western countries impose complete trade embargoes on, and later sever diplomatic relations with, South Africa. If some Wes­ tern countries prove unwilling to comply, this issue may well affect the structure of re­ lationships between the Third World . on the one hand and both the West and the Soviet Union on the other.

17. If the recent !ecord is any indication, it seems unlikely that the Third World's impact on multilateral institutions will be so profound that it achieves anything very decisive as regards a redistribution of international power or wealth. But whatever the Third World achieves for itself in tangible terms, it already has, and will continue to

have, an impact on the character of multilateral institutions and, through that, on the course of multilateral diplomacy. It has made group and group confron­ tation a standard feature of contemporary diplomacy. This carries important impli­ cations for countries like Australia which in some situations do not fit easily into any of the recognised groups.

18. Perhaps more importantly, the Third World has won, over time, acceptance by Western countries of certain general principles. These begin as moral assertions, but evenutally become part of the received wisdom of international politics. Poor coun­ tries have come to expect some degree of development assistance from rich countries more as a right than as a voluntary favour. And, as mentioned above, the idea that the exploitation of non-national resources by advanced industrialised countries should be conditional both on some form of consent by the international community at large and on some measure of the sharing of benefits with developing countries seems to be in the process of gaining international acceptance. At negotiations on the Common Fund, the Third World is seeking, inter alia, acceptance of the desirability of attempts to stabilise commodity prices by intervention in the international market.

19. Acceptance, willing or grudging, of such principles by the international com­ munity does not necessarily promise any immediate tangible benefit to Third World countries,but it affects the psychology and balance of advantage in international negotiations, and that is not insignificant.

PART B THE THIRD WORLD'S CLAIMS ON THE INTERNATIONAL ECONOMIC SYSTEM

20. In recent years countries of the Third World, acting in their collective capacity, have formulated under the heading New International Economic Order (NIEO) their formal claims for changes in the structure and operation of the existing economic sys­ tem. Changes in the system have been occurring continuously since its inception at the

55

end of the Second World War. Before reviewing the proposals for an NIEO it is rel­ evant to note briefly some major examples of such changes which were specifically designed to benefit the Third World:

(a) In 1955, a new article was incorporated in the General Agreement on Tariffs and Trade (GAIT) enabling developing countries to make derogations from the gep.eral membership obligations, on grounds that, as countries 'ex­ cessively dependent' on primary production, their economic development

might require a more active promotional role for government than the orig­ inal Agreement foresaw as desirable.

(b) In 1966, a new chapter was added to the GAIT delineating the special needs of the less-developed contracting parties and enjoining the developed coun­ tries to give these needs systematic special attention in their trade and fiscal policies. This chapter-GAIT's Part IV-speaks of the need to devise

through joint action measures to 'attain stable, equitable and remunerative prices, for exports of primary products'; it obliges developed contracting par­ ties to consider steps 'to promote domestic structural changes' so as to pro­ vide greater scope for the development of imports from less developed coun­

tries ( LDCs ); and in it the developed contracting parties make the significant declaration that they 'do not expect reciprocity' for commitments made by them in reducing tariff or non-tariffbarriers to the trade ofLDCs.

(c) The GAIT's Part IV provisions, introduced at the time when preferential trade arrangements for developing countries were being pressed vigorously following the first UNCTAD in 1964, contributed to the adoption by the European Economic Community (EEC) and Japan in 1971 , and by the

United States in 1975, of 'Generalised Systems of Preferences' ( GSP) pro­ viding non-reciprocal margins of preference to developing countries under waiver of obligations from the GAIT. The industrialised countries offering preferences have largely had discretion to fashion their systems in respect of

indentifying which countries will be the beneficiaries and of setting the often varying magnitude of concessions offered. Australia had pioneered this inno­ vation in commercial policy in 1966.

(d) The Long-Term Arrangement Regarding International Trade in Textiles was introduced within the GAIT in 1962. It was then intended as a mechan­ ism to enable the orderly dismantling of the import restrictions imposed on exports of textile products from developing countries, by specifying allow­

able rates of increase in market penetration of individual countries. While it provided preferential treatment for developing countries it.also con­ trols to be imposed by country quotas. In the agreement which replaced 1t, the Multi Fibre Arrangement, the emphasis of these special measures has been

more to solidify and extend the restrictions.

(e) A new drawing facility was cre ated in the International Monetary Fund (IMF) in 1965 enabling member countries suffering temporary shortfall s in export earnings to draw 'compensatory fin ancing ' from the Fund at co nces­ sional rates. This Compensatory Financing Facility, which has bee n used entirely by primary producing countries, was enl arged and liberalise d in

1975. Other drawing Facilities have been established which have be en of as ­ sistance to member countries (including developing co untries) in particul ar circumstances.

56 Chapter III

(f) The Second Amendment to the IMF 's Articles, which came into force in 1978, made provision for special benefits for developing countries in connec­ tion with the disposition of the Fund's gold. The reference in the amended articles to the developing countries as a class of member country, and the con­ ferring of special benefits on that class through the Trust Fund, is an excep­ tion, albeit a narrow one, to the Fund's general adherence since Bretton Woods to the principle of uniformity, or non-discrimination, among partici­ pant countries in the international monetary system.

(g) The change in the role of the World Bank from post-war reconstruction in Europe to mobilising funds to provide loans on favourable terms to promote economic growth in developing countries, thus making available to many developing countries funds from capital markets to which they would not have been able to gain access on their own account. The activities of the World Bank have been complemented since the 1960s by the establishment of regional development banks in Asia, Africa and Latin America and have coincided with the emergence oflarge-scale aid.

21. Much of the background to the NIEO is contained in Chapter I and will not be repeated here, save in summary form; nor will the details of the institutional setting of the protracted negotiations be discussed. The emphasis, rather, is on the proposals themselves and their implications.

22. The NIEO proposals cover commodity trade, aid, investment, exchange rates, debt relief, food and agriculture, industrialisation, transfer of technology, and insti­ tutional arrangements. The aim of the NIEO is to meet the development needs of the Third World by increased and more automatic direct and indirect resources and tech­ nology transfers from the developed countries, by preferential treatment for Third World countries in all aspects of economic organisation, and by giving greater weight to developing countries in the decision-making machinery in the international finan­ cial institutions.

23. The rationale of the NIEO is the claim that the external environment, rather than domestic conditions, is the cause of underdevelopment. Third World resolutions on the NIEO are heavily flavoured with radical anti-Western sentiment, and underly­ ing the demands for greater equality and justice in the world economy is the conten­ tion that developing countries were exploited by the colonial powers and that redistri­

bution of wealth, a recompense for alleged injustices, past and present, is their due. 1 The idea that the developed countries continue in various ways to exploit the poor countries is advanced as the principal reason for the economic retardation of the lat­ ter; in addressing mainly the external environment of the Third World, there is little, if any, attempt in the NIEO to acknowledge the domestic causes of inadequate econ­ omic progress in developing countries. The NIEO, together with the writings and speeches of its more radical Third World exponents, advocate international redistri­

bution, :egulation and planning and reject a number of the principles of a liberal economic order. Even the more moderate argue that large disparities of wealth be­ tween whatever their cause, are not consistent with moral norms of equity and fairness. As with their idea that colonialism meant no more than exploitation of the colonised, the perception of economic transactions is that one party must lose what the other gains.

See, for example, the Manila Declaration and Programme of Action adopted by the Third Ministerfal Meeting of the Group of77, Manila, February 1976.

57

24. The propensity to look abroad rather than inward reflects also an important pol­ itical motivation for the development of demands for an NIEO, namely frustration at the unfulfilled developmental expectations engendered by the process of achieving politiCal independence from colonial rule. In nearly all cases removal of political con­

trol did not lead to economic take-off. An explanation was sought in other forms of 'domination' wielded by overseas interests possessing power by virtue of superior economic weight. Some of the more successful developing countries, however, have a conspicuously different view of the external environment.

25. The cluster of proposals comprising the NIEO can be regarded as the current manifestation of continuing efforts since the early 1960s by developing countries to improve their economic performance and increase their national power and prestige by seeking changes in the international economic system, primarily in the context of their relations with the industrialised countries of the West. Most of the proposals

have long been pursued, with only partial success, by the developing countries. But their aggressive and urgent advocacy under the label of the NIEO was given impetus by the dramatic success in late 1973 of the OPEC cartel, which seemed to offer a source of new Third World influence, namely 'commodity power'. It was also given

momentum by the rise and then collapse of the commodity boom in 1974, the difficul­ ties of reaching agreement on the outlines of monetary reform following the cessation of dollar I gold convertibility in 1971, the recession from 197 4 and higher rates of inflation, all of which raised doubts as to the continued viability of important el­

ements of the existing economic order. These doubts about the capacity of the inter­ national economic system appeared to be reinforced by the fears about resources de­ pletion engendered by, among others, the Club of Rome, and the adverse food situation at that time.

26. The debate on the NIEO has largely centred on the various forums of the United Nations where the developing countries have displayed sustained unity in mobilising their majority voting power. Parts of it dealing with trade are also an element of the current round of multilateral trade negotiations-MTN- being conducted under GATT auspices. 1

27 . More radical aspects of the NIEO, supported only by a minority, include an ab­ solutist notion of national sovereignty for Third World countries. Thus, the right is asserted to take over foreign-owned property without regard to international legal conventions on compensation. While claiming complete internal freedom for

developing countries the NIEO proposals would involve countries a range of new obligations. For example, the latter group are asked to mtroduce an m­ ternational development tax and a mandatory code of conduct for the transfer of technology to Third World countries.

I Most notably, the Sixth and Seventh Special Sessions of the United N ations Genera l Asse mbl y were co n­ vened for this specific purpose in 1974 and 1975 respectivel y. The pro posals were fo rm ali sed when th e Sixth Special Session adopted in May 1974 ' The Declaration a nd Progra mme of Action on the Es ta bl is h­ ment o f a New International Economic Order'. The NIEO prece pts were also el aborated in the 'Charter of Economic Rights and Duties o f States' (ado pted at th e 29th Session of the United Natio ns G eneral Assembly in December 1974) and the UN IDO ' Declara tion and Pl a n of Action on Industrial Develo p­

ment and Co-operation ' ( Lima, March 197 5 ). All these resolu tio ns we re adopted by co nse nsus, with th e develo ped countries entering many reservations. In additio n, CIEC, co nve ned in D ecember 1975 and concluded in June 1977, was specifi cally for discussions betwee n developed and developin g co untries. Before and after CIEC, the UNCTAD has provided the principal forum for detail ed discussion on th e

proposal s, particul a rly o n commodity tra de and debt.

58 Chapter III

28. A somewhat more radical aspect, the 'de-linking' proposal, on the extreme fringe of the NIEO, holds that integration of developing countries with the inter­ national economy will lead to their national disintegration. Thus, either a complete or partial separation from the international economy is recommended, either by re­ gional groups practising collective self-reliance or by national autarky.

29. The proposals form a heterogeneous package reflecting the different interests of the extremely diverse members of the Third World. Agreement on its elements would appear to have been reached often by simply aggregating together demands of different groups of countries, demands which are sometimes incompatible with each other.

THE NIEO PROPOSALS

30. The following is an outline of the main NIEO proposals:

Trade and Commodities 31. A high priority has been placed on international commodity trade in the debates and resolutions of the NIEO. The central document in this respect is Resolution 93 (iv) on the Integrated Program for Commodities (IPC) which was adopted at UNCTAD IV in Nairobi in 1976. This Resolution represents, in effect, a summation of the regulatory proposals foi international commodity trade which developing countries had been advancing for well over a decade. The major objectives of this proposal, which concentrates on eighteen commodities of significance to developing countries, are the 'stabilisation' of the relevant commodity markets and the improve­ ment of the real income which developing countries receive from commodity exports (two ends which, as discussed below, are sometimes incompatible).

32. The measures suggested to achieve these objectives focus on the establishment of international commodity buffer-stocking arrangements, coordinated with national stockpiles and supply management measures such as production and export controls. A key element is the establishment of a Common Fund to finance these arrangements.

33. The Common Fund concept is aimed at improving conditions of trade, particu­ larly the stability of prices, for a range of commodities of importance to developing country exporters. Two main views have prevailed in the negotiations associated with it; the developing countries have viewed the Common Fund as an all-embracing source of commodity related financing for the developing world; the developed coun­ tries, on the other hand, have viewed it as a financially viable institution contributing to the financing of commodity price stabilisation about long-term trends through

buffer-stocking and the provision of finance for a circumscribed range of other measures. Agreement was reached in March 1979 on the principles and financial magnitudes of a Common Fund but it remains to be seen whether the two views de­ scribed above have been reconciled.

34. The NIEO commodity proposals also include the indexation of prices for com­ modity exports to the prices of manufactured goods imported by developing countries (although this proposal has not been actively pursued in recent years); improved access to markets and supplies; improved arrangements to provide finance to com­ pensate for fluctuations in export earnings; and increased drawing facilities on con­ cessional terms from the IMF and other sources in periods of balance of payments diffi cui ties.

59

35. In trade generally the developing countries seek greater trade liberalisation and increased access to markets of developed countries especially for their manufactures and processed raw materials. Their demands go beyond trade liberalisation and em­ phasise the need for discriminatory benefits in their favour. This is to be achieved by

the strengthening of the existing GSP to make the preference margins contractual and binding, and to make the preferences apply to items of particular export interest to the developing countries. Expansion of the Third World's share of invisibles trade is also sought, as well as the elimination of restrictive business practices such as monopolistic or oligopolistic practices by private international interests.

Industrialisation 36. The UNIDO Lima Declaration ( 1975) called for the developing countries' share of total world industrial production to be increased from its present 7 per cent to the' maximum possible extent', if possible to at least 25 per cent by the year 2000. The

Declaration also called for the strengthening of developing countries' bargaining pos­ ition for the acquisition of technology, expertise, licences and equipment. Following Lima, discussion of industrialisation has included the redeployment of industrial ca­ pacity from developed to developing countries and the restructuring of industry in de­

veloped countries, the latter to involve developed countries ensuring access to their markets and discouraging production of synthetics.

Transfer of Resources 37. Development Assistance-The proposals seek an increase in official development assistance (ODA), improvement in the terms of these transfers, and greater automa­ ticity to be built into them so that recipient countries can be assured a continuing ad­ equate flow of resources for planning purposes. Specific elements include a call for de­

veloped countries to achieve the ODA target of 0. 7 per cent of GNP not later than 1980, various measures to 'soften' aid (such as longer repayment periods and higher grant elements) and an international development tax.

38. Debt-The original proposals sought generalised debt relief through the conver­ sion of official loans into grants, rescheduling of commercial debts and a facility under the auspices of the IMF or the International Bank for Reconstruction and Develop­ ment (IBRD) to refinance them. Following a series of discussions in UNCTAD, most

notably the ministerial meeting of the UNCTAD Trade and Development Board in March 1978, there was a significant degree of convergence of developing and devel­ oped countries' views on the question of indebtedness, suggesting that proposals for generalised debt relief will be diminished. The discussions are now focusing on the conversion of past ODA debt to grant terms and the identification of certain 'features' -conditions and norms under which debt reorganisation should be con­

ducted on a case-by-case basis-which will provide guidance for future debt relief operations.

International Monetary and Financial System 39. This group of demands which is addressed primarily to the workings of the IMF, reflects the developing countries' claim that international financial institutions are not sufficiently responsive to their development needs and their aim to build into the international monetary system more devices to transfer resources in their favour. The developing countries seek:

replacement of gold and national currencies as reserve assets by the Special Drawing Right (SDR);

60 Chapter III

renegotiation of the principles of allocation of SDRs to give developing coun­ tries a larger share; there have been proposals in this regard for both direct and indirect links between the allocation ofSDRs and development assistance; less fluctuation in exchange rates as developing countries claim such move­

ments have been to their disadvantage; and changing the decision-making procedures in such institutions as the IMF and the IBRD to give greater weight to developing countries.

Investment and Technology 40. The developing countries seek: . interest subsidies on developing country borrowing; guarantees to facilitate developing country borrowing in private capital

markets; . removal oflegallimitations on outflow of capital; . investment by transnational corporations to be governed by a mandatory code of conduct (which would extend to all aspects oftheiroperations-including the

claiming of a right for the host country to expropriate assets on terms deter­ mined by it); and . a mandatory code of conduct on the transfer of technology by private enterprise to improve the international flow of, access to, and dissemination of technology,

by setting out the ground rules for firms and governments in regard to licensing agreements. The NIEO contends that existing efforts to transfer technology to developing countries are far too small and are flawed by restrictive business practices, and that the present technological 'system' is biased towards the needs of the industrialised countries and does not cater to the developing coun­ tries' special needs.

Food and Agriculture 41. In this field developing countries demand increased external assistance to ex­ pand food availability in developing countries both by increased local production and by food aid transfers. The NIEO would also provide for increased world food security against global shortfalls of production through an internationally coordinated food grains stockholding system, and improved access for the poorest developing countries to commercial supplies.

Auxiliary Aspects 42 . Outside the NIEO package, but nonetheless reflecting similar assumptions and claims, is the concept of the 'common heritage of mankind' which has been accepted in the negotiations on the Law of the Sea and which could have implications for the internationalisation of the Antarctic continent and, by extension, to all unappropri­

ated global resources and potential resources. In 1970, the United Nations General Assembly passed a resolution that this concept should apply to all the resources of the sea-bed beyond national jurisdiction. The original contention of the Third World that the sea-bed should be exploited solely by an international authority with the revenue being channelled to developing countries has now been modified to a parallel system allowing access to sea-bed resources by both an international authority and commer­ cial enterprises.

43. Other auxiliary parts of the NIEO deal with the idea of diverting funds now used for military spending towards the development of Third World countries, with such

61

campaigns as the call for conservation of non-renewable resources and for protection of the environment.

44. The NIEO to some extent makes a distinction between two groups of developing countries, the poorer and the richer, and also deals with issues internal to the develop­ ing countries as a group, though with complementary actions requested of the devel­ oped world. Thus, the Third World seeks the adoption of measures designed to help

the specific categories of 'least developed' countries, 'developing island ' countries and 'developing land-locked' countries which are seen to have particular disabilities not borne by other Third World countries. In another direction, under the rubric of Economic Cooperation Among Developing Countries (ECDC), developing countries are themselves enjoined to step up their mutual cooperation at both international and regional levels, and to consider such measures as extending trade preferences to each other. Requests of the developed countries in this field generally seek their direct as­ sistance for regional projects and solicit their support for regional initiatives taken by

developing countries in international bodies. Another and more fundamental interest developing countries have in the area of ECDC is the encouragement of developed countries' indulgence of preference schemes among developing countries, having the effect, inter alia, of discriminating against the developed countries in commercial

relations.

HOW THE NIEO PROPOSALS HAVE BEEN RECEIVED . 45. The NIEO proposals have stimulated intensive scrutiny in the West from politi­ cal, economic and moral standpoints and most of the substantive measures have been-and continue to be-considered in specialised forums . Although responses

have included the sympathetic as well as the critical (and have been largely a mixture of both) the NIEO has emerged from this scrutiny as a much reduced package, though one still based on a distinctive perception of morality in dealings between states which is largely disputed by the West, and containing much defective economic

reasoning. Much of the detailed analysis has focused on the economic and technical aspects of the proposals, a process which has proceeded furthest in consideration of the Common Fund part of the Integrated Program for Commodities. With the disaggregation of the NIEO into its component measures, and the continuing inter­

national discussion of those parts of it not obviously unacceptable as starting points for discussion, an appreciation has emerged among many developing countries that the NIEO as a package, and certain important parts of it (such as the indexation pro­ posal), would be of little benefit, or even detrimental, to the developing as well as to

the developed countries. This understanding has weakened, at least for the present, the advocacy of the NIEO both in the Third World and the West.

46 . The main elements in the Western analysis and critiqu e of the NIEO are dis ­ cussed below.

47. Prefacing most of the comment is a serious ques tioning of the ce ntral claim of the NIEO, that external factors are the primary co nstrai nt on the eco nomic growth of developing countries. In this regard it is pointed out th at the perio d since the Seco nd World War has been one of unprecedented eco nomic grow th for both developed and

developing countries, and that although there are still widespread poverty and enor­ mous problems in the Third World, the eco nomic success of a num ber of cou ntries has demonstrated that responsibility for lack of progress in th e Third Wo rl d ca nnot all or even mainly be laid at the door of the international sys tem as such. Why .it i a

should the same international environment have held back Arge ntma Ind1 a

62 Chapter Ill

Bangladesh, or Burma, yet allowed South Korea, Taiwan, Hong Kong, Singapore, Brazil and Mexico to do well? 1 By stressing the external order the NIEO diverts atten­ tion from the much more crucial factors of domestic attitudes and circumstances.

48. The merit of some of the NIEO proposals has been recognised; some of the de­ mands are both politically and economically sound and would contribute to a more just and efficient world economy. The most important of the proposals in this category are those seeking market access for the products of the Third World, the breaking

down of existing trade barriers and. the removal of selective non-tariff measures de­ signed to delay industry reorganisation in the developed world. The central issue in trade in manufactured goods is the degree of willingness of the industrial countries to allow their present industrial structure to change because of growing competitiveness of imports from developing countries, and, insofar as they are willing, how rapidly they will permit that change to occur. They can resist the change or they can, in ac­ cordance with their espousal of a liberal trading system, facilitate it.

49. Three general criticisms made of the NIEO, which are reflected in the following specific comments, are: that it fails to recognise the degree of interdependence be­ tween developed and developing countries by proposing action which could damage the economic interests of the former; that by concentrating on external factors it ob­ scures the fact that a country's growth is primarily dependent on its own policies and efforts; and that the NIEO wrongly assumes that economic advantage obtained by one partner in a transaction is necessarily at the expense of the other, thereby denying the possibility of a two-way process of mutual gain.

50. A further general aspect of the NIEO implicit in a good deal of the debate which has taken place in North-South arenas, and underlying much of the Western criticism of it, is the assumption that governments-Western as well as Third World-have a capacity to command the home and overseas activities of private individuals and cor­ porations. Such a proposition is in head-on conflict with a central assumption of the post-war international economic system and presents an ideological challenge to Western democratic institutions going well beyond the plane of international relations.

Commodity Agreements 51. The developing countries' proposals on commodity trade have been a subject of considerable discussion and negotiation since 1976 when UNCTAD 93(iv) set a timetable in which preparatory meetings on the eighteen commodities were to complete their work by February, 1978 and negotiating conferences were to be concluded by the end of 1978. Of the eighteen commodities listed in Resolution 93 (iv), four are already covered by international agreements. Of the remainder, with the exception of rubber on which negotiations have begun, the preparatory phase is yet to be completed. The deadline for the completion of preparatory meetings has now been extended to the end of 1979. To date, three sessions of a negotiating conference on a Common Fund have been held and broad agreement on the outline for a Fund has now been reached.

52 . The serious involvement of developed countries in this dialogue indicates a rec­ ognition of the problems facing exporters of primary products, particularly the difficulties for economic management created by fluctuations in price of a commodity

I W. Corden, The New International Economic Order: A Cool Look, unpublished paper, Australian Nauonal University, August 1978 , p. 41.

63

or commodities on which a developing country is dependent for a large part of its export earnings. It also recognises the wider instability, political and social, which can be exacerbated by fluctuations in export earnings. The slow -progress of the nego­ tiations reflects, on the other hand, the difficulties in reconciling the many interests in­ volved as well as serious doubts about whether the developing countries' proposals as presently formulated represent an effective and viable means of dealing with com­

modity problems. The main doubts which have been expressed about the economic viability of the proposals are ·summarised below.

53. The developing countries' proposals for regulating international commodity trade cover both price stabilisation, that is, stabilising prices around their underlying market trend, and raising that long-term trend, that is, shifting the terms of trade in favour of producing countries. 1 The NIEO proposals are thus concerned with both stabilisation and price increases, and often even seem to use the two concepts interchangeably. It is clear, however, that the developing countries actively pursuing the Integrated Program are actually concerned with the second objective. 2 The

measures suggested focus on commodity agreements with price-raising objectives and various measures such as production and export controls to restrict supplies.

54. Agreements aimed at securing commodity prices higher than they would other­ wise be, will result-if they are successful-in a transfer of resources to the producers of those commodities via higher prices. The questions then asked are: can the agree­ ments be made to work and will developing countries benefit? Taking the latter first, it is evident that developing countries would not all benefit because some are net im­

porters of commodities which would be the subject of the agreements. In addition, unless discriminatory arrangements -favouring developing countries were adopted some developed producers would benefit more because they account for a larger pro­ portion of world exports of some commodities than developing countries. In the case ofthe ten 'core' commodities of the Integrated Program (coffee, cocoa, tea, sugar, cot­

ton, rubber, jute, sisal, copper and tin) in respect of which developing countries' exports account for the greater proportion of world trade, a net transfer of resources to Third World producers of these commodities would seem likely to occur where effective price-raising agreements were in place.

55. For the agreements to be able to secure this partial benefit would require a high degree of control over supply of both the commodities covered and their close substitutes-control that is unlikely to be possible except in a few cases. The mainten­ ance of restrictions on supply requires solidarity among existing producers as well as

new producers becoming members of the agreement. Restriction of supply will mean that the more efficient producers may forgo opportunities to produce and thus may have a strong incentive to withdraw from the agreement. Even when market control is possible, and even when it is possible to support high prices by tight production co n­

trols, these arrangements, in many cases, would still be thwarted by substitution over time. Few materials or foods are so crucial that they cannot be replaced with some other existing product or the development of new technology. Thus, in general, any

l The immediate background of these proposals was the dramatic success of the Organisation of Pet­ roleum Exporting Countries (and to a lesser extent the more limited success of several bauxite producers) which strengthened the conviction of many developing countries that their re venues co uld be incre as ed by direct intervention in commodity markets through withholding supplies and I or stockpiling. 2 This view was reflected in the Group of 77 's Manil a Declaration ( formul ated in preparatio n fo r

UNCTAD IV) which pledged 'to make full use of the bargaining power of the developing co untries through joint and united action to secure these aims'.

64 Chapter III

attempt to raise prices above the long-term trend by means of a commodity agree­ ment may be expected to meet with only short-term and partial success.

56. The discussions and negotiations have, partly in recognition of these difficulties, focused on the less ambitious goal of stabilising prices, with the proponents stressing the potential benefits, for both producers and consumers, of stability in commodity prices. 57. Proposals for price stabilisation take account of the disruptive effects on continuity of supplies which sharp price fluctuations bring, the advantages to con­ sumers as well as producers of more stable investment conditions and the claimed anti-inflationary effects in consuming economies of more stable prices of raw materials. In short, those arguing the advantages of price stabilising international commodity arrangements point to the mutuality of benefits arising out of any success­ ful schemes, for both producers and consumers and for both developed and develop­ ing countries.

58. Considerable difficulties have arisen, however, in devising what is the best and most cost-effective means of achieving this for each commodity; relatively few com­ modities are suitable for buffer-stocking and there is a variety of approaches and mechanisms suggested for the wide range of commodity trade problems. These pro­ posals all involve costs (the developing countries' original proposals for a Common Fund, for example, was conservatively costed by the UNCTAD Secretariat at $6 billion) which must be set alongside the prospective benefits when judging their feasi­ bility. Buffer-stocking involves considerable acquisition costs, particularly if the stocks are going to be large enough to be effective, and carries the risk of trading losses. Those agreements which rely on production controls, on the other hand, can involve costs of resource misallocation by restricting the efficient producer and encouraging the inefficient.

59. One underlying difficulty is that the relationship between prices and earnings fluctuations is complex (depending on the source of price instability-demand or supply-and the price elasticities of demand and supply) and it cannot be assumed that price stabilisation will result in all cases in revenue stabilisation. A recent study by the World Bank concluded that developing countries as exporters would benefit from price stabilisation in only two agricultural commodities, coffee and cocoa. 1

60 .. uncertainty of developing countries' gaining significant benefits from price sta?Ihsatwn has led o alternative proposals for compensatory financing schemes (of the IMF 's Compensatory Finance Facility and the EEC's STABEX scheme are

eXIstmg examples) which have the advantage of dealing directly with the problem of export revenue fluctuations and which avoid the random distribution of benefits and costs of attempts to stabilise prices.

61 .. The many discussed in this section of attempts to regulate inter­

natiOnal are reflected in the history of such arrangements. The

doubts about their feasibility and the complex issue of the distribution of benefits be­ tween producers are evidenced by the fact that commodity agree­

mvolvmg pncmg and marketing provisions have proved very difficult to nego­

tiate. To date, agreements which incorporate such provisions have been concluded only for a handful of commodities. The operations of those agreements have not been

1 IMF/ IBRD, ' Commodity Price Stabilisation and the Developing Countries: The Problem of Choice', Finance and Development, Vol. 14 No. 1, pp. 8-11.

65

continuous, nor have they received the full support of all major producers and con­ sumers at all times. The evidence indicates that they have operated 'satisfactorily' in periods when pressures have not been excessive. The International Tin Agreement is the only commodity agreement which has functioned over a long period and it has

maintained its floor price on all but one occasion, but has had le ss success in holding prices below the agreed ceiling.

Debt 62. As already noted, developing countries have now dropped the proposal for generalised debt relief. This was mainly because of pressure from those developing countries that are large borrowers from the international capital market. These coun­ tries, such as Mexico, Brazil, South Korea and Singapore, clearly recognised that the proposal would harm their credit worthiness and could well contribute to longer term

reductions in capital flows to the Third World. The proposal ignored the important role which borrowing can play in the development process and would have discriminated against those countries which have managed their borrowing wisely.

International Financial Institutions 63. The proposal for the elimination of, or a significant change in the weighted voting system in the IMF which gives developed countries substantial co ntrol at present, means, in effect, that the developing countries want to exercise control over

the institution despite their minority financial position in it. The developing countries have often stated that the IMF is not sufficiently sensitive to their needs and they would undoubtedly use greater voting power to change rules from uniformity of treat­ ment to preferential treatment for themselves. This would be against the developing countries' own interests. A move to a discriminatory approach by the IMF could ad­

versely affect the revolving nature of its fin ancial operations- specifi cally the willing­ ness of surplus countries to make their currency available to members in de fi cit-and thus weaken its balance of payments support facilities. At the root of the N IEO pro­ posals is a concern that many developing countries have about what they regard as

the stringent conditions which the IMF applies in some circumstances when providing balance of payments support. These conditions are aimed at ensuring effective adjustment among members both for the economic stability of the co untry co ncerned (which in any event will ultimately be obliged to adjust, proba bly in more adve rse cir­ cumstances) and for that of other countries adversely affected by co ntinuing imbal­

ance. Conditionality is thus a complement to financial assistance, and the adoption of the recommended policies serves to enhance the ability of the borrower to gain access to additional sources of finance. Furthermore, the IMF programs are norm ally spread over time in recognition of the fact that sharp adjustm ents to economic policy ca n cause political and social problems. It is thus diffi cult to see how developing co untries

would benefit in the longer term from a proposal that wo uld enable th em to delay making necessary policy changes.

64. The NIEO proposals, in general, misco nstru e th e dis tinct role of the IMF. It is not a development as sistance body. It is a fin ancial institution providing faci lities on the basis of uniform criteria to all members which experie nce bala nce of payments difficulties, irrespective of their stage of development.

65. In the case of the World Bank, apart from th e iss ue of vo ting power, the N IEO proposals have largely sought increases in the Bank 's ca pi ta l base, new facilitie and softer lending terms. Developed co untry co nsi deration of these propo al ha been against the background of the desira bility of partic ular fo rms of ass istance , a de ire to

66 Chapter III

avoid duplication of existing facilities and the necessity of maintaining the ability of the Bank to continue to raise funds on the international capital markets and to attract contributions from member countries to its concessionallending window. In the case of the latter, Third World support for the successive replenishments of the Inter­ national Development Association's resources have been reflected in the successful negotiation of the Fifth Replenishment.

Indus tria lisa tion 66. Criticism of the industrialisation proposals has centred mainly on the fact that they are based on arbitrary targets, particularly the 25 per cent of world industrial production by the year 2000 of the UNIDO Lima Declaration, rather than consider­ ation of the economic viability of locating certain industries in the developing coun­ tries and the most appropriate policies to promote their industrialisation. Given that the developing countries' present share of total industrial production is only about 7 per cent, the feasibility of the Lima target has been questioned and concern has been expressed about the difficult adjustment process which would be necessary if policies were oriented towards this artificial goal. Developed countries have stressed that structural changes arising from industrial redeployment need to be gradual and pol­ itically and economically manageable.

Control of Transnational Corporations/Transfer of Technology 67. The proposals for a mandatory code of conduct for transnational corporations (TNCs) has been opposed in the West largely on the grounds that conflicts involving TNCs, to be effectively resolved, must be negotiated between the three main partners (the host government, the TNC and the home government )-and not by international decree. It is argued in response to the proposals that the imposition of mandatory con­ trols over the activities of TNCs would deter foreign equity investment which has traditionally been a very important element in the development process, and ref­ erence is made to some developing countries which, through expropriation, have frightened off foreign investment completely. The proposals are often regarded as largely reflecting an ideological suspicion ofTNCs-a position not supported in prac­ tice by those developing countries which have conducted mutually advantageous ar­ rangements with TNCs and have gained, in the process, capital, technology and ex­ pertise, particularly in manufacturing.

68. Developed countries have, however, been prepared to participate in drawing up a voluntary code of general behavioural guidelines for TNC activities; such a code to be universally supported by governments. This approach is predicted on the belief that, where the interests of TNCs conflict with those of home or host nations, re­ sponsibility for action rests primarily with the governments concerned.

69. Similarly, a mandatory code of conduct for the transfer of technology has been criticised in the West as being more likely to inhibit rather than to encourage tech­ nology transfers. Technology transfers will only be encouraged if adequate benefit ac­ crues to both buyers and sellers and thus a mandatory code would be both impractical and the interests of technology importers. The Western response has

the need for developing countries to endeavour to attract, by appropriate

policies? on mutually advantageous terms. Developed countries, such as Australia, which are net technology importers consider that the code should cover technology transfers between suppliers and receivers of technology rather than be­ tween developed and developing countries. A number of developing countries have large and advanced manufacturing sectors and giving such countries preferential

67

access to technology through a code based on a developed/ developing distinction would unfairly discriminate against developed technology importers. The developed countries have supported the drafting of a voluntary code of conduct, but negotiations are deadlocked on, among other things, the question of the legal status of the code,

with the developing countries insisting on a mandatory code.

THE FUTURE OF THE NIEO

70. Although the many, varied (and sometimes conflicting) proposals have been ex­ pressed as a package under the NIEO there is no prospect that they will be implemented as such-as a new international system brought into being by some massive global bargain.

71. Since the mid-1970s the developing countries have pursued the NIEO with greater moderation; they have sought dialogue rather than confrontation. For many Third World countries, the time-frame in which the structural changes which they contemplate are expected to be implemented has been very much expanded, with a consequent lessening of urgency. There is an inclination to emphasise incremental

adjustments, and changes in existing arrangements, rather than radical reform of the system as a whole. Underlying these developments is the fact that the political mo­ mentum behind the NIEO as published in 1974-75 has slackened perceptibly. Among the reasons for this are:

. the changed bargaining positions of producers and consumers of raw materials consequent upon the international recession;

changed expectations regarding the preparedness of some key OPEC countries to join broader Third World causes, coupled with reduced optimism about the effectiveness of' commodity power';

a balancing of Club of Rome views on resources/food/population pressures with more optimistic outlooks;

. a succession of relatively favourable harvests in major food producing areas;

the absence of any clearly defined Third World leadership of the type displayed in the past by such figures as President Boumedienne and President Echeverria;

. emergent feelings in some Third World circles that the NIEO may contain im­ portant formulations and proposals which lack pertinence in the quickly chang­ ing world economic environment of the late 1970s-that it addresses 'the wrong agenda'; and

. increased readiness by Western nations to appreciate the perspectives of developing countries in relation to their development problems, to enter into a detailed dialogue with them and to explain the elements of their own policies more carefully and more sensitively.

72. In these circumstances the global unity maintained by the Third World on NIEO issues has developed a formalistic character. In practice, developing countries seem more and more concerned to maximise whatever advantages they possess in negotiations taking place in regional contexts and bilaterally, selectively drawing on

NIEO elements for support as and when they are judged to be helpful to the cause. These countries will still seek practical implementation of particular elements of the NIEO seen to be in their national interest. Except for a small proportion of developing countries, the NIEO as a package can be expected to be regarded as a general outlet

68 Chapter III

for the expression of grievances and as a means of exerting political pressure to try to obtain particular concessions and advantages.

73. It would be wrong to conclude, however, that the NIEO must necessarily fade away. It has demonstrated its power to impart a degree of integrated political dyna­ mism to the pursuit by developing countries of their very disparate needs. The politi­ cal and symbolic content of the NIEO-its underlying concepts, as distinct from its detailed technical formulations-is likely to vary in importance in response to such changeable factors as the availability of appropriate platforms, the behaviourofWes­ tern countries in relation to circumstances in the Third World, and the internal dy­ namics of the Third World itself.

THE NIEO IN PERSPECTIVE

74. The NIEO proposals by the Third World need to be viewed in the context of the present international economic' system'. Essentially that system is, like the economies that are members of it, a mixture of the operation of market forces and of controls and regulations that constrain the 'free' operation of such forces. Notwithstanding these constraints on the operation of market forces, there can be little doubt that the present international economic system is basically market-oriented in the sense that pro­ duction, trade and prices are generally permitted to reflect the individual decisions of consumers and entrepreneurs. The system has been progressively liberalised over the past 30 years by the removal of restrictions on international trade and capital flows. In spite of some recent retrogression, international economic relations are probably now as free as they have ever been.

75. The NIEO proposals, in their most radical form, would involve very significant changes to this system. There would be a considerable increase in government inter­ vention in and control over international trade and capital flows, with a consequent increase in government controls over domestic economic activity. Market forces would play a considerably smaller role than at present in determining the allocation of resources and returns to producers, and there would be less emphasis on economic growth and greater emphasis on redistribution of income and wealth. The more mod­ erate NIEO proposals, however, would involve much less of a change to present ar­ rangements and would not fundamentally alter the essential character of the present international economic system. Indeed, in one respect at least-namely proposals to increase market access for developing country exports-acceptance of the NIEO

would strengthen a liberal, market-oriented system.

76. The NIEO proposals need to be viewed against the background of the coinci­ dence between the unprecedented rate of economic development over the last 30 years or so and the progressive reduction in restrictions on trade and capital flows. The experience of those years lends support to the view that, in the broad, minimal re­ strictions on flows of trade and capital between nations are conducive to sustained economic growth in both developed and developing countries.

77._ this, however, it is clear that economic efficiency is not the only cri­ m terms of which economic policy must be formulated and judged. In inter­

natiOnal affairs as in domestic politics, efficiency has to be balanced against and reconciled with political and humanitarian considerations if a reasonable degree of peace and harmony is to be maintained. A degree of intervention in and constraint on the operation of market forces is necessary and desirable for this reason. And there may be areas, such as commodity agreements designed to even out fluctuations in

69

prices, where the unconstrained operation of market forces can be ameliorated to pro­ duce both economic and political benefits. The experience of the recent period sug­ gests, however, the need for a cautious approach to any proposals involving sig­ nificant government intervention or control over the operation of market forces in the area of international economic activity.

78. This is also relevant to consideration of the view which is espoused in the Third World, and in some quarters in the West, to the effect that poverty in developing countries can only be overcome through a redistribution of income and wealth be­ tween developed and developing countries and that this will not be effected by a con­ tinuation of the present international economic system. Even leaving aside questions of political and economic practicality, it seems unlikely that redistribution could pro­

vide a general answer to the problems of economic development faced by developing countries, and attempts to implement proposals involving a significant redistribution of resources between developed and developing countries could well have severe ad­ verse effects on levels of international economic activity. It would not be in anyone's interest, least of all the developing countries', if attempts at significant redistribution

were to result in a general lowering of economic prosperity. Redistribution proposals also overlook that economic development depends importantly on the actions and policies of developing countries themselves and that it takes considerable time for a country to adapt its infrastructure and develop the administrative and entrepreneurial skills that are inherent elements of the 'modern' economic system based on the div­ ision oflabour. It is noteworthy that those developing countries that have been able to adapt to this system have made very considerable economic progress in a relatively short period of time, in many cases significantly reducing previous differentials in in­ come and wealth between them and developed countries.

79. At the same time, it is impossible to ignore the contrast between the generally high levels of income and wealth in the West and the generally low levels in the Third World. Nor can it be overlooked in political terms that wide differentials in income and wealth are likely to continue into the foreseeable future (see Chapter V). Such

differentials are deplorable, in that they are a source of tension between the Third World and the West, quite apart from the serious moral issues which they raise. For these reasons it is thus essential that the West take action to redistribute resources to developing countries in the form of aid. If properly executed and directed, such aid

can also make a contribution to economic development.

80. Beyond this it is important to ensure that the present international economic sys­ tem is made to work in an equitable manner. If the West is to continue to espouse a basically market-oriented system it must be prepared to put into practice the principles of that system, and see that it operates equitably. This means, in particular, that it should allow developing countries progressively increased access to developed country markets; that it should not impede the development of industry in developing countries by preventing structural adjustment within developed economies; and that if and when d. convincing case can be made that some deviation from the liberal sys­

tem would help poor countries to make more rapid progress without inflicting serious damage on the developed countries, the latter should not allow adherence to doctrine to lead them to reject action.

70 Chapter IV

CHAPTER IV

Political Prospects

Political Style and Stability of Third World Countries-Political Effects of Econ­ omic Growth-Militancy and Solidarity in Relations with the West- Western Responses-Unresolved Political Issues in Relations with the West-East- West Conflict and the Third World-China's Relations with Third World Neighbours­

Western Oil Supplies and Saudi Arabian Leverage-Nuclear Proliferation in the Third World.

This Chapter examines in turn various questions which seem likely to affect in one way or other the Third World's political significance in the international system dur­ ing coming years. The time-frame is necessarily short, because there is a limit beyond which it is only productive to speculate in terms of the most general trends. As the his­ tory of recent decades has amply demonstrated, domestic and international politics are prone to such discontinuities that it is idle to develop prognostications in any de­ tail for more than a decade or so ahead.

2. A further disclaimer is appropriate: a disparate set of questions is dealt with here seriatim, simply because the Committee judges that a range of aspects need to be con­ sidered to assess adequately the future political significance of the Third World phenomenon. As in other parts of this Report, the Third World is considered both as a group of countries in which certain things are happening with possible wider inter­ national impact and as a collective entity, which campaigns for various changes to the prevailing international order.

PART A: INTERNAL POLITICAL FEATURES

3. It is unlikely that the features which characterise the domestic politics of many !hird World countries will change significantly over the next decade. These features mclude:

Deep internal cleavages which make the politics of consensus and compromise difficult to sustain. Widespread poverty, the political consequences of which are compounded by an extremely unequal distribution of wealth. A sharp dichotomy between small elites, in whose hands power and wealth are concentrated, and the mass of the people. While there has been a significant

71

growth of a middle class in some of them, by Western standards most Third World countries are still characterised by this polarisation. . Inadequate institutional means-free elections, a free press, genuinely indepen­ dent interest groups, voluntary associations-by which interests and grievances

can be expressed and made known to governments, with the result that dissatis­ factions and frustrations tend to build up.

. A high degree of instability, as represented by coups, insurrections, riots and assassinations.

4. The state of affairs which these features represent is unlikely to change rapidly for three reasons: first, because it reflects structural features of Third World society which are deep-set and intractible; secondly, because the means available to change it-the institutional and human resources-are in many cases inadequate; thirdly, and per­ haps most decisively, because, even if the means were available, significant and rapid

political responses to pressures for change would threaten the position of those who now possess power and wealth. This is not to say that there will be no significant struc­ tural and cultural changes over the next decade, due to factors such as the growth and dispersion of wealth in some countries and the spread of education in even more. But,

as will be argued below (paragraphs 9 to 11 ), the short-term effects of such changes are likely to be mixed. In some instances, they will reinforce and, in others, modify the features listed above. Where significant change does occur, the chances that it will in­ volve political upheaval are considerable.

POLITICAL STYLE AND STABILITY

5. The process of modernisation, which has affected, to a greater or le sser degree, all Third World countries during the past two decades, reveals two markedly different trends as regards the absorption of Western methods. On the one hand, mo st Third World countries have been anxious to introduce modern methods of production, mar­ keting, transportation and communication. Third World societies have acquired Wes­

tern consumer tastes in varying degrees. Modern weapons (from Western and com­ munist sources) have also been sought and acquired for both internal and external security purposes. On the other hand, the overall pattern with regard to internal politi­ cal style has been to reject Western institutions such as parliamentary democracy and

safeguards to protect human rights.

6. There is little to suggest that this selective approach in acquiring onl y thos e parts of the Western 'modernising package' which seem useful or relevant will not co n­ tinue. Indeed, it will probably strengthen as: the governments of more economically success ful Third World co untries be­

come more confident that they know best wh at political style is appropriate for their countries and cease to be defensive about fa iling to fo ll ow Western models; some Third World countries-both economicall y success ful and un successful ones-strive to maintain traditional religious a nd cultural valu es again st what

they might see as the destructive influences of Wes tern materialism and of Western-Soviet intellectual and moral hegemony;

some Third World governments decide that they will never receive due inter­ national respect from either Western or co mmunist advance d powers and see k

72 Chapter IV

to compensate for this by efforts, which will often be contrived, to strengthen political, economic and intellectual ties with Third World neighbours; and some Third World governments, in both natural and contrived ways, seek to strengthen their relations with members of the Organisation of Petroleum Exporting Countries (OPEC) and other increasingly powerful Third World countries.

7. Whatever the consequence of attempts by Third World countries to do things more their own way, they will have to contend in the coming decade with both old and new sources of political instability: the lack of a predictable process of succession, which is a common element

among the many types of authoritarian regimes in the Third World;

demands for more representative government by students, adult intellectuals and other Westernised social groups; resistance in outlying areas against attempts at firmer control by central governments;

exacerbation of tribal and ethnic tension through discriminatory policies and the uneven distribution of benefits of economic development; and increasing political volatility in cities as urbanisation continues.

8. Political instability within Third World countries does not always carry direct in­ ternational implications, but there are at least two areas which might be important in this regard. The arc of countries stretching along the northern littoral of the Indian Ocean has such geopolitical significance that should there be changes in East-West alignment in a number of them, whether brought about mainly by internal forces or external influence, they would be likely to affect eventually the global balance of advantage between the superpowers. Nearer home, Australia is naturally concerned that any instability within the countries of South East Asia should not encourage intervention by stronger and potentially hostile external powers or otherwise increase international tension within the sub-region. None of Australia's northern neighbours is completely immune from the destabilising factors mentioned in the previous para­ graph and some of them may have to contend with serious political crises during the

1980s. Even so, as a group, non-communist South East Asian governments have been more successful in recent years in containing and defusing potential sources of internal instability than most other regimes in the Third World.

POLITICAL EFFECTS OF ECONOMIC GROWTH

9. A group of Third World countries-many of which are concentrated in regions of significance to Australia- has achieved rapid growth in recent years and it is widely predicted that this growth will continue over the next decade. It is often anticipated that this will result in greater political stability in the countries concerned. This expec­ tation , however, must be treated with some reservation. The relationship between economic growth, particularly when it is rapid, and political stability is not a simple one. While very low levels of growth create one range of problems, rapid growth also creates socia l, cultural and political dislocations and tensions of a serious kind ­

' revolution of rising expectations' in some groups, but acute fear and in­

m others. Bearing in mind Tocqueville 's well-known observation that revol­

utiOns u ually occur during periods of economic growth rather than of stagnation, and

73

given the problems they already face, the effects of rapid growth in some Third World countries, far from resulting in increasing stability, may be seriously destabilising. 1

10. Much, of course, will depend on the foresight and skill of the Third World governments involved in anticipating and coping with the social and political conse­ quences of rapid growth. Current performances do not encourage great optimism in this respect. The governments of most of the newly industrialising countries (NICs) are comparatively efficient, but they are also authoritarian and frequently repressive. As a group, they have created more effective bureaucratic-technocratic apparatuses than other Third World countries and they depend on these to maintain the political status quo while implementing innovative economic policies. Given this, it is ex­ tremely doubtful that development, in the full sense of that term (i.e. the raising of the living standards of the mass of the people; the provision of basic social amenities; the conversion of subjects into citizens), will keep pace with growth. 2

11. The example of Iran, until recently one of the Third World's show-pieces in terms of growth and a country which seemed to possess one of the most effective apparatuses of political control, lends support to these points. Rapid growth and the attempt to impose 'modernisation' from the top, without paying due regard to the social, cultural and political consequences of these processes, activated both the fears of conservative groups and the aspirations of radical ones, contributing to a major

political crisis. It can be expected that Iran will have a' demonstration effect' for both the governments and the governed of other Third World countries, particularly Islamic countries and those experiencing rapid growth.

PART B: THE THIRD WORLD AND THE WEST

MILITANCY AND SOLIDARITY

12. In the relationships between the Third World countries and th e West, the initiat­ ive is usually taken by the former. It is they who are the claimants, the ones who are dissatisfied with the existing order and relationships and who wish to change th em. Western countries are essentially reactive-to demands for decolonisation, more aid ,

changes in southern Africa and the Middle East, a New International Economic Order and so forth. How they react, what salience they are prepared to give to Third World issues, depends essentially on how much ' trouble ' the Third World represents at a given time- strategically in the Cold War context, politically in the anti-co lonial

context or in terms of internal disorder, economically in terms of em bar goes and price

Brzezinski, for example, maintains that the combination of demographic growth, the spread o f ed uca tio n and the fact that ' equality is becoming the most powerful moral im perative in our time ' means th at ' in the next two or three decades we will witness a n intensified crisis in the developing wo rld '. Zbigniew K . Brzezinski ' US Foreign Policy: The Search for Focus', Foreig n Affairs, July 1973 , p. 72 6. 2 P. T. Bauer concludes that 'the dominant ideology and po licies of the Third World are unlikel y to pro­

mote a rise in mass living standards, though they may prod uce misleading statistical growth ra te unrelated to it'. Commentary, August 1975, p. 10. Some co mmentators go further and argue th a t th e a t­ traction of a manufacturing export-oriented growth strategy for the le aders o f the newly indu tria lising countries of the Third World is precisely that it is seen as an alternative to serio us social a nd eco no mic domestic reform, a way of avoiding decisions which would reduce the wealth a nd power o f the do mina nt

groups. See, for example, Richard R. F agen's contribution to Fishl ow et al. Rich and Poor at ions in th e World Economy, 1980s Project, Council on Foreign Relations, McGraw-Hill , N .Y. 19 78.

74 Chapter IV

rises, 'morally' in the United Nations context. In the. absence of such 'trouble', the West gives Third World matters a fairly low order of priority.

13. Apart from its capacity to create situations which threaten Western interests, the ability of the Third World to demand Western attention in these terms is largely a function of two factors: its ideological and political militancy and its solidarity. What are the prospects as far as these factors are concerned?

14. Third World militancy is partly a product of frustration and a sense of impo­ tence. The familiar psychological mechanism of projection, whereby internal or dom­ estic problems which cannot be solved are externalised, is a marked feature of Third World foreign policy. Thus the problem of integration-that is, of overcoming the effect of serious internal divisions and creating a sense of unity-is often coped with by highlighting foreign policy issues which involve the assertion of national identity and by perpetuating belief in external, 'colonialist' threats to the integrity of the country. Similarly, the domestic problems of development and redistribution of wealth are externalised by placing the primary emphasis on the need to change the international economic system and to redistribute income among states, rather than on domestic reforms-which would be more difficult to achieve and would have far-reaching im­ plications for the existing domestic class and power structures.

15. To point to this feature is not to deny that there is any substance to what Third World countries claim on such issues. It is, however, to suggest that the claims reflect potent psychological and domestic political pressures as well as rational foreign policy objectives. As long as they continue to be functionally important in this sense, as long, that is, as the frustrations which they reflect continue to exist, it is unlikely that a rational demonstration of their inadequacy will dispose of them.

16. As it is widely believed that rapid economic growth in some Third World coun­ tries will lead to greater internal stability, so it is also believed that such growth will lead to greater moderation in foreign policy. Such a belief may well turn out to be jus­ tified in some cases. Growth, when achieved by the importing of Western technology and the exporting of manufactures to Western markets, is likely to strengthen links

between the countries involved and the West and, when sustained, to make the case for working within the existing system more convincing. In this way it may lead to the diminution of some forms of economic conflict.

17. But again, some caution is appropriate. In the first place, it is important to re­ that the Third World is not only about economic growth. It is also about

colonialism, the need to establish identity, the concern to compensate for

polltlcal weakness by maintaining solidarity, the Israeli-Arab dispute and the politics ?f southern Africa. How any of these concerns will weigh in the balance against the II_TI portance of economic links with the West in any instance will depend on the

of the time; it certainly cannot be assumed that economic consider­

atiOns Will always prevail.

18 . P. T. Bauer, an acute and critical observer of the Third World scene, has argued forcefully against the acceptance of economic determinism in this context, maintain­ ing that_ 'the hope that the substantial economic growth rates registered in the Third w_ orld m recent years will diminish its antagonism towards the West . . . is misplaced'. He points out that the rapid and substantial growth which has already taken place not had this effect and asserts that, 'the optimistic liberal assumption that economic Improvement and reduction in economic differences probably, or even

75

necessarily, diminish or avert political conflict is unfounded. Two world wars should have taught us better'!

19. Again, while rapid growth achieved by the export of manufactured goods may bring some Third World countries and the West closer in some respects, in others it is pregnant with the possibility of increased tension. The emergence of several 'little Japans' during a period when Western economies continue to experience serious economic problems already raises the prospect of a Western retreat from a commit­

ment to a liberal trade regime. Should that prospect become a reality, with the major Western countries resorting increasingly to protectionist measures-and this must be considered a real possibility-the consequences for the newly industrialising coun­ tries, and indeed for the internal politics of the Third World as a whole, would be serious. The position of the Third World' moderates', who accept that their needs can

best be met by working within the existing economic system and cooperating with the developed countries, would be undermined, while the radical view that the system is so rigged against the Third World that attempting to work within it is futile would gain ground. In this respect the treatment of the NICs, in terms of access to Western

markets, may be seen as a test case for the wisdom of political moderation on the part of the Third World.

20. Much of what is said above about militancy is also relevant to an appraisal of the prospects of continuing Third World solidarity, in that similar caveats must be entered concerning expectations that the passing of time will more or less naturally re­ sult in a process of' graduating out' of the Third World and dissociation from its cam­

paigns on the part of some of its present members. Such expectations are based on a number of considerations: the fact that the colonial experience is receding and likely to become a less compelling psychological factor; the increasing economic success of a number of Third World countries and the greater commitment to the existing econ­ omic order which is likely to result from this; and the evidence of greater ideological

diversity in the Third World as its members move from the immediate 'post-colonial' phase of their development. These are important factors and over the next decade they are likely to result in a more shaded and complex Third World.

21. Again, however, it is necessary to bear in mind that there will be significant fac­ tors working against such a process: . In many respects, the countries experiencing rapid growth will remain more Third World than Western in terms of their political, social and cultural

characteristics . . Third World solidarity reflects a range of interests and needs which extend well beyond economic growth and there is no obvious reason for expecting econ­ omic considerations to prevail over others in all circumstances.

There will be strong political and psychological pressures, emanating from both domestic constituencies and other Third World countries, against any move towards a total and overt breach of solidarity on the part of any member.

22. Apart from these considerations, in cost-benefit terms it is to see wh!' even the more prosperous Third World countries should retreat from the Ideal of soLI­ darity. On the one hand, it represents a diplomatic asset which can be used to com­ pensate for individual weakness in a range of dealings with developed countries; on

the other, the demands it makes and the restrictions it imposes on individual Third

I Bauer, ibid., p. I 0.

76 Chapter IV

World countries are, in most circumstances, not onerous, being largely symbolic and rhetorical.

23. It is likely, therefore, that the wealthier Third World countries will resist the notion that they are faced with a choice between remaining Third World and developing bilateral relations with Western countries. Rather, they will attempt to combine the two approaches, stressing whichever is more to their advantage in a given situation. In other words, in this respect they will continue to behave very much as they do at present.

WESTERN RESPONSES

24. If the initiative in the relationship usually rests with the Third World, power overwhelmingly resides with the Western countries. The former can propose, but it is only the latter which have the means of disposing of most of the contentious issues arising in the relationship.

25. Until the last decade, American dominance and the imperatives of the East­ West conflict imposed a considerable degree of unity on the Western approach to the Third World. As episodes like the Suez Crisis of 1956 indicate, this was never com­ plete even during the height of the Cold War, and insofar as it was achieved it was with some difficulty. European powers sought to retain some residual advantages of the old system and were often less convinced than the United States that Cold War issues should be overriding. Nevertheless, an impressive degree of unity was achieved.

26. In recent years this has diminished significantly, mainly due to the United States' declining capacity and inclination to exert leadership and to impose its will both within the Western Alliance and on Third World issues. The rhetoric of detente, the after effects of Vietnam, and the weakening of American executive power are the most obvious explanations for this; but it also reflects a secular decline in the superior­ ity of the United States, politically and economically in the context of the Western Al­ liance and militarily in that of the East-West conflict. Another factor-in this case affecting alJ the developed countries, the Western Europeans and Japan as well as the

United States-is the increasing importance attached to economic issues, both dom­ estic and international, during a period of sluggish growth and inflation.

2 7. To the extent that these factors continue to apply, they are likely to affect Western-Third World relations in several significant respects. First, they are likely to result in a less coordinated, more competitive approach to the Third World by Wes­ tern countries, with individual states and groups shaping their own policies in terms of their own interests rather than of any agreed' Western' goals.

28. Secondly, they may lead to an increasing emphasis by Western countries on the economic dimensions of the relationship, not in the sense envisaged by the pro­ ponents of the NIEO, but in the form of an increasingly competitive concern to further their respective economic interests-for example, the gaining of access to growing Third World markets which are assuming greater significance in a slowly g;rowing economy, and the safeguarding of supplies of natural resources, par­ ticularly o1l-and a concern to placate increasingly powerful domestic pressures aris­ ing out of the troubled economic situation.

2 9. Thirdly, should full economic recovery and more purposeful leadership be long a tougher, more narrowly' realistic' approach-substantially divorced from

the Wider moral and ideological aims and the longer term geopolitical considerations

77

which have largely defined 'the West' as an entity in recent decades-may come to prevail in Western dealings with the Third World. To some extent, such an approach already seems to be gaining ground, being implicit in such assertions as 'that the An go las of the world do not matter very much'; that any attempt to find accommo­ dation with the Third World in terms of its claims would amount to appeasement;

and that the economic issues between the West and the Third World should be dealt with in purely economic terms; without regard to their political dimensions. Whatever may be said in favour of such an approach, it should be recognised that if it prevails it will represent a major retreat from the posture of the early post-war decades.

30. Insofar as the internal politics of the Third World are characterised by an on­ going struggle for ascendency between moderate and radical elements (defined essentially in terms of the strategies which they advance as appropriate for dealing with the West), Western interests would seem to require the strengthening of the former and the weakening of the latter. This in turn requires the adoption of policies which create incentives for moderation, by making it clear that, both in economic and strategic terms, it provides better returns than militancy and extremism. A policy

which involves being most responsive to the Third World when it is at its most radical or one of being indiscriminately ' tough' (or indifferent) towards both moderates and radicals is unlikely to achieve this objective.

UNRESOLVED POLITICAL ISSUES

31. One aspect of Western relations with the Third World which perhaps receives insufficient attention is the interplay between political issues such as southern Africa and the Arab-Israeli dispute, on the one hand, and the various Third World cam­ paigns for changes to the international economic system, on the other. It ha s been

noted earlier in the Report that the various campaigns pursued by the Third World, whether on political or economic issues, all represent in part a bid for a greater share of power and status within the international system. Or to put it another way, Third World countries are naturally concerned to have their views taken seriously and to exert greater influence on the various international iss ue s over which they are particu­

larly exercised. In these circumstances it is natural that the political iss ue s of so uthern Africa and the Arab-Israeli dispute, which have been two of the mos t potent iss ues for galvanising Third World solidarity and militancy, should affe ct the ge neral tenor of Western relations with the Third World at the collective plane.

32. These factors may provide part of the explanation why the intensity of co nfro n­ tation between the Third World has abated so markedly since 1974 and 1975 when the Third World was pressing vigorously its demands for a new international eco n­ omic order. This relative moderation can be explained partly by ' eco nomic' reasons

such as the Third World's recognition of continuing economic diffi culties in the Wes t and its newly acquired awareness of the complexity of so me of the iss ues it has raise d. It would seem to be equally relevant, however, that during 1977 and 1978 Bl ack Africa and Arab countries had reason to be le ss dissatisfi ed with Wes tern policies

towards southern Africa and the Arab-Israeli dispute th an they had three or four years earlier.

33 . Indeed, on both issues, Western countries have made co ncessio ns which wo uld have seemed inconceivable a decade earlier. With regard to so uthern Africa , We te rn countries have deferred to Third World opinion in wi thhold ing support fo r an internal settlement in Southern Rhodesia which, des pite its mani fe t inequ alities

would have been seen in the West a few years ago as a model of reasonablene s. In

78 Chapter IV

the Middle East, the United States has shown firm support for Egyptian conciliation towards Israel and has sought to develop a more equal relationship of collaboration with Saudi Arabia. Of course, there have been indications during recent months that, with regard to both issues, Third World dissatisfaction with Western policies is again mounting.

34. In the future too, it seems very likely that the extent of dispute or agreement be­ tween the Third World and the West over the handling of the southern African and Middle East issues will have a large bearing on the tenor of overall relations between the two sides. This is simply because Black African, Arab and Islamic countries, which are those seriously concerned about either issue, account for about half the member­ ship of the Third World and include in their number nearly all the radical members of

the Third World and most of the countries aspiring to its leadership.

35. Neither issue is likely to be settled quickly or easily and the Third World coun­ tries especially concerned about them seem bound to retain for the foreseeable future some sense of grievance over what they will see as Western prevarication or obstruc­ tion. The only thing likely to make these countries more interested in cooperative re­ lations with the West would be the emergence of a situation where they saw the Soviet

Union as posing a serious threat to their interests and sought Western assistance in countering it. There is no guarantee, of course, that they would find the Western re­ sponse so much more helpful in this regard either.

PART C: THE THIRD WORLD AND THE MAJOR COMMUNIST POWERS

THE EAST-WEST CONFLICT AND THE THIRD WORLD

36. The diminished inclination of the United States to assert itself in relation to political and strategic developments in the Third World has coincided with increasing activism on the part of the Soviet Union, focused mainly on southern Africa and the area stretching along the Indian Ocean littoral from Ethiopia to Afghanistan, though also em bracing Indo-China in our own region.

37. The postures of the two superpowers are not unrelated. For, while there are independent reasons for the more thrusting policy of the Soviet Union, notably its strengthened military position and greater strategic reach, the inhibition of the United States has both encouraged bolder intervention on the part of the Soviet Union and

made those Third World countries which seek outside political assistance more re­ sponsive to its advances. The more it is believed that Soviet clients receive more effec­ tive assistance from their patron than Western clients do from theirs, the more likely it is that Third World countries which are ideologically anti-Western or indifferent in East-West terms will turn to the Soviet Union, while pro-Western or conservative ones (like Saudi Arabia) will become increasi ngly uncertain about their future and

may feel that they have no choice but to adjust to circumstances and to hedge their political bets. As Mrs Imelda Marcos succinctly put it on returning from a visit to Mos­ cow in July 1978, 'No one wants to be caught on the losing side'.'

New York Times, 30 July, 1978. The report continued: ' The non-aligned nations, she warned , are be­ ginning to believe the old Soviet line ... that the American Star is waning or, in the words o f Foreign Minister Isidoro Mai mierca of C ub a, the "wave of the future is Socialism".'

79

38. Looking forward into the 1980s, the following three factors are likely to have an important bearing, in one way or other, on the Soviet Union's policies towards the Third World:

(a) If present trends continue, the Soviet Union's comparative military position will be more favourable in the 1980s than it has ever been before. It will have achieved full parity or better in relation to the United States. This state of affairs may be perceived by Soviet leaders as transient, in that it will be likely

to activate the West's much greater capacity in order to redress the balance and that the Soviet's ability to maintain this advantageous position will be economically questionable.

(b) Even discounting the bleaker predictions about the Soviet economi, it is likely to face serious strains in the decade ahead due to a number of factors including a sharp drop in the growth of the labour supply, an inability to find and develop new deposits of oil rapidly enough to offset declines in other

fields, an increasing need to buy technology and make massive grain pur­ chases from the West, and the burden imposed by a huge military program.

(c) Given the present age structure of the Soviet leadership, it seems inevitable that there will be a turnover in personnel sometime during the decade. This will involve not only one or two figures at the top but a whole generation of leaders. It may involve a succession struggle which in turn may have foreign policy implications. It will certainly mean a period of relatively inexperienced

leadership, involving younger men without adult experience of the Second World War and therefore perhaps with fewer inhibitions about the use of force to further foreign policy goals.

39. The combined effect of these factors is difficult to predict. One possible outcome is that the Soviet Union may become increasingly preoccupied with internal problems and be content to preserve the status quo as regards its international position. It seems at least equally likely, however, that the new leadership will expect to receive some

benefit, not necessarily of a military nature, from the Soviet Union 's unprecedented, but possibly transient, military advantage and that this will lead to a sustained bid for enhanced political influence in the Third World, where the perceived risk will be lowest.

40 . Such a scenario does not presuppose a grand design or reckless adventurism on the part of the Soviet Union. It merely assumes a readiness to accumul ate benefits in an ad hoc way by exploiting whatever opportunities present themselves.

41. If this happens, the dilemma likely to face Western powers is th at the le ss willing they are (because of domestic opposition, fe ar of' another Vietn am ', co ncern not to alienate radical Third World elements, economic costs, or whatever ) to intervene effectively in situations which in themselves are less than crucial to their interests, the

more likely they are to allow situations to develop which will ultim ately be seriously threatening to important interests. They may then be presented with a choice between sacrificing those interests and accepting a dangerous co nfrontation with a Soviet Union which, having become accustomed to calcul ating on an ineffectu al Wes tern re­ sponse, may well misjudge Western re solution.

I See, for example, S oviet Economic Problems and Prospects, prepared by th e CIA for th e Joint Eco no mic Co mmittee, United States Congress, 8 Au gust, 1977 .

80 Chapter IV

42. The specific areas of Soviet activity are likely to be determined more by oppor­ tunity than by any set plan. But present indications are that southern Africa and the Middle East-West Asia region are likely to figure prominently. If, or more likely when, a situation evolves in southern Africa where the Republic of South Africa is effectively isolated (and this must be considered more likely than not within the next

five years), the Soviet Union will be presented with an eminently exploitable situ­ ation, in which the West-having a considerable economic and strategic stake in South Africa, as well as domestic constituencies which are sympathetic to the white regime-will be at a moral disadvantage in relation to the Third World.

43. Recent events in Afghanistan, South Yemen and Ethiopia have extended Soviet influence in the Middle East-West Asia area significantly, while developments in Iran (and, to a lesser extent, Turkey) have created considerable uncertainty about the stability of the whole region. Given the geopolitical sensitivity of the region, the Soviet Union can be expected to proceed with great caution. But, by the same token, the magnitude of the potential gains to be made there, if combined with the existence of increasingly exploitable opportunities, make it unlikely that it will equate caution with inaction. This, taken together with the West's ultimate stake in the region, makes the Middle East the most likely area in which miscalculations on either side could lead to a major superpower crisis.

44. The extent of the Soviet Union's involvement in South East Asia is likely to de­ pend on factors over which it has very limited control: the behaviour of its powerful and independent-minded client, Vietnam, and the reactions this evokes from China. Given the Soviet Union's limited influence and reach in respect of the area, and China's preoccupation with economic development and its basically defensive pos­ ture, the choice of options would seem to lie principally with Vietnam over the next decade.

45. Nothing which has been said is meant to imply an inevitability about the course of future events. As has been emphasised, Western policy towards the Third World is a crucial variable in the situation and this may well be changed-in fact, there are powerful voices in the West arguing that it should be changed urgently. At the same time, the political pressures which have resulted in the present policy should not be underestimated. As far as the Soviet Union is concerned, many Western commen­ tators (and many Third World spokesmen) stress the fact, already noted, that in the past its own maladroitness and misjudgments have often destroyed its political in­ vestments in the Third World, and they argue that this is likely to happen again in the future. This may well turn out to be the case. However, two things need to be borne in mind in relation to this argument. First, the Soviet Union may be capable of learning from its past mistakes and may be, as some observers believe, on a 'learning curve' in this respect, so that it would be dangerous to base predictions or policy on the expec­ tation that it must repeat its errors. Secondly, misjudgments can have multiple effects; they may result in a weakening of the Soviet Union's position, but equally well they may precipitate situations of crisis.

CHINA'S FUTURE RELATIONS WITH THIRD WORLD NEIGHBOURS

46. While future changes in the Chinese leadership may easily give rise to important adjustments in China's foreign policy, basic antipathy towards the Soviet Union seems certain to continue well into the 1980s. In these circumstances, China's policies towards Third World countries are likely to remain subordinate to and supportive of the primary objectives of its foreign policy-namely, to counter the threat the Soviet

81

Union is seen to pose to China's national security and to mm1m1se Soviet inter­ national influence, especially in Asian countries on or near China's borders.

47. On a secondary plane, China will continue to oppose the Soviet Union on politi­ cal and strategic issues in multilateral forums and seek to limit the influence of Soviet clients such as Vietnam and Cuba in the Non-Aligned Movement. In early 1979, China was particuluarly active at the United Nations in encouraging members of the

Non-Aligned Movement to criticise Vietnam over its invasion of Kampuchea.

48. The determination with which China has sought to retain influence in North Korea, Indo-China, Burma and Pakistan and its preparedness to attack Vietnam after the latter's invasion of Kampuchea demonstrate a preoccupation with the geopoliti­ cal imperative of avoiding encirclement by countries friendly to or under the influence of the Soviet Union. The attack on Vietnam also served to demonstrate to potential

adversaries that China is fully prepared to meet force with force in defending its im­ portant interests. Vietnam's efforts to establish hegemony throughout Indo-China and to extend wider influence in non-communist South East Asia are apparently resisted both in their own right and because of Vietnam's alliance with the Soviet

Union.

49. The recent hostilities between China and Vietnam have virtually ensured that Indo-China will remain for some time a primary focu s of confrontation between China and the Soviet Union and between China and Vietnam. China will probably continue to seek to undermine Vietnamese influence in both Laos and Kampuchea by providing material support to anti-Vietnamese forces in both countries, while compet­ ing assiduously against both the Soviet Union and Vietnam for favour in ASEAN capitals. Probably none of the three communist powers will have clear-cut success in

this regard. At the same time, China is unlikely to abandon completely its support for insurgency movements in non-communist South East Asia, for the reasons given in paragraph Ill of Chapter II.

IMPACT OF CHINESE INDUSTRIALISATION

50. China's current policies to promote industrialisation involve, inter ali a, the introduction of advanced technology from Japan, the United States and Western Europe and a related interest in exporting oil and expanding other foreign trade. This has given rise to speculation that a more outward-looking and eco nomicall y powerful

China, perhaps in close collaboration with Japan, might exert increasing political and economic influence on the developing countries of East Asia.

51. While such speculation is plausible in describing th e direction of a move ment towards greater involvement in international rel ations, it eem unlikel y that th e pace of this process will be so fast as to produce any dramatic change, at lea t durin g the 1980s. Moreover, there is also room to question the extent to which China ha

seriously modified its policy of self-reliance. The e judgment are ba ed on the fol­ lowing considerations: So long as a fair measure of internal political harm ony i maintain ed, hin a' efforts to mechanise agriculture, expand it ind u tria l ector a nd m derni e it

armed forces will, if sustained, lay the ba i fo r it projecti n of far greater national power by the turn of the century. During th e h rt term ho e r, the effect on China's international standing i not like! to b e grea t. In fact preoccupation with laying the dome tic foundation r u tain ed indu trial

growth may in the short run diminish China' international acti it

82 Chapter IV

. China's current two-way trade is estimated to be approximately 5 per cent of its GNP. The experience of other 'continental economies' -the United States and the Soviet Union-suggests that, even after extensive industrialisation, China's two-way trade will not amount to much more than 10 per cent of its GNP.

China's current total trade is small compared with that of Japan and the five ASEAN countries. In 1976, China's total two-way trade was approximately $11.9 billion, that of Japan was $132.0 billion and that of the ASEAN countries was $52.7 billion. In the same year, China's trade with Japan and the ASEAN countries represented only between one and two per cent of the other side's total trade in both cases. China's trade would therefore, have to grow much fas­ ter than these countries' trade for several years before it became a major com­ ponent of East Asian trade either within or outside the region.

. The recent conclusion of the Japan-China Peace and Friendship Treaty and the Japan-China Long-Term Trade Agreement is a firm indication that Japan and China are intent on conducting their bilateral relations on· a mutually pro­ ductive basis. There is, however, no necessary implication that they will tend to work in league as regards relations with third countries.

52. China's determination to modernise its economy and its willingness to expand its foreign trade are, of course, not unrelated to its security concerns. Expansion of the industrial sector enhances the nation's viability against external threat and increasing trade with both developed and developing non-communist countries does something to reduce the likelihood of their taking the Soviet Union's side against China.

PART D: WESTERN OIL SUPPLIES AND SAUDI ARABIAN LEVERAGE

53. The disruption to Western oil supplies caused by revolution in Iran has underlined the heavy dependence of Western economies on Middle East oil. Until this year, five countries located around the Gulf -Saudi Arabia, Iran, Iraq, Kuwait and the United Arab Emirates-have supplied together about half the oil imported by countries of the Organisation for Economic Cooperation and Development ( OECD ). Thus, the health of the Western economies depends very directly on the security and political stability of these countries and the attitudes of their ruling regimes. Foremost among this group is Saudi Arabia, which in 1978 accounted for 2 7 per cent of OPEC's total production and 38 per cent of its spare capacity. This section examines the poss­ ible leverage that Saudi Arabia may acquire during the next decade as the world's producer .. of-last-resort in a gradually tightening oil market.

THE OIL SITUATION

54. While there is considerable variation in published projections about the future supply and demand of oil, derived as much as anything from different assumptions about future economic growth in Western countries and about the possible impact of future price movements, it is at least possible to indicate roughly some of the likely trends:

(a) The outlook during most of 1978 was that the world oil market would con­ tinue in a state of structural surplus for some years, but this changed abruptly with the suspension of Iranian exports in December 1978. The subsequent shortfall in available supplies of 5.0 million barrels per day (mbd) was offset partly by increased production by Saudi Arabia and some other OPEC

83

members and partly by running down stocks in OECD countries. Iran's re­ sumption of exports in March 1979 at the much reduced maximum level of 2.3 mbd' means that the market is likely to remain tight for some time and that prices may rise appreciably.

(b) The United States is now the world's largest single oil importing country and for the foreseeable future will provide the primary growth market for Middle East oil. 2

(c) The Soviet Union's oil production is expected to decline, perhaps seriously, during the 1980s, partly because of delays in developing new fields. The United States Central Intelligence Agency has predicted that, without sig­ nificant change to existing policies, the Soviet Union and other East European countries will need to import by 1985 something of the order of2.7

mbd. 3 Other analysts have argued that the Soviet Union would be loath to di­ vert from other important purposes the very substantial amounts of hard cur­ rency needed to pay for such large imports. For its part, the OECD predicts that the Soviet Union and other East European countries will have net

exports of 0.5 mbd in 1980 and net imports of 0.4 mbd in 1985. 4 Given the strong incentives for the Soviet Union to avoid or minimise oil imports during the 1980s, it seems likely that the amounts involved in any such imports will not be so large as to change appreciably the world supply-demand situation. Thus, there will be no need for the Soviet Union to consider itself competing

against the West for access to finite amounts of Middle East oil. There will, of course, remain other important reasons for the Soviet Union to continue to pay close attention to the Middle East.

(d) An aggregation ofOECD projections suggest that, if all the countries belong­ ing to neither the OECD nor OPEC are considered as a group, their net effect on the world supply and demand of oil between 1980 and 1985 will be vir­ tually negligib1e. 5 If this forecast is proved wrong-because, say, Mexico is

able to export more than now expected-the most that seems likely to change is that the convergence of supply and demand will be delayed by one or two years. 6 Thus the two essential variables in determining the balance of supply and demand are the OECD 's total demand for imported oil and OPEC's ag­ ·gregate export capacity.

I At a press conference on 8 March 1979, the Chairman of the National Iranian Oil Company said th at Iran would not produce more than 3 mbd in the foreseeable future. Domestic co nsumption is about 0.7 mbd. 2 John Waterbury and Ragaez El Mallakh, The Middle East in the Coming Decade, 1980s Project, Coun cil

on Foreign Relations, McGraw-Hill, N.Y., 1978, p. 153.

3 Soviet Economic Problems and Prospects, prepared by the CIA for the Joint Eco no mi c Committee, United States Congress, 8 August, 1977. 4 OECD, WorldEnergyOutlook, 1977, p. 9. 5. ibid., p. 9 and Dank wart A. Rustow, 'US-Saudi Relations and the Oil Crises of the 1980s ', Fo reign

Affairs, Vol. 55 No.3, April 1977, p. 508 . Combining the various OECD projections suggest th at the net contribution of these countries will be nil in 1980 and an export volume of0.4 mbd in 1985. 6 The Oil and Gas Journal, Vol. 76 No. 52, 25 December 1978, p. 103 , lists Mexico's proven crud e· oil re­ serves at the end of 1978 as 16 billion barrels, that is to say of the sa me order as th ose of Yen ezuel a and

Nigeria, but some other estimates are much higher. The Mexican Government has ann oun ced its inten­ tion of producing 2.3 mbd by 1980 and of maintaining that level until at least 19 82. After domes ti c co n­ sumption, this will allow about 1.1 mbd for export.

84

(e)

Chapter IV

OECD projections published in 1977 suggested, inter alia, that, if annual growth rates averaged 3.6 per cent between 1980 and 1985, the total oil im­ port needs of OECD countries in 1985 would be 31.9 mbd; and that, if annual growth rates averaged 4.1 per cent, import needs in 1985 would be 35.0 mbd.' The record so far suggests that the lower estimate will probably turn out to be more accurate. 2

(f) What is already known about the capacltles and policies of all OPEC members except Saudi Arabia and Iran suggest that their combined export capacity in 1985 will be something close to 17.8 mbd.3 The Saudi Arabian Government is reported to have. instructed the four United States companies which manage the country's oil fields to plan an increase in sustainable ca­ pacity to only 12 mbd by 1985 , which is equivalent to an export capacity of

11.2 mbd .< Hence, without Iran, OPEC's export capacity in 1985 will be about 29.0 mbd. Iflran exports no more than it does now, the OPEC capacity will be around 31 mbd: and if Iran exports half-way between what it does now and what it might have done had the Shah's polices continued, the OPEC total export capacity will be around 33 mbd.

55. A comparison of the projections in sub-paragraphs (e) and (f) above suggests the tentative conclusion that, unless OECD growth rates between now and 1985 are around 3 per cent or lower, a point will be reached by the late 1980s when increasing OECD oil import needs can only be met by progressive expansion of Saudi Arabian production. Moreover, even if growth rates are around 3 per cent or lower, the main­ tenance of adequate oil supplies will probably depend on Saudi Arabia's putting into effect its present expansion plans.

56. Of course, an important caveat that should be entered against the preceding dis­ cussion is that it takes no account of the longer term role of price increases in balanc­ ing supply and demand- their dampening effect on demand and their stimulative effect on supply through, inter alia, more exploration and making commercially vi­ able hitherto uneconomic fields as well as other means of production. At one price or another, demand and supply must be bal anced and the higher the relative price of oil, the quicker will alternatives be developed.

SAUDI LEVERAGE

57. The prospect of adequate Western oil supplies becoming more and more di­ rectly dependent on Saudi Arabia's ability and willingness to expand production means, of course, th at Saudi Arabia will acquire an increasingly pivotal role in inter­ national affairs.

I OECD, op. cit., pp. 9 and 94-95 . 2 Combined OECD oil imports from all outside sources were 27.2 mbd in 1978.

3 Calculated from figures given by Rustow, op. cit. , p. 509. 4 Robert J. Samuelson,' Will the Real " Oil Crisis" Please Stand Up?', National Journal, 26 August 1978, p. 1349. See also Louis Turner and James Bedore, 'Saudi Arabia: The Power of the Purse-Strings ', Inter­ national Affairs, Vol. 54 No.3, July 1978, p. 412.

85

58. Its scope to exercise its unique form of leverage is qualified by some rather serious weaknesses and vulnerabilities: Saudi Arabia depends heavily on the West, and particularly the United States, for technology, defence equipment and security of investment of its surplus oil

earnings. In particular, if increased OPEC prices lead to a worsening of the United States' balance of payments position and a decline in the value of the dollar, there will be a similar decline in the value of Saudi Arabian investments, the bulk of which are dollar-denominated.

Although currently the ruling regime is not subject to any internal challenge, with time it may have to contend with pressure from religious radicals who oppose relations with the West or with other forms of internal dissension.

Saudi Arabia would ultimately have to rely on United States support to resist determined manoeuvrings against it by external radical Arabs especially if they were supported by the Soviet Union.

59 . There is clearly considerable compatibility of interests between Saudi Arabia and the West in terms of both sides wanting Saudi Arabia to be immune from any external threat or internal disorder which would disrupt Western oil supplies. At the same time, it is important to note actual and potential sources of conflict:

Saudi Arabia takes very seriously both its responsibilities as a guardian of Islamic holy places and its relations with other Islamic countries.

With regard to the Arab-Israeli dispute, Saudi Arabia looks for a compre­ hensive settlement which would pay respect to the interests of all Arab states and the Palestinian Arabs. It has so far resolutely refused to support the Camp David arrangements as a basis for settlement.

Saudi Arabia's concern over increasing Soviet influence in its region makes it uneasy about what it sees as United States complacency and lack of resolve in resisting the Soviet challenge.

Despite Saudi Arabia's resourcefulness in pre-empting pressures from external radical Arabs and the influence inherent in its enormous wealth, it needs to be responsive to the views of its Arab neighbours, some of whom aspire to leading roles in the Third World. This means that, whatever the relevance to its own

national interests, Saudi Arabia will often be more inclined than Western nations to show sympathy for Third World positions.

60. These considerations suggest that situations in which Saudi Arabia attempts to use oil leverage against the West might arise with ro ughl y the following order of probability: (a) Saudi Arabia is very likely to use ' indirect ' leverage again st Western coun­

tries, for example, by making clear to the United State s th at Saudi co oper­ ation in expanding oil production or in moderatin g price increases will be contingent on fulfilment of United State s' co mmitments to supply defen ce equipment; (b) It is quite possible that Saudi Arabia and other Ara b oil exportin g nations

might apply an embargo on oil exports durin g a future Ara b-Israeli war, par­ ticularly if it were judged that the United States' position was ex cessiv ely par­ tial towards Israel ; (c) Saudi Arabia, if caught in the middle of so me protracted co nfront ation be­

tween Western nations a nd radica l Third World co untries , might decide on

86 Chapter IV

the basis of its own interests to pressure the West to make concessions to the Third World; and

(d) It is conceivable, though unlikely, that Saudi Arabia would take the initiative on behalf of the Third World and use its oil leverage to press some general demand on the West, when Saudi interests were not directly involved.

61. To sum up, the relationship between Saudi Arabia and the West is an extremely important and delicate one. This is especially so in the case of its relations with the United States, and the successful management of those relations will require each side to take due account of the other's legitimate needs, and interests and vulnerabilities. Given Saudi Arabia's profound dissatisfaction with the Camp David peace arrange­

ments to which the United States is obviously deeply committed, the immediate prospect is for United States-Saudi Arabian relations to cool somewhat. In the longer term, Saudi Arabia's abundant oil reserves provide it with such economic leverage that the OECD countries can only ignore important Saudi Arabian interests at the risk of serious damage to their economies. At the same time, Saudi Arabia has very lim­ ited military power, its survival depends ultimately on guarantees by powers external to its region, and its prosperity depends on secure investment opportunities in the West.

PARTE: NUCLEAR PROLIFERATION IN THE THIRD WORLD

62. The commitment of Third World countries to the prevailing nuclear non­ proliferation regime is more qualified than that of Western powers and the Soviet Union. Their most basic criticism centres on the inherent discrimination in the Nu­ clear Non-Proliferation Treaty (NPT) in its different treatment of nuclear weapon and non-nuclear weapon states.

63. Third World countries are increasingly critical of the nuclear weapon states for not having satisfactorily fulfilled their obligations under Article VI of the NPT to pur­ sue the negotiation of nuclear arms control and disarmament measures. They are par­ ticularly dissatisfied with the situation in which non-nuclear weapon states are required under the NPT to foreswear nuclear weapons while the nuclear weapon states continue 'vertical' proliferation with the development of nuclear weapon sys­ tems of increasing sophistication. In a similar vein, they have been in the forefront of efforts to persuade the nuclear weapon powers to provide adequate assurances against the threat or use of nuclear weapons against non-nuclear weapon states. Insufficientprogress on these issues of nuclear arms control has also provided a ready excuse for some Third World states to refuse to subscribe to the NPT and to oppose

measures aimed at strengthening international non-proliferation arrangements.

64. An issue of even greater concern for many Third World states which has become prominent in the last two or three years arises from the increased restrictions which supplier countries have imposed for non-proliferation reasons on the international trade in nuclear materials, equipment and technology. These more restrictive policies, whether in the form of guidelines which have been agreed by the Nuclear Suppliers Group, or the more stringent safeguards policies which have been adopted by major

uranium suppliers such as the United States, Canada and Australia, can be traced to reactions to India's 'peaceful nuclear explosion' in 1974. Many Third World states are arguing, however, that such restraints are contrary to Article IV of the NPT which

87

deals with the inalienable right to develop research, production and use of nuclear en­ ergy for peaceful purposes. The 'Article IV issue' has thus taken on an important North-South dimension and Third World countries-both NPT parties and non­ parties-have pressed the matter in the United Nations General Assembly and other forums.

65. At present, more than 35 Third World states are not parties to the Nuclear Non­ Proliferation Treaty. To a large proportion of these, the NPT seems irrelevant given their scientific and technical backwardness. But there is a small group of non-parties in the Third World, notably Argentina, Brazil and Pakistan (in addition to India), which are highly critical of the NPT and have the capacity to develop nuclear

weapons.

66. The perception of increased risk of nuclear proliferation in the Third World de­ rives from:

(a) The diffusion of information and technology over the past decade, which greatly accelerated India's ability to develop and test a nuclear device.

(b) A sense of insecurity among some of the more technically advanced Third World countries about future access to nuclear materials, equipment and technology. This has strengthened their inclination to establish, under their national control, full nuclear fuel cycle facilities, including enrichment and reprocessing facilities.

67. The disincentives against a Third World country's acquiring nuclear weapons are very strong and include the likelihood of:

a hostile reaction from major Western powers, the Soviet Union and inter­ national opinion generally;

denial of further external supplies of nuclear materials, equipment and technology;

increased tension with neighbouring states which might react by trying to obtain nuclear weapons of their own; and

. development, as a result of the work being carried out now in the International Nuclear Fuel Cycle Evaluation (INFCE) and parallel efforts, of new insti­ tutional arrangements to cover sensitive aspects of nuclear activities, for example, international management of plutonium, interna tional spent fuel storage repositories, and multinational control of enrichment and reprocessin g. A corollary of the success of such efforts would be disin ce ntives for

non-cooperation.

68. Nevertheless, if a country with the necessary scientific and technica l reso urces was determined to acquire nuclear weapons, irrespective of the full internation al consequences this would entail, there are no absolute technical barriers which co uld prevent it from doing so either directly or through an established nucle ar energy

program. The time taken to do so would vary greatly depending on the co untry's level of technical sophistication. A country with independent access to uranium , and with the necessary technical skills, could probably produce we apon material more quick ly and cheaply by a weapon-dedicated process of uranium enrichment or plutonium

production than by first establishing a commercial nuclear power re ac tor. In other words, a country operating a nuclear energy program is not necessa ril y clo er to nu ­ clear weapon capability than one which is not, unless its program involves a full nu­ clear fuel cycle with enrichment or reprocessing facilities under its national co ntrol.

88 Chapter IV

69. Apart from the actual acquisition of nuclear weapons, two related courses of action might seem attractive to some Third World countries: (a) intimidation of a neighbour by merely exploding a nuclear device for alleg­ edly' peaceful purposes' as India did in 197 4; and

(b) an attempt to extract concessions from, say, the United States in return for not acquiring nuclear weapons when they clearly had the capacity to do so.

70. Some variables possibly affecting proliferation trends in the Third World are: a decision by allies of the United States that they had been left to fend for them­ selves against perceived security threats; intensification of hostility between certain pairs ofThird World neighbours; arrangements among certain Third World countries to collaborate in the devel­ opment of nuclear weapons;

public demonstration that Israel or South Africa had acquired nuclear weapons; and refusal by advanced countries to supply sophisticated conventional weapons.

71. It is difficult to offer confident predictions about whether and, if so, when there might be further nuclear proliferation in the Third World. The establishment by Third World countries of commercial nuclear facilities to meet their electricity re­ quirements need not of itself increase the likelihood of proliferation. To the contrary, many of these countries will become increasingly dependent on external supplies of nuclear materials, equipment and technology and the likely impact of sanctions on their energy supplies will become a strong deterrent against acquiring nuclear weapons. But the risk of attracting sanctions or international opprobrium is less of a deterrent for some Third World countries than for others and the possibility that there will be some countries prepared to accept these risks cannot be ruled out. Ultimately, a decision on whether or not to acquire nuclear weapons revolves around questions of national security and prestige. As long as nuclear weapons retain their value as im­ portant sources, symbols and instruments of international power, the danger of further proliferation will remain.

89

CHAPTER V

The Economic Prospects of the Third World

Population-Economic Growth-International Trade-Importance of Manufacturing-Implication for Australia-Capital Flows and Debt-Private Di­ rect Investment-Major Issues Affecting Economic Prospects: interdependence in the international economic system; protectionism; primary commodities vs manu­ factures; development aid; the role of transnational corporations; international

monetary arrangements.

Any assessment of future economic prospects is fraught with uncertainty because so much depends on what happens to matters about which a wide range of views can rationally be held-such as the economic and political policies that are pursued by governments; the development of economic and political relations between countries; the future effects of past economic, social and political developments within a country.

Much also depends on the scientific and technological progress which is certain to occur but whose economic effects cannot be foreseen. Because of the difficultie of assessing the effects of changes in such variables, assessments of future economic prospects tend to be based on the assumption that, broadly speaking, current or re­ cent economic trends, policies and relationships will continue.

2. This Chapter proceeds along these lines although indications are also given of possible changes in direction and possible areas of economic development that could involve contentious issues between the Third World and the West. Attention is thus directed primarily to possible . broad trends rather than to detailed statistical

projections.

MAIN ELEMENTS

Population 3. Third World populations have been growing fa ster than those of the developed countries since the first half of this century, and there was a rapid increase in momen­ tum after about 1950. 1 Demographers associate the causes of this differential with

differences in the phasing of the' mortality transitions' and the ' fertility transition 'of the two groups of countries. The Third World 's mortality transition took effect at a time more in line with that of the developed countries, whereas the fertility transition was retarded.

I See Appendix J.

90 Chapter V

4. Because of the different stages of each group of countries in the process of demo­ graphic change the population growth in developing countries is likely to continue at a faster rate than in developed countries, at least until the end of this century. By that time the developed world is likely to account for about one-fifth of the world's popu­ lation compared with one quarter now, and the developing world (including China) will probably comprise more than five billion people. The significance of the popula­ ton factor is a function of:

the implication of the increase in sheer numbers of the Third World for patterns of consumption and production, as between developed and developing coun­ tries, of raw materials, energy, manufactured goods and services;

. the interaction of population growth and economic performance of individual countries (see paragraphs 5 and 6 below);

the rapid expansion of the size and numbers of urban centres in the Third World as a result of migration out of overpopulated and underdeveloped rural areas, and the attraction exerted by the measure of success of industrialisation and urban development policies achieved in many Third World countries; and

the additional impulse it provides for international migration, especially from countries where average incomes are likely to increase at a slow rate.

5. The effects of population increases on economic growth performance are uncer­ tain. As pointed out in Chapter I, experience to date shows that there is no necessary correlation between high rates of population growth and poor economic achieve­ ment, so the impact seems likely to vary from country to country. Australia may be fortunately placed in that, on their past record, many of its Third World neighbours should be able to continue impressive per capita income growth as well as high popu­ lation growth.

6. However, increased urban populations seem likely to generate social and political pressures on a more widespread scale throughout the developing world.

Economic Growth 7. The Committee reviewed several important projections of world economic growth which have been made in recent years. In particular, it examined the projec­ tions (mainly to 1985) of the World Bank, and the extrapolation of these to the year 2000 by the Overseas Development Council in the United States; the study conducted

by Professor Wassily Leontieffor the United Nations; and material which was avail­ able from a major though yet uncompleted study by the Organisation for Economic Cooperation and Development ( OECD ). 1

8. Several broad conclusions can be derived from these studies:

(a) A wide spread in the performance ofvarious sub-groups of countries is to be anticipated, continuing the trend of differentiation already evident. no region or country is expected to be actually worse off by the end of the cen­ tury, and significant growth should occur in all areas, per capita income differences will be considerable. A number of countries, for example those in the Sahel, might achieve per capita increases of a few dollars between now and 2000. On the other hand, some countries enjoying currently very high rates of growth, such as the 'newly industrialising countries' (NICs), might

Appendix K contains fuller details.

91

reach per capita incomes comparable to those of some of the developed coun­ tries in the 1970s.

(b) The projections are not dissimilar from rates actually achieved in the post-1950 period by developed and Third World countries. Future perform­ ance may well be better than this for Third World countries because of the effects of the cumulative investment in both physical and human capital over the past 25-30 years. On the other hand, unpredictable socio-political dislo­ cations may impede performance. Much hinges as well on the ability of the developed countries to move towards reinstating the sustained high growth

rates they achieved in the greater part of the post-war period, and the steady convergence in their economies' productivity levels, which is assessed as im­ portant for the preservation of relatively open trade both among themselves and globally.

(c) Unless Third World and developed countries' per capita growth rates di­ verge unexpectedly in favour of the Third World, the current aggregate ratio of 12: 1 between the per capita income of the two groups will not alter. But be­ cause of the differentiation between countries' performances noted in (a)

above, the projected ratio will be rather less for high-growth countries and significantly more for the low-growth countries.

(d) The incidence of absolute poverty can be expected to fall quite

significantly-by as much as 50 per cent-as a proportion of total Third World populations between 1975 and 2000. But in absolute terms it might not diminish much. 'Absolute' poverty might be reduced from about 800 million in 1975 to 260 million by the end of the century. On less optimistic assumptions, the number would be perhaps 600 million. These people would continue to be concentrated in areas of South Asia, Africa and parts of

Indonesia.

(e) East and South East Asia are noted as a region in which the unevenness of the Third World's performance is particularly evident. It includes

South Korea, Taiwan, Singapore and Hong Kong which have been the most dynamic economies in the world in the 1960s and 1970s. Already at an ad­ vanced stage of industrialisation, these countries and territories exported almost half the Third World's exports of industrial goods in 1975 and South Korea's planners expect a GNP per capita in the year 2000 of some $4000-that is, above the United Kingdom's 1976 figure . On the other hand,

Indonesia, with a population probably of nearly 200 million in 2000 (com­ pared with 135 million in 1976) would not reach a GNP per capita of $300 even if its economy grows at the high rate of6.0-6.9 per cent projected by the UN Economic and Social Commission for Asia and the Pacific (ESCAP). This region also exhibits the full spectrum of openness to influences from the outside world, and thus of dependence on world economic conditions. Sin­

gapore and Hong Kong, wholly dependent for their prosperity on outside economic relationships, are at one extreme, with Vietnam and Kampuchea at the other.

(f) Physical shortages of natural resources is unlikely to act as a restraint on growth well into the next century, and the distribution of natural resource supplies between developed and developing countries is unlikely to alter sig­ nificantly. However, inadequate investment and I or the absence of adequate

technology could lead to short-term shortages in the supply of some raw

92 Chapter V

materials, particularly in the early 1980s, leading to rises in their prices rela­ tive to the price of manufactures. The relative price of oil is certain to increase significantly (inducing, in turn, the development of other sources of energy).

9. Simple extrapolations of the GNP and GNP per capita growth of the market­ oriented economies of East and South East Asia and Australia to the year 2000 reveal that, on the assumption of a continuation of past trends, Singapore is the most likely country to overtake Australia by that date. 1 The extrapolations reveal, however, a very large gap-of some $10,000 per capita GNP-between Singapore's achievement and that of the next most successful Third World areas, Taiwan and South Korea.

10. The assumptions underlying the projections referred to above are largely from the experience of the past 25-30 years, projected forward. Whether there will be a repetition of the unprecedented growth that then occurred in developing countries as a group is contingent on many factors. From some viewpoints a more favourable out­ look might be assessed. For example, the large investments which developing coun­ tries have made in infrastructure and production facilities, as well as in development of aptitudes and skills, have diversified most developing countries' economies and have provided a more solid foundation from which to move forward than existed, say, 30 years ago. Important here also is the fact that, notwithstanding some recent retrogression, the substantial liberalisation of international trade and capital flows during the post-war period provides a significantly better environment for more rapid expansion in the future than existed at that earlier time.

11. There are, however, also important areas of uncertainty which could impinge adversely on this generally favourable outlook. Chief among these would be: possible failure by developing countries themselves to pursue economic policies which provide an economic and political environment conducive to

entrepreneurship and growth; or a possible failure by developed countries to pursue economic policies which en­ able improved growth rates and lower levels of unemployment than in the past few years; or

a widespread resurgence of protectionism as an attempted solution to current high levels of unemployment in developed countries (a particular example of the preceding point); or a possible restriction of oil supplies as a result of action by the Organisation of Oil Exporting Countries (OPEC)-although the certain increase in the relative price of oil, and the inducement this will give both to the production of pet­ roleum from other sources and by other means and to the switching to other sources of energy, seem likely eventually to diminish OPEC's existing substan­ tial power over the West's main source of energy.

12. It is relatively easy to postulate scenarios that would fit either optimistic or pessi­ mistic assessments of the future outlook on these various factors. What can be said with reasonable confidence, however, is that there appear to be no 'technical' factors (such as shortages of resources or technology) that would stand in the way of a further significant increase in average standards of living in developing countries. In short, a great deal depends on how human attitudes and relationships develop, both within the framework of individual societies and in terms of relationships between those societies.

I See Appendix L.

93

13. Whatever the precise trends, it seems certain that the West will remain in a pos­ ition of economic 'dominance', in the arithmetic sense of having the largest share of world output and trade. Developing countries' share of world output, at present around 16-17 per cent, is likely to increase in the next 20 years but probably not to

much more than 20-21 per cent. 1

International Trade 14. The growth prospects of Third World economies outlined in the previous sec­ tion, uneven though they might be, assume continued fairly rapid expansion of world trade. Increases in the developing countries' share of world manufacturing output, and the productive utilisation by these countries of their growing labour forces, will depend on a number of factors. The most important of these will be the external poli­ cies of developing countries and the capacity and willingness of the developed coun­

tries to make the economic and social adjustments necessary to allow penetration of their markets by products from the new source countries. In this connection, para­ graphs 33 to 42 below review the importance of the threat of protectionism.

15. The key to increased aggregate Third World participation in international trade, oil apart, is the expansion of its exports of manufactured goods. The share of manu­ factures in developing countries' non-oil exports has already increased markedly, from 10 per cent in 1955 to 41 per cent in 1977. World Bank projections suggest a

further rise to 55 per cent by 1985.

16. In global terms, any of the rates of expansion of Third World industrial exports which might be · considered practicable do not result in spectacular increases in developing countries' share of world trade in manufactures. Projections for the year 2000 range from about 10 per cent to about 17 per cent, compared with the present proportion of around 7 per cent. The share thus remains relatively modest, despite quite high annual growth rates, because of the low starting level and the much greater

bulk of manufactured exports shipped by the industrialised countries, in large measure among themselves.

17. Developing countries could undoubtedly further increase their participation in world trade in manufactures if they continued to move away from import sub stitution strategies and took further steps towards reducing the high levels of protection they themselves maintain on their industries. The more advanced of the developing coun­

tries will probably continue to move towards such liberalisation as their industries de­ velop out of' infant' status and when insulation from outside competition is seen as being less necessary.

18. For the developed countries as a group, the expanded industrial ca pacity of some industrialising Third World countries over the next two decades should mean steadily increasing market penetration and adjustment problems in particul ar indus­ try sectors. However, the projected increases in developing co untry share of

manufactured exports do not suggest that developed countries will face severe indus­ trial competition on a broad front.

19. For the more highly protected economies like Australia, however, the chall enge could be somewhat greater even though about half of our manu facturin g indus try i not subject to protection. Because the East and South East Asian region is lik ely to re­ main an important focus of Third World industrialisation for th e fo reseea ble future,

l See Appendix M.

94 Chapter V

this geographical factor adds a further dimension to Australia's position as a potential market for Third World exports, its importance measured less in terms of absolute size than its function at the margin.

20. To date, significant market penetration achieved by Asian exports into Australia has been confined to the three broad product groups of clothing and footwear, textiles and timber products. However, the increasing diversification of these countries' econ­ omies and their movement away from import substitution strategies have laid a basis for large-scale expansion of output and increasing trade specialisation. This will un­ doubtedly increase the range of industrial sectors in Australia which will be subject to competition from the products of Asian industrialisation. It also implies changes in the composition of these countries' imports, which in turn should offer greater export opportunities not only for Australian resource industries but also for specialised

manufactures.

Capital Flows and Debt 21. Since the late 1960s and especially after 197 4, Third World countries have had increasing resort to non-concessional, private sources of finance for their external capital needs. Increased borrowing has financed the larger current external deficits of a number of developing countries, partly reflecting the effects of oil price rises and partly the higher credit worthiness of the middle and higher income groups of developing countries, who have been the chief borrowers. Whereas in 1971 official aid (ODA) exceeded private capital as a source of development funds, by 1976 for every dollar of official flow, two dollars were transmitted to the Third World in the form of private capital (not including private export credits).

22. World Bank projections suggest that the availability of external medium to long-term capital should be sufficient to enable borrower countries to achieve the rates of economic growth projected for them to 1985. Some 85 per cent of this capital would be from private sources and 15 per cent from official. Of course, much depends here on continued growth in world economic activity and world trade. The pursuit of appropriate domestic economic policies by the governments of the borrowers will also be important. As with the Third World's contribution to world exports of manufac­ tures, a very small group of developing countries accounts for the bulk of borrowing. Thus, some 66 per cent of outstanding debt is owed by nine middle-income non­ OPEC countries plus one European borrower. 1 Eight more countries account for a further 12 per cent. The number of Third World countries drawing on private exter­ nal sources can be expected to increase, which will add to the importance of develop­ ing countries' maintaining access to markets for their exports so that they can service their debts.

23 . As indicated in Chapter II, there can be little doubt that the concern which has been expressed in recent years that a general debt problem exists, or threatens, is overdrawn. By historical standards, current debt service ratios do not seem excessive. However, some countries are facing difficulties in servicing debts- for example, Turkey-and the increased emphasis on debt rather than equity capital (see para­ graphs 26 to 28 below) in recent years has exposed those Third World countries with large borrowings to higher risk in the event of economic downturn. Debt problems in

l Brazil, Mexico, Argentina, South Korea, Chile, Turkey, Colombia, the Philippines and Peru.

95

any one of these countries could make lenders reluctant to refinance existing debt and possibly affect their willingness to lend to others. Moreover, if the banks in developed countries are to increase their lending to developing countries over the next several years they will need to increase their capital base and have a regulatory environment conducive to continued active lending.

24. Overall, the middle and higher income developing countries appear likely to be able to look forward to incre·asing net transfers of borrowings. There will doubtless be instances of individual debt servicing difficulty due to an inability to adjust domestic economic policies because of factors such as internal political instability or downturns in demand for staple export products. Subject to such developments, however, this group of countries should experience little difficulty in obtaining access to loan funds.

25. The outlook for the low-income countries is less favourable. In recent years the net inflow of external capital, including ODA, has not kept pace with inflation, reflect­ ing the lesser capacity of these countries to utilise such funds in productive ways. They are likely to continue to rely for external capital primarily on aid and will be looking

for official aid to be redirected more towards them in the future (see paragraphs 47 to 52 below).

Private Direct Investment 26. The increase in bank lending to developing countries since the 1960s has been accompanied in recent years by a fall in the relative importance of foreign direct in­ vestment in Third World countries. The fall undoubtedly reflects the increased con­ cern on the part of host countries about foreign ' control' inherent in foreign equity ownership. And, to some extent, direct investment has been replaced by increased

borrowing.

27. As with the increase in private flows of resources generally during the 1970s, transnational investment has favoured the higher income groups of Third World countries, contributing further to the differentiation process between the poorer and richer of them.

28. Notwithstanding the recent decline in the relative importance of foreign direct investment, there may be scope for this form of investment to play an increased role. Developing countries are now more able to negotiate on equal terms with transna­ tional corporations and there appears to be increasing resort to negotiating ' package'

deals which take advantage of the capital and technology which transnational corpor­ ations have to offer while ensuring adequate benefits to the host country. Those Third World countries that are unable or unwilling to accept transnational investment may find that their rate of development is affected, further increasing the disparities in in­ come and wealth between the richer and poorer countries of the Third World .

MAJOR ISSUES AFFECTING THE THIRD WORLD'S ECONOMIC PROSPECTS

29. It is a theme of many statements, speeches and communiques of Third World leaders that their countries' economic prospects are bound up with the implemen­ tation of the New International Economic Order ( NIEO). As Chapter III ought to argue, while all the elements in the NIEO package are unlikely to be b.y t.he

West, the package does contain elements which have been tss ue m m­

ternational economic relations and which may well be of a b1dmg 1m porta nee. Indeed some of them are capable of resolution, with mutual benefit to the Third World and

96 Chapter V

the West. It might not be misrepresenting the 'moderate' Third World proponents of 'an NIEO' to describe them as advocating no more or no less than the satisfactory res­ olution of these sorts of issues.

(a) Interdependence in the International Economic System 30. Whether interdependent economic relations among nation states will be al­ lowed to increase, or whether there will be some deliberate movement backwards towards self-reliance or autarky, is a basic issue which will have profound impli­ cations for international peace and stability as well as for future economic progress. The relatively free movement of goods in international economic transactions, the willing partnership of buyer and seller, which has characterised the post-war inter­ national economic system has served much of the world, including significant and growing sections of the Third World, very well over recent decades. It promises to continue to do so, provided that the major states remain prepared to help make the necessary adjustments to the system, to permit it to adapt to provide for the interests of relative newcomers and participants with less bargaining power, and to take account of changing circumstances generally.

31. In this context it is relevant to cite three major examples of pressures inimkal to the system, emanating from both First and Third World quarters: (a) the cartelisation of oil supplies by OPEC governments replacing the compe­ tition among international oil companies which had had the effect of keeping

the relative price of the commodity at a low level over a long period; (b) the calls for 'collective self-reliance' by Third World countries, pushed to the extreme of' de-linking' proposals in the radical version of the NIEO; and (c) protectionism in the developed countries, already chronic in the case of tem­

perate agricultural products competing with their own farm industries, but threatening to extend on a broad front into the field of manufactures.

32. The extent to which such pressures are effectively resisted or at least contained will have clear consequences for the economic growth of both the faster and slower growing groups of Third World countries, and for the rates of progress achieved in al­ leviating poverty in them.

(b) Protectionism 33. The international trading framework has been at the centre of the moderate Third World interest in international economic relations because through trade they hope to obtain greater integration into the world economy and thereby accelerate their rates of growth. The rapid growth of the manufactured exports of developing countries in recent years indicates that, so far at least, protection in developed coun­ tries has not prevented a significant increase. But it is not, of course, possible to quan­ tify the export opportunities lost by trade barriers. The quotas and non-tariff barriers imposed over recent decades by developed countries on items of export interest to developing countries are evidence that the scope available to Third World countries to increase their exports has been restricted.

34. At issue for the future is whether the recent tendency to intensify protection will continue, or whether developed countries will reduce protection of various sorts and allow the adjustments to industry that are needed if manufactured imports by developing countries are to continue to grow at the rates achieved in the first half of this decade. The tendency towards increased protectionism has formed part of a wider phenomenon affecting trade among developed countries as well as with the

97

Third World. Since the mid-1970s the international trade framework has been sub­ jected to very strong pressures as a result of unprecedented post-war inflation and un­ employment in the developed countries.

35. Two influences are present which provide grounds for concern. The first is the increasing number of products (albeit still small) in which Third World manufac­ turers are competitive in Western markets and which pose the threat of dislocation in a number of politically sensitive sectors of Western production.

36. The second influence is a combination of the apparently increased inflexibility of Western economies (evident in the extent to which certain industrial groups, in­ cluding unions and employers as well as governments, seem increasingly unprepared to allow the structural adjustment which in the past has been a source of Western

economic strength) and an increase in the political precariousness of some Western governments whose parliamentary majorities are fragile . This second influence is the more worrying because it has a two-edged effect. Weak governments in the major trading countries tend to inward-looking and timid policies. They are likely to lack the capacity-or at least the inclination-to apply policies based on the mutual benefits to

be obtained in the long run from greater efficiency in the international use of pro­ ductive resources. Protection invoked or retained primarily as a result of such weak­ nesses would directly impede trade growth among the major economic powers as well as with developing countries. It would also significantly slow the rate of growth of the advanced economies, having a further retarding effect on Third World growth prospects.

37. On the other hand, there ate indications that give some cause for optimism. The Seventh Round of trade negotiations conducted under the auspices of the General Agreement on Tariffs and Trade is in progress and most favoured nation (mfn) re­ ductions in industrial tariffs se.em to be in prospect. Moreover, notwithstanding the

increased resort in recent years to non-tariff barriers, the line against protectionist pressures has been fairly well held in difficult circumstances of rising unemployment. Political leaders in the West are cognisant of the risks of a slide into protectionism and international meetings of such leaders have strongly endorsed the need to avert this. The idea that the interests of developing countries should receive 'special ' attention

continues to be given prominence, at least at the rhetorical plane, in Western econ­ omic discussions.

38. While Third World countries have received benefits from reductions in tariffs exchanged between developed countries, such reductions have not necessa ril y bee n related to the exports of most interest to developing countries. Non-participation in reciprocal exchanges of tariff reductions may also have led to incre ases in their own

levels of protection. Moreover, the lowering of de vel oped co untrie ' tariff ha reduced the significance of preferential tariff margins in developed co untries' mark et and this, coupled with the use of non-tariff barriers to re strict certain major import into developed country markets, have limited the value ofGSP sc heme .

39. The relatively high degree of protection which tend s to be acco rd ed indu trie in developing countries, and the extent to which many of the co untne

especially those in the lower middle-income bracket, pursue poltcte whtch actu a l! function as disincentives to exports, seem lik ely to recei ve in crea in g emph a i in m­ ternational debate. In the case of the rapidly industrialisin g N IC dome tic and inter­ national pressures for them to participate more _ actively in recipro al neg -tiations are likely to increase. In these countnes th ere would otherwt e be an

98 Chapter V

increasing contrast between the protective regimes of their industry sectors as against those of the industry sectors in developed countries. Such pressures would also arise as a result of the evident ability of the NICs to compete in international markets. Fur­ thermore, some degree of trade liberalisation will be required ofThird World coun­ tries if intra-Third World trade is to continue to increase and to help sustain the growth of industrial capacity in these countries.

40. Notwithstanding the apparent scope for liberalising the import policies of many developing countries, the governments of developed countries cannot prudently advocate this course too vigorously while they themselves maintain protective regimes for their own vulnerable industries. To do so would be to expose themselves to criticism for trying to postpone their own domestic restructuring tasks.

41. While it may be reasonable to hope for no resurgence of general protectionism, it is possible that protectionist pressures will lead to an increasing number of bilateral and multilateral 'arrangements' for particular commodities governing allowable export volumes from participating countries. (These are already in existence for tex­ tiles, apparel and steel.) That is, whatever the rhetoric, there could be some modifica­ tion in practice to the operation of the non-discrimination and mfn principles in inter­ national trade.

42. If such modifications were to become widespread, it would undoubtedly slow the growth prospects of some of the NICs following export-oriented industrial growth strategies. It could also provide an impulse to the development of discriminatory re­ gional trading arrangements linking countries with broadly complementary trading interests. Such groupings could eventually acquire the character of economic ' blocs ', depending upon the degree of exclusion from the markets of non-regional or non­ participating countries which protectionism came to entail.

(c) Primary Commodities vs Manufactures 43. Over recent years there has been a significant increase in industrialisation in the Third World, to the point where the aggregate value of manufacturing production is now about the same as agricultural production and manufactured exports of develop­ ing countries are now almost as large in value as agricultural exports. Of course, this increased focus on manufacturing is largely concentrated in the higher and middle­ income developing countries, although a few lower income countries have also estab­ lished substantial manufacturing sectors, mainly for import replacement. As indicated, further expansion in manufacturing will depend substantially on develop­ ing countries obtaining adequate access to developed countries' markets.

44. Against this background, some commentators have questioned whether the Third World will continue to give such strong emphasis to the conclusion of inter­ national agreements designed to stabilise or raise commodity prices and to mechan­ isms, such as the Common Fund, designed to help finance such agreements or other­ wise to help stabilise earnings from commodity exports. A further factor pointed to is that there are only a few commodities that lend themselves to internation al co m­ modity agreements.

45 . The more likely prospect, however, would seem to be for commodity trade reform-in one version or another- to continue to be a significant Third World ' cause'. This is so because:

99

the conditions of trade in primary commodities will be directly relevant to the trade interests of the great majority of developing countries for the foreseeable future;

it has been a feature of the internal dynamics of Third World caucuses to date that groups of countries with different trade and economic interests provide each other with mutual support; there is no reason to expect this pattern to change in the future;

as the campaign for a Common Fund has shown, the iss ues lend themselves to initiatives of a global institution-building character;

the notion of falling or adverse terms of trade for primary producing countries has been shown to generate strong political feeling; and

Third World possession of important deposits of key raw materials required by industrialised and industrialising countries is likely to continue to be regarded as a possible instrument for use in any confrontation with the West.

46. If the Third World's objectives are of a long-term nature, the proponents may not be discouraged by the slowness of progress in negotiating the highly complex Integrated Program for Commodities. Furthermore, the Program itself is open to modification and simplification. For example, the Common Fund, as presently dis­ cussed, is much smaller than was originally conceived a few years ago. In view of the strength of opposition to it which the developed countries mounted until recently, it is

already no mean achievement that the Group of 77 has obtained 'in principle' accept­ ance of it. Acceptance of the Common Fund will undoubtedly have an encouraging effect-at the symbolic plane-on the development of new, if modest, multilateral approaches to the regulation of international commodity markets.

(d) Development Aid 4 7. The aid performance of the developed countries has little if any relevance to the economic prospects of the upper income group of developing countries; it is most per­ tinent for those countries in which aid comprises a sig nifi ca nt source of development

funds. In Australia's region such countries include Indonesia , Bangladesh, Papua New Guinea and most of the South West Pacific countries and territories . In inter­ mediate positions are countries like Thailand , the Philippines , Malaysia and Fiji.

48. The most important issues affecting Western aid flows would appear to be:

growing reluctance on the part of major donors to continue to devote increasing amounts of resources to aid, notwithstanding acceptance of ' targets', and in part reflecting growing disillusionment with the effectiveness of aid in donor circles;

whether aid should be co ncentrated in the poorest co untries and to wh at exte nt regional priorities of donor countries should prevail;

a growing inclination to establish linkages between certain aspects of th e politi­ cal performance (including human ri ghts) of recipient co untries and the main­ tenance of aid flows to them; and

associated with this, an inclination by so me donors to see k to direct aid towards meeting' basic huma n needs'. 49. These iss ue s reflect the discretion which donors seek to exercise over th e utilis­ ation of most aid and over the amount provided. It contrasts with seve ral of the key Third World proposals for change which see k to secure greater a utomaticity and

100 Chapter V

predictability of resource transfers-for example, the proposals for a development tax and for the setting aside of proceeds of deep sea-bed exploitation.

50. The inclination of donors to be more selective as regards the country and sec­ toral targets of aid, so that more emphasis is based on redistribution through meeting basic human needs, rather than on growth through improving aggregate incomes, has already provoked countercharges of interventionism from Third World leaders. For Australia, moves within OECD circles to encourage the progressive redeployment of

Western grant aid towards the poorest countries could not be accepted without qualification, partly because any major redirection of our aid would be in conflict with our policy that it be focused on countries in our own region.

51. The raising of more explicitly political conditions for the continuation of aid­ such as the human rights record of recipient governments-often done in response to public pressures in the donor countries, is a further instance of a toughening of atti­ tude on the part of some Western governments and their constituencies. In the multi­ lateral aid institutions, attempts by some donors to impose political conditions on the use of their contributions are bound to increase political frictions within these organis­ ations, with possible repercussions on their ability to mobilise funds.

52. Notwithstanding the need for increased aid flows, especially to poorer Third World countries, the historical stagnation of aid in real terms over recent years leaves little cause for optimism that aid flows will increase as proportions of developed coun­ tries' gross national product, let alone approach the 0. 7 per cent target accepted by most of them. Resistance in legislatures, especially in the United States Congress, to vote increases in aid budgets was in evidence before the present international econ­ omic downturn. With the availability of concessional funds stagnating in real terms, it is not an unimaginable prospect that conventional international aid will be relegated

more and more to the alleviation of particular instances of acute suffering and to the attainment of particular political goals of donors. Such an eventuality could have adverse implications for the growth prospects of some countries in Australia's

regwn.

(e) The Role of Transnational Corporations 53. In the greater part of the post-war period the transnational corporation (TNC) has functioned in relation to economic development as an organisational phenom­ enon transmitting an integrated package of productive resources comprising capital, technology, management, marketing and labour skills.'

54. Transnational corporations have, however, been subject to frequent attack from interests and governments of Third World countries sensitive about their newly won independence and resentful of the inevitable trade-off between increased dependence on foreign controlled entities, and the acceleration of economic growth. The positive contribution of the TNC to economic growth and development has tended to be overlooked by the critics who have concentrated on the inappropriate actions and policies sometimes pursued by transnational corporations and the issue of the en­ croachment on' sovereignty'.

55. Such criticism, the restrictive rules that are often applied, and in some cases punitive measures taken against foreign owned interests in Third World countries, have undoubtedly constrained the role of the TNC in Third World development, and

I David Robertson, ' Transnational Corporations in the Third World', 1978-paper prepared for the Com­ mittee on Australia 's Relations with the Third World. See Appendix W.

101

must partly explain the fall-offin the relative contribution of foreign direct investment in the supply of external resources to developing countries noted earlier in this Chapter.

56. Since the early 1970s, Third World countries have sought, more constructively, to establish mechanisms at the multilateral level by which the conduct ofTNCs might be placed under some form of international regulation. The proposed code of conduct for TNCs, and the related code regulating transfers of technology, are intended to en­ able transnational investment to play a larger role in Third World development while also reducing the often great disparity in bargaining strength between the TNC and the prospective host country. However, in insisting that the codes be 'mandatory' on governments and companies, their Third W odd proponents are claiming a status for the codes which is unrealistic in terms of the political possibility of getting them ac­ cepted and which would be counterproductive in terms of attracting investment, if they were accepted. Non-mandatory codes, containing appropriate behavioural guidelines .for companies and governments, seem more realistic and might be seen as

a positive response to the elements of conflict evident from time to time in the re­ lationship ofTNC,s and governments.

57. Apart from these initiatives, changes appear to be taking place in the environment of transnationals' operations which may have the effect of naturally re­ duCing imbalances in the bargaining power between TNCs and host governments. The in)nternational communications and the diversification of sources of financial capital, technology and management skills, have in many instances had a

weakening effect on.the concept of direct foreign investment as a comparatively fixed package of .resource inputs closely controlled by TNCs. This 'unravelling' of the foreign investment package, if it continues, should mean that host governments will have more freedom .to pick and choose among competing sources of components of

the old.package-among independent licensors of the technology, among indepen­ dent . finan<;:ial . institutions, and among independent sources of technical, entrepreneurial and managerial skills required to design, commission and operate the investment.

58. TNC operations in the Third World could introduce new potential for conflict between TNCs and 'home' governments and countries. If TNCs expand off­ shore production facilities-usually in Third World countries-either as a result of bet­ ter conditions or special incentives offered there, governments and interest groups in

developed countries may see this as 'exporting jobs' and take restrictive action, in the (perhaps mistaken) belief that such a measure would ensure maintenance of employ­ ment levels at home.

59. The transnational corporation has a potentially important and helpful role in promoting mutually beneficial international division of labour. In this way it can extend to industrialising Third World countries the benefits of technologi­ cal innovation produced elsewhere. Its capacity to fulfil this potential would appear to

be closely linked to the development of more certain political and economic con­ ditions in less developed prospective host countries.

(f) International M,onetary Arrangements 60. Third World ·developments, as well as attitudes adopted by Third World governments, have had some impact on international monetary arrangements, and have been a. factor in the evolutionary process of international monetary reform since

the late 1960s. The increased economic 'weight' of some Third World countries,

102 Chapter V

particularly the capital surplus oil exporters and the NICs, is likely to involve an increasing role for these countries in discussions on monetary arrangements.

61. Major issues are likely to include: the conditionality imposed by the International Monetary Fund (IMF) on drawings for short-term balance of payments support; the set of demands elaborated in the NIEO that voting power in the IMF and the World Bank should be based on the United Nations principle of equality rather than continuing to be weighted according to the economic importance of members; and pressure that the IMF should change its operating character as provider of tem­ porary balance of payments financing and become more of a development finance agency; and, related to this, the interest of some Third World countries, predating the NIEO by some years, in the creation of a 'link' between new liquidity creation (SDRs) and aid to developing countries.

62. The IMF is the only international institution which has the objective of provid­ ing financial facilities to meet short-term balance of payments difficulties. While some Third World countries may seek to give it a greater 'development' orientation, the scale of the Fund's activities is heavily dependent on the continuing cooperation of creditor members-which are, overwhelmingly, the industrialised countries. It seems

unlikely that those countries, notably the United States, would permit any significant move in that direction and would rather see expanded lending for development pur­ poses take place through existing multilateral development institutions, such as the World Bank.

63. The continued usefulness of the international monetary institutions will be de­ pendent on their being able to adapt to reflect changing patterns of economic power with reasonable accuracy. Increases in the relative economic importance of individual Third World countries will have to be reflected in those countries receiving increased weight in international monetary and financial councils. Some such changes have already occurred-notably the increase in the voting power of oil exporting countries as a result of the Sixth General Review of Fund Quotas. Unul the develop­ ing countries come to equal the industrialised powers, however, it seems that the industrialised countries will be prepared to relinquish power to control votmg on key issues in the IMF-and it may not be in the interests of preserving such a facility that they do so.

CHAPTER VI

Australian Interests Involved • Ill Relations with the Third World

Special Challenges in Australian Foreign Policy-Third World's General Sig­ nificance for Australia-Effects of Third World Influence in United Nations­ Continuing Importance of Security Interests in South East Asia-Emerging Econ­ omic Dimension of Regional Relations-Economic and Other Interests in North East Asia -Australian Responsibilities and Interests in South West Pacific-South Asia-Middle East-Africa-Latin America-Multilateral Situations-Protection

of Our Own Standards-Implications for Australia of Challenge to the Status Quo.

103

An important and abiding element of Australian foreign policy is the special set of challenges confronting us as a Western nation located in the Asia-Pacific region far from the traditional centres of Western power. On the one hand, Australia's iden­ tification with the Western group of nations is ensured by our racial, cultural and pol­ itical affinities with Western Europe and North America; by the value placed on the ANZUS Treaty with the United States; by our relatively high standard ofliving; and

by the great importance of our economic relations with Japan, the United States and Western Europe. On the other hand, Australia's location in the Asia-Pacific region means that, in contrast with the position of almost all other Western countries, the overwhelming majority of our regional relationships are with Third World countries. 1 In these circumstances, the Third World's significance for Australia works at two gen­ erallevels. First, Australia is affected along with other Western countries-and prob­

ably more than most-by the Third World's collective impact on the course of inter­ national political and economic relations. Secondly, our relations with a sizable number of individual Third World countries, particularly many of those in our region, have considerable importance in their own bilateral terms.

2. In this Chapter, the term 'national interest' is used to embrace Australia's national security, its economic prosperity, the material and social well-being of its people, the maintenance of its political values and institutions, and its national power and influence. When used below in an interna tiona! context, the term 'interest' is

taken to mean Australia's stake in terms of loss or gain for the national interest in a particular situation.

3. It is clear, of course, that the various components of the national interest listed above are not independent of each other and that there will be many situations where

I See Dissenting Views, p. I 91 .

104 Chapter VI

an action designed to advance one aspect of the national interest has adverse reper­ cussions on another. Moreover, it is not possible to determine a priori a hierarchy of importance among the various components which can be applied equally successfully in all situations. Thus, an essential task of foreign policy is to identify the interests in­ volved in a given international situation, judge the relative weight to be accorded to each, and formulate policies reflecting, where necessary, an optimum trade-off among competing objectives. This Chapter will confine itselflargely to the first of these three steps.

PART A: GENERAL PERSPECTIVES

STRATEGIC INTERESTS

4. The Third World's strategic significance for Australia should be viewed in terms of both Australia 's geographical location and its basic political alignment in inter­ national affairs. Australia's direct security interests in particular Third World regions will be considered in more detail below. They include, for example, the avoidance of threats being posed against Australia from neighbouring Third World areas, whether independently by Third World countries themselves or in collaboration with external

hostile powers, and the maintenance of Australian access to Third World waterways and air space.

5. But, given Australia's continuing commitment to the ANZUS Treaty as a corner­ stone of its defence and foreign policies, we also share with other members of the Western Alliance wider strategic interests in the Third World as a whole. Our stake in the continuing capacity of the United States and its major allies to counter the ideo­ lo gical and military challenge of the Soviet Union generates a strong interest in avoid­ ing situ ations in the Third World which allow the Soviet Union to secure strategic gains of lasting significance against the West. Such undesirable situations would in­ clude, for example, any serious extension of Soviet influence in the Gulf or Red Sea areas. Similarly, Australia's considerable dependence on the security, political independence and economic prosperity of other advanced industrialised democracies generates an important indirect interest for Australia in having those nations able to

maintain access to Third World oil, minerals, waterways, canals, ports and airspace. This is not to say that Australia should automatically strive to defend every Western interest in the Third World as though it were equally its own-an error into which it ca n perhaps be argued we have fallen in the past, failing to distinguish between com­ mon Wes tern interests and the particul ar interests of individual Western countries. Rather, wh at it does me an is simply that we should take due account of the fact that Australi a's security, prosperity and general national well -being are interwoven with those of the other advanced industrialised democracies .

6. To th e extent th at Au stralia has influence in this regard, it is thus appropriate for it to enco urage th e adoption by other Western powers, including especially the United States , of policies towards the Third World which are likely to defend and ad­ va nce th e Wes tern in te re sts mentioned above. To do this on a su stainable basis, it is import ant that major Western powers not commit the error they sometimes have in the pas t of over- es tim atin g or otherwise misunderstanding the interests they have in th e Third World and of consequently adopting untenable policies which try too rigidly to defe nd the status qu o. The un success ful military intervention by Britain and

105

France in the Suez crisis of 1956 and the reluctance for many years of leading Wes­ tern countries to apply effective pressure against the Smith regime in Southern Rhodesia, because it was thought that interference would lead to a more unpalatable alternative, are two prominent examples of such self-defeating policies. Adequate de­

fence of the important Western interests that actually are at stake in the Third World requires policies which are sufficiently sensitive and flexible to take into account the attitudes of Third World countries on the issues over which they are most exercised and especially, of course, on those issues where their will is likely to prevail in the long term.

POLITICAL INTERESTS

7. Australia's relations with the Third World also involve important political interests. As discussed already in Chapter I, the Third World has acquired consider­ able political significance by virtue of its capacity to maintain solidarity and exploit its numerical advantage in multilateral forums and by holding the initiative as the main challenger of the status quo in many international situations. This process has carried important implications for Australian foreign policy.

8. It is sometimes suggested that the United Nations is little more than a ' talking shop' whose exhortatory resolutions pushed through by the Third World's numerical majority in the General Assembly, have little direct effect on any country's important interests. To demonstrate the fallacy of this view, one only has to examine the reper­ cussions of United Nations resolutions on countries such as South Africa, Southern

Rhodesia and Israel. But it is not necessary to go so far from home. While the experi­ ence of those countries is certainly not entirely irrelevant to a consideration of Australia's interests, there is enough evidence in Australia 's own re cent diplomatic history to refute this view. It was largely under the influence of' world opinion ', whose

sharpest expression was felt in the United Nations, that Australia retreated from a position held in the 1950s, when we asserted that Western control of the whole island of New Guinea was vital to our security, to a view in the mid-1960s that the earl y independence of Papua New Guinea was necessary for Australia to maintain good in­

ternational standing.

9. If, then, we have been affected in the past by the Third World 's numerical superi­ ority in the United Nations, at a time when that superiority was not as marked as it now is , there may well be equally significant examples in the future. Australia's ge n­ eral standing with the Third World and particularly with our Third World neighbours

in South East Asia will be a major factor in determining whether we are abl e to exer­ cise sovereignty over the Cocos Island and Christmas Island Territories inde fi ni te ly. Both Territories are currently regarded as having important strategic denial valu e. In terms of potential wealth, and international embarrassment, higher stakes are in­

volved in Australia's claim to sovereignty over a large part of the Antarctic co ntinent, which is not even recognised by the major Western parties to the Antarctic Treaty. If, as seems quite possible, Third World countries apply to Antarctica a similar claim to that whereby they assert that the deep sea-bed is part of the 'common heritage of

mankind', our claim to the Australian Antarctic Territory will beco me an in creasingly contentious matter in our relations with the Third World .

10. It is important to recall too that, largely as a result of de fe rence to Third Wo rl d se nsitivities, some of the values and standards Australi a subscribes to in intern ational relations have undergone important changes. As re cently as 1960, Au tr ali a wa s till openly resisting the idea of a racially non-discriminatory immigratio n policy an d till

106 Chapter VI

actively supporting South Africa's membership of the Commonwealth of Nations. The fact that, less than two decades later, such policies should seem both anachron­ istic and needlessly offensive is a measure of the extent to which we have been willing and able to adjust to the point of view of other countries.

11. Most Australians would probably now accept that these changes in national atti­ tudes have been for the good. But there are other pressures Third World countries exert on our political standards which are less benign and which warrant resistance. Quite a number of Third World countries have distressingly bad records ofviolations against basic human rights and are very resentful of Western criticism in this regard. Some of the offending Third World governments go so far as to insist that Western governments should discourage the public media in their countries from reporting on human rights violations. These issues are obviously very controversial and are likely to remain potential sources of friction in relations with some Third World countries. But, because respect for political freedom and human rights is one of the most basic values of our society, we cannot be indifferent to their violation wherever it occurs, though what if anything our Government should seek to do about it is, of course, another problem which is discussed later in this Report. Similarly, Australia is com­ pelled to resist firmly any suggestion by non-democratic Third World countries that our democratic institution , including the freedom of our public media from govern­ ment censorship, are a hindrance to the smooth conduct of friendly relations.

ECONOMIC INTERESTS

12. The Australian economic interests involved in relations with the Third World are significant and are likely to become more so. Nevertheless, at least when com­ pared with the scale of our transactions with certain advanced industrialised coun­ tries, those with the Third World are not yet of the same major importance to our national prosperity.

13. In 1977-78, 23.9 per cent of Australia's total two-way trade was conducted with the Third World, compared with 18.9 per cent in 1971-72. 1 During this period, the share of Australian exports purchased by all Third World countries increased slightly from 24.2 per cent to 25.6 per cent, whereas the share of Australian imports supplied by Third World countries increased sharply from 12.4 per cent to 22.1 per cene Im­ ports from Saudi Arabia, Kuwait, Hong Kong, South Korea and Singapore were among those whose share of Australia's total increased most markedly during the

1970s.

14. Considered among countries of the Organisation for Economic Cooperation and Development (OECD), Australia's dependence on trade with the Third World is not particularly high. In 1977, the share of Australia's two-way trade conducted with the Third World (23.1 per cent) was a little higher than that of all European Economic Community (EEC) countries (20.4 per cent), but much lower than that of the United States and Japan ( 41.7 per cent and 49.6 per cent respectively). Moreover, Australia is much less dependent on Third World oil than Japan and most Western European countries, because approximately 70 per cent of our consumption is supplied from domestic production, though this ratio is expected to decline gradually during the

1980s.

l This figure includes trade with Hong Kong and Taiwan. See paragraph 52 below. 2 In 1977-78, petroleum and petroleum products, over 90 per cent of which came from Third World coun­ tries, accounted for l 0.3 per cent of Australia's total imports.

107

15. Australia remains a net importer of capital, but has engaged in a limited amount of direct investment in neighbouring countries. As of mid-1977 the cumulative book value of Australian direct investment in developing countries and territories in South East Asia and the South West Pacific was approximately $A462 million or about 40 per cent of Australia 's overseas direct investment stock.

16. Australia's position as one of the four countries regularly exporting substantial quantities of grain means that our interests may be affected, perhaps more than those of most other developed countries, by recurrent food shortages which are expected to continue in some of the poorer Third World countries. On the one hand, in a situation where there was widespread famine in South Asia or Africa, Australia might come

under international pressure to provide a large part of its grain production as grant food aid or on very concessional terms. For our part, we would want to ensure that the cost of any such relief program was spread among as many developed countries as possible, regardless of whether or not they were grain exporters. On the other hand,

the very fact that Australia has the capacity to supply food grains to food deficient Third World countries and is well placed to assist in improving their agricultural tech­ nology enhances our scope to respond sympathetically and constructively to the prob­ lems of the most needy Third World countries.

17. More details of Australia's economic relations with Third World countries and regions are given in subsequent sections of this Chapter. It should be noted, however, that detailed analysis of Australia's aid policies towards Third World countries has been deferred until the next Chapter.• The separation has been made because Australia's aid programs, as an outcome of discretionary government grants, cannot

be thought of as involving primary economic interests in the same way as foreign trade or overseas private investment. We should recognise, of course, that there are other interests involved in aid programs. First, they are an expression of our com­ munity's values insofar as we are not indifferent to the problems of hunger, disease

and underdevelopment in various Third World countries. Secondly, to the extent that aid programs designed to assist economic development in the Third World achieve their purpose, this outcome, though not necessarily an end in itself for the donor country, will perhaps be supportive of other objectives such as maintaining political stability or expanding international trade. Thirdly, as long as our development assist­ ance remains respectable internationally in terms of quantity and quality, we are bet­ ter placed than we would be otherwise, from the point of view of both our own resolve and our capacity to persuade others, to resist other Third World economic demands which we consider to be unreasonable.

18. It should be recognised that the potential impact of the Third World on Aus­ tralian economic interests extends beyond the scope of our economic relations with particular Third World countries. One example of this wider potential impact is the Third World's campaign, pursued with varying conviction and intensity, to change the prevailing international economic system. If taken literally, implementation of some of the more extreme Third World demands for a new international economic order- for example, automatic indexation of commodity prices, a mandatory code for

the transfer of technology, and automatic resource transfers-would involve a basic shift in the international system away from the operation of market forces . Because of the strong likelihood that such changes would diminish the prospects for sustained

I See Chapter VII- Part C: Aid.

108 Chapter VI

economic growth in both the developed and developing worlds, their enactment is not in the interests of Australia or any other country concerned.

19. At the same time, support for a market-oriented system has not prevented Australia from working hard in its trading relations with various countries to make more secure its access to foreign markets, to avoid sharp fluctuations in its export earnings and, in some cases, to secure commodity export prices to offset increases in production costs. In these circumstances, we can understand a Third World desire for arrangements which would ensure more security in its external trade. Indeed, it is not surprising to discover that Australia has several different interests involved in these issues and that they are not always mutually supporting. We have an interest in the economic efficiency of the international system, an interest in obtaining for ourselves

the benefits of international trade, an interest in maintaining employment and pro­ fitability in local industries, an interest in having our external transactions made as predictable as possible, and an interest in avoiding political tension in Australian and Western relations with Third World countries. In some situations all these interests can be advanced together, but when they cannot it is necessary, prudent and proper for policies to be devised on the basis of an optimum trade-off among competing objectives.

20. In the long term, however, an aspect of the Third World's impact which is likely to have much greater repercussions for Australian interests than the campaign for a new international economic order is the individual economic performance of some of the more successful Third World countries. A sizable number of middle-income Third World countries now have manufacturing industries which are able to compete effec­ tively with those in the West. Leading members of this group are South Korea, Taiwan, Hong Kong and Singapore, which are all located in the region of most im­ mediate interest to Australia; but the World Bank also lists another nine or ten Third World countries (including Argentina, Brazil, Mexico and India) which are relatively advanced industrially. Whereas in the past lower labour costs in these countries tended to be offset by lower productivity, in recent years increased resort to foreign capital and technology and improved workforce skills have increased their pro­ ductivity and competitiveness. During the same period, rising labour costs have reduced the profitability and competitiveness of many industries in the West. 21 . Australian industry is thus facing increasingly strong competition from middle­ income Third World countries for international capital flows and for markets, both inside and outside Australia, and for manufactured products with a relatively high labour content. At the same time, the rapid economic growth ofthese countries is pro­ viding Australia with increasing export opportunities. In the years ahead, Australia's response to the economic dynamism of the newly industrialising particu­ larly those in our region, is likely to have a significant bearing on our overall economic performance and the quality of our external relations.

PART B: AUSTRALIA'S THIRD WORLD NEIGHBOURS

22 . It is apparent to any observer that the developing countries of. the Asia-Pacific region represent for Australia the most important part of the Third World.' Historical ties, political and security relationships and extensive commercial transactions are

I Taken here to mean the five members of the Association o f So uth Eas t Asian N a tions (AS EAN ), Burm a, the three Indo-China States, N orth and South Korea, Papua New Guinea and the Island St ates of th e South Pacific.

109

part of the substance, generated by geographical proximity, which guarantees that Australia's relations with most of these countries would be important regardless of whether or not the Third World was an identifiable force in international politics.

23. It was appropriate, therefore, that the first independent steps of Au stralian dip­ lomacy after the Second World War represented an attempt to come to terms with the newly released forces of nationalism and the problems of economic underdevelop­ ment in Asia. In the late 1940s, Australia collaborated with a newly independent

India to assist the cause of the Indonesian nationalists and was the only non-Afro­ Asian country to attend the 1949 New Delhi Conference on Indonesia. Largely as a result of an Australian initiative, the Colombo Plan was established in 1951 to pro­ vide economic and technical assistance to developing countries in South and South East Asia. During the next two decades, the strategic defence of South East Asia con­ tinued as a major theme of Australian foreign policy.

24. Considered as a group, the developing countries of the Asia-Pacific region are heterogeneous even by Third World standards. It is significant, for example, that in multilateral situations they have not caucused on a regional basis as regularly or as effectively as the Third World countries in Africa, the Middle East or Latin America.

Neither have Australia's developing neighbours been especially vigorous, at least not in recent years, in espousing general Third World causes, though they all most assur­ edly regard themselves as part of the Third World and are ready to invoke Third World positions to advance their interests in regional or bilateral dealings with

Australia and other developed countries, when they consider it advantageous to do so.

SOUTH EAST ASIA

25 . The close attention given in Australian foreign policy to South East Asia arises from various considerations of which most basic, if not always the most pressing, is the area's strategic importance for Australia. We have a vital interest in avoiding a di­ rect threat against Australia from any South East Asian country and in avoiding a situation where any South East Asian country gives assistance to a threatening force from further afield. In addition to our own security, we are concerned that Papua New Guinea's territorial integrity and political independence should not be threatened

from South East Asia. The emphasis that should be given to these security concerns in Australia foreign and defence policy naturally varies with the ass essed probability of such threats emerging. But, in the case of a region which sin ce 1945 has seen far more than an average share of national revolutions, wars of insurgency , coups d 'etat and overt aggression across international borders, its possible impact on Australia's secur­

ity is clearly something to be taken seriously.

26 . The lines of military and commercial communications maintained acro ss South East Asia by Australia and its major allies and trading partners are also very import ­ ant, though perhaps not vital in every respect.

27. Access to the South China Sea and the waterways in and around the Indonesian archipelago is convenient rather than essential for strategic deploy ments on a co n­ tinuing basis by the United States Navy in East Asi an waters and the Indian Ocean. On the other hand, the United States' ability to react promptly to un fores een develop­

ments in the Indian Ocean by dispatching naval forces from the We st Pacifi c depends

110 Chapter VI

heavily on access to the Malacca Straits or a nearby alternative. Without such access, diversion around the mainland of Australia would more than double the distance from the Philippines to the central Indian Ocean, requiring a carrier force dispatched from Subic Bay to spend at least twelve days on that journey. 1

28. Access to South East Asian waters is obviously essential for the carriage of Aus­ tralian trade with the South East Asian countries themselves, but it is not so for the carriage of Australian trade with Japan and other major trading partners. Even so, it should be noted that denial of access to Indonesian waterways, such as the Lombok Strait, would carry important implications for Australia's export trade with Japan in iron ore. If ships carrying iron ore from north-west Australia to Japan were diverted

around the mainland of Australia, the increase in freight costs should not, of itself, de­ stroy the basis of the trade. However, it would reduce substantially, if not remove, the freight advantage we currently enjoy over our main competitor, Brazil.

29. Australia's heavy dependence on trade with Japan generates an interest in Japan's continued prosperity, which in turn depends heavily on its maintaining the supply of imported fuels and raw materials. While recognising that Japan's continued access to South East Asian waterways is certainly not vital for the transport of essen­ tial imports, Australia has a general interest in avoiding any serious disruption of Japan's commercial lines of communication through the South East Asian area.

30. In the civil aviation field, maintenance of the most convenient and economic air links between Australia and Western Europe depends, inter alia, on access to Indonesian airspace and to at least one airport in the Indonesia/Singapore/ Malaysia/Thailand area. 2

31. To date, Australia's overall economic stake in South East Asia has been only moderately important, but it has been growing in recent years and is likely to continue to do so. At the most general level, we share an important interest with other Western countries, and especially with Japan, in ensuring that at least the growing economies of the five states of the Association of South East Asian Nations (ASEAN) remain part of the international free market system and that Australian and Western access to those countries' markets and natural resources is maintained.

32. Australia 's trade with South East Asia is growing steadily, but only slightly fas­ ter than our overall world trade. In 1977-78 Australia's two-way trade with all coun­ tries in South East Asia was worth $A1 ,426 million of which $A1,410 million, or 6.0 per cent of Australia 's global total, was with the five ASEAN countries. Between

1967 and 1977-78 ASEAN 's share of Australia's exports increased from 6.4 to 7.0 per cent, while its share of Australia's imports increased from 3.0 to 5.0 per cent. In other words, Australia's imports from ASEAN countries have been growing at a faster rate than our exports to them. From the point of view of the ASEAN countries, the share of their combined exports purchased by Australia declined slightly from 2.3 per cent in 1971 to 2.1 per cent in 1977. Australia's principal exports to ASEAN are currently sugar, wheat, iron and steel, machines and machinery, lead, zinc, tin ores and concentrates, powdered milk and chemicals and the principal items imported from ASEAN are tea, coffee , petroleum and petroleum products, crude rubber, wood

I Michael MacGwire 'The Geopolitical Importance of Strategic Waterways in the Asia- Pacifi c Region ', Orbis, Vol. 19, Nos. 3- 4, 1975 - 76 , p. 1071.

2 See also paragraphs 64 and 65 .

Ill

and timber, cork, textiles and clothing. A breakdown of 1977-78 trade with ASEAN on a country basis is given below:

Australian Exports Australian Imports

($Am) ($Am)

Indonesia 197 84

Malaysia 215 120

Philippines 130 57

Singapore 238 265

Thailand 74 31

Total 854 557

33. The imbalance in Australia's favour in Australia-ASEAN trade is in line with a general pattern in Australia's trade throughout the whole Asia-Pacific region. While such imbalances sometimes become issues of contention in bilateral relations, it should be remembered that Australia and most of its non-communist trading partners generally conduct their trade on a multilateral basis. In the case of trade with the ASEAN countries, another relevant consideration is that in recent years nearly half

the trade imbalance has been offset by Australia's deficit on invisible transactions, which largely reflects debits from transportation expenditures, travel and official transfers. Further, although Australia is a net importer of capital, successive Govern­ ments have maintained liberal policies towards direct Australian investment in South

East Asia. As of mid-1977, the cumulative book value of Australian direct investment in the five ASEAN countries was approximately $A 132 million. In this context, it should also be noted that the ASEAN countries are becoming increasingly important competitors against Australia for direct investment from major Western countries.

34. The categories of interests identified so far-security, communications and economic-generate between them a considerable stake for Australia in international stability and orderly economic and social development in South East Asia. They mean too that we wish to avoid having any of the countries in the area assume a hos­

tile attitude to Australia, as long as this is compatible with the defence of other im­ portant interests.

35. As regards great power influence in South East Asia, it follows that Australia has a strong interest in encouraging sufficient United States involvement in the area to maintain there a sound balance of power and in supporting a more active and con­ structive role by Japan. We wish to avoid the disruptive effects of more intense Sino­ Soviet rivalry in non-communist South East Asia. Equally, we wish to avoid situations

where either major communist power is able to establish exclusive influence in any further part of South East Asia.

36. Australia has a strong interest in avoiding conflicts among South East Asian countries, in the relaxation of tension between the communist and non-communist states, and in the maintenance of harmonious relations among the non-communist states (as long, of course, as one manifestation of that harmony is not shared hostility

towards Australia). In this context, Vietnam's recent invasion of Kampuchea is a mat­ ter of deep concern and it has vindicated the fears in neighbouring non-communist countries of Vietnamese expansionism. Vietnam's action against Kampuchea and China's subsequent attack on Vietnam have virtually ensured that Indo-China will re­

main for some time a primary focus of confrontation between China and the Soviet Union and between China and Vietnam. It is very much in Australia's interests that

112 Chapter VI

this struggle not give rise to an intensification of Sino-Soviet rivalry in non-communist South East Asia, otherwise disrupt the political stability of the ASEAN countries, or lead to the establishment of a Soviet strategic lodgement in South East Asia.

37. With regard to domestic politics in South East Asia, we wish to avoid a situation where any of the ASEAN states is governed by a communist regime. Such a develop­ ment would probably lead to confrontation with neighbouring non-communist states, reduce Australia's scope to conduct worthwhile economic relations, and increase the possibility that the Soviet Union, China or Vietnam could extend influence which was inimical to Australia and its allies. It is also in Australia's interests that these countries not be governed by adventurist regimes of a non-communist kind, since they would

be likely to raise the temperature of regional politics, direct attention from economi­ cally rational goals and threaten the prospects of stable and peaceful development and cooperation.

38. A key question for each of the ASEAN countries is whether its economy can con­ tinue to expand at a sufficient rate to increase the standard of living of its rapidly growing population and to avoid the development of large-scale urban unemploy­ ment. Population growth rates throughout the area range from 1.7 to 2.9 per cent and, on this basis, the populations of some countries, which have already doubled since

1945, are likely to do so again during the next thirty years. If development efforts should fail, political and social disruption could result and might eventually lead to new international tension and alignments, with perhaps unfavourable consequences for Australia. If, on the other hand, the prevailing prospects for sustained economic growth by the ASEAN countries are realised, our economic relations with them may

become much more important.

39. Since the Second World War, Australia's foreign policy towards South East Asia has been characterised by a highly active approach whereby we have sought to become and to be seen as closely involved in the affairs of the sub-region. As part of this process, Australia dispatched troops to fight in the Malayan Emergency, the Indonesia-Malaysia confrontations and the Vietnam War; gave firm support until

1972 to United States military intervention in Indo-China; entered into defence ar­ rangements with Malaysia. and Singapore; and, in terms of the size of the Australian economy, gave significant amounts of economic, technical and military assista.nce to various South East Asian countries. In such ways, we have sought to emphasise com­ mon interests with the non-communist South East Asian countries in the general stab­ ility of the sub-reg'on and to project ourselves as a responsible and cooperative neighbour.

40 . However, given the situation which now exists in South East Asia, the question arises as to whether this approach will be as appropriate or as easily sustainable in the future. Two important changes have taken place. First, compared with the decade up to 1975 , the ASEAN governments now appear to be more confident about the sur­ vival of their own countries and political systems and are paying increased attention to the tasks of economic and social development. Secondly, while the recent hostilities in Indo-China confirm that security questions remain very important in South East Asia, the direct involvement of a major Western power in the defence of one or more of the ASEAN countries now seems much less likely than before.

41. Though circumstances have changed in these ways, Australia's interests in the ASEAN sub-region remain just as important. Given our very limited capacity to pro­ vide unilateral defence assistance to our ASEAN neighbours, can common security

113

concerns continue to provide an adequate framework for the conduct of close and friendly relations with these countries? If not, will expanding economic relations or anything else be able to replace them?

42. The combined population of the ASEAN countries gives them the potential to develop over coming decades into a market as important as that currently provided by the United States or the EEC. If that potential were realised, there would be grow­ ing trading and investment opportunities for Australian businesses; equally, of course, expanding ASEAN industries would provide increasing competition and make it increasingly important for Australian industry to be internationally competi­ tive. Failure to measure up in this sense would mean that Australia's relative import­

ance in the region would diminish in both economic and political terms.

43. Current levels of economic development vary considerably among the non­ communist countries of South East Asia, but at least Singapore, the Philippines, Malaysia and Thailand have good prospects for sustained economic growth and in­ creases in per capita incomes. In all these four countries, there is a discernible trend

towards increasing reliance on labour-intensive and export-oriented light manufac­ turing as a basis for economic expansion.

44. In these circumstances, any action taken by Australia that might have the effect of restricting exports of South East Asian countries to Australia assumes a somewhat greater significance than it might otherwise do. For example, our imposition of quan­ titative restrictions on imports of light manufactures, such as textiles, clothing and

footwear, has caused friction in our bilateral relations with Singapore, Malaysia and the Philippines, notwithstanding. that these restrictions are global in nature. It is now becoming clear that, from the point of view of the ASEAN countries, Australia 's rel­ evance to their sub-region will no longer be measured predominantly in terms of com­

mon security interests and the continuation of our programs for economic and mili­ tary assistance, but increasingly in terms of our willingness and capacity to participate in a process of expanded economic exchange.

45. For the moment, Australia has responded to ASEAN criticism of its import re­ strictions by pointing to the need to give adequate protection to local manufacturing industries during a period of economic difficulty; by reminding the ASEAN countries that the size of the Australian market is far smaller than those in major Western coun­

tries and that, on a per capita basis, Australia already imports a greater share of sensi­ tive manufactures from ASEAN than most other Western countries; by explaining to the ASEAN countries that our restrictions allow them to compete equally with other exporters in the context of global restrictions; and by indicating our intention to make adjustments as soon as the domestic economy has recovered.

46. Looking further ahead, what are the main Australian interests that should be taken into account in the future conduct of relations with the ASEAN states? Given the prospect of sustained economic growth in some parts of South East Asia, we wish to take advantage of expanding markets for Australian exports of food- stuffs, indus­

trial raw materials and specialised manufactures and to avoid a situation where any South East Asian country is inclined to take retaliatory action against Au stralian exports. We also have a legitimate interest in deciding for oursel ves what levels of protection of employment and profitability in our manufacturing industry are desir­

able from the point of view of Australia's economic and social well-being. More gen­ erally, and perhaps more importantly, we need to judge carefully how mu ch it mat­ ters in terms of Australia's strategic and se curity interests and our general

114 Chapter VI

international standing if the ASEAN countries as a group decide that Australia is be­ coming increasingly irrelevant to their region.

47. It has been to Australia's advantage that, while the ASEAN countries most as­ suredly regard themselves as members of the Third World, their approach to issues of general concern in the Third World has been for the most part relatively moderate. In many situations, they have appeared as somewhat reluctant participants in Third World campaigns. Accordingly, Australia's relations with these countries have devel­ oped, until recently, largely under their own bilateral momentum with little direct influence from issues of contention between the West and the Third World as a whole.

48. In the future, however, our regional neighbours may bring Third World issues more prominently into bilateral relations. Indeed, there have already been cases, such as the long-term sugar contract with Malaysia, differences over civil aviation policy and the general question of access to the Australian market, where ASEAN countries have explicitly invoked NIEO principles to strengthen their position in negotiations with Australia. These examples have not been decisive, but they serve as reminders of earlier Third World manifestations in South East Asia, when Indonesia demon­ strated, during Sukarno 's rule, the capacity and will to exert considerable influence in the Third World. Although the Suharto Government has shown much more sym­ pathy with the concerns and commitments of Western governments, it should be noted that Indonesia was one of the countries which spoke out most strongly against United States disinclination to embrace NIEO proposals at the United Nations Sev­ enth Special Session.

49. On balance, however, the strong anti-communist character of the ruling ASEAN regimes, the consequent value they attach to political cooperation with Western coun­ tries, and the fact that each country in its own way has achieved significant economic growth within the existing international economic system suggest that, even if the ASEAN countries become more active in the Third World as a whole, their role will

be essentially a moderate one. It will, of course, be important for their apparently favourable economic growth prospects to be realised and an important factor here is likely to be the extent to which these countries are able to expand their manufacturing industries. This will, in turn, be influenced significantly by the opportunities for improved access not only to the relatively small Australian market, but to Western markets generally. Denial of access to Western markets for South East Asian manu­ factures would undermine the prospects for industrial growth and, perhaps more im­ portantly, lead to antagonism towards the established powers.

50. In any case, it should be noted that the tenor of Australia's relations with the South East Asian countries, and in particular the ASEAN states, will have a large bearing on our general standing in the Third World. Indifference or hostility towards Australia in South East Asia would be a considerable obstacle to satisfactory relations with other Third World countries. On the other hand, as our nearest Third World neighbours, apart from Papua New Guinea, the ASEAN countries are able, if so inclined, to exert a benign influence on general Third World attitudes towards Australia.

51. Outside the ordinary substance of bilateral dealings, the difficult problem of relocating hundreds of thousands of Indo-Chinese refugees has caused new complications in Australia's relations with non-communist South East Asia.

115

Australia's geographical proximity, our relatively high standard of living and low population density give rise to expectations among our northern neighbours and, to a lesser extent, among other Western countries that we should be able to receive a disproportionately large share of these people. Both for humanitarian reasons and to demonstrate our willingness to fulfil our responsibilities as a member of the region, we have committed ourselves to accept a larger share of refugees than any other country so far, on a per capita basis. At the same time, we have to make clear to our

neighbours that there are firm upper limits on the numbers we can be expected to absorb smoothly into our community. 1

NORTH EAST ASIA

52. Although neither Hong Kong nor Taiwan is included in the list of Third World countries shown in Appendix C (because Hong Kong is a colony and because Taiwan neither claims itself to be an independent country nor is regarded as one in Australian foreign policy), they are considered here along with South Korea as rapidly developing areas in Asia with particular significance for Australia. In 1977-78, these

three trading partners accounted for 5.5 per cent of Australia's total two-way trade and the breakdown in each direction is shown below:

Hong Kong Taiwan .

South Korea

Total

Australian Exports Australian Imports

($Am) 215 182 266

663

($Am) 265 247 120

632

53. All three areas have achieved extremely impressive economic growth rates in recent years through the expansion of export-oriented manufacturing industries. Having relied initially on labour-intensive light manufacturing, they are now moving into the production of more capital-intensive goods such as electronic items, motor vehicles, metal manufactures, machinery and ship building and show good prospects of maintaining relative!y high economic growth rates in at least the medium term. This general trend is compatible with the expansion of labour-intensive light

manufacturing in South East Asia and reinforces the implications discussed earlier for Australia's trading relations with its developing neighbours.

54. Taken together, the developing non-communist areas of South East and North East Asia have the potential to become an increasingly valuable export market for Australian foodstuffs, industrial raw materials and specialised manufactures. Realisation of that potential depends partly on the quality of access to Western

markets generally which those areas can achieve for their export-oriented manufactures, and partly on Australia 's ability to avoid a trade policy which is perceived to be unduly restrictive in comparison with other Western countries.

55. The growing momentum of Australia's trade with South Korea (almost a nine-fold increase from $A42 million in 1971-72 to $A386 million in 1977 - 78 ) generates a direct Australian interest in stability on the Korean peninsula. However, a more serious consideration from Australia's point of view is that the possibility that any outbreak of hostilities between the two Koreas might force involvement by the

1 See Chapter VII-PartE: Immigration and Refugees.

116 Chapter VI

superpowers and perhaps China or lead to unwelcome changes in Japan's foreign and defence policies. The precise impact of such hostilities on Australian interests would depend largely on which countries . were involved, but the ramifications in North East Asia and the Western Pacific would almost certainly be profound.

SOUTH WEST PACIFIC

56. Papua New Guinea and the independent island states of the South West Pacific have a particular significance in Australia's relations with the Third World. It derives as much as anything else from their inherent weakness and considerable though varying dependence on Australia as the dominant power in their immediate sub-region. The conduct of Australia's relations with these countries has a direct bearing on whether or not we can sustain an international reputation as a benevolent Western power which maintains a sensitive and responsive attitude towards the aspirations of small Third World neighbours, with many of whom we have dose historical associations. In this context, if in no other, prudence requires that Australia take due account of the assertions the Third World is fond of making about the moral obligations and responsibilities which fall on former Western colonial powers. Australia's international standing was enhanced considerably by the exemplary conditions under which Papua New Guinea achieved independence and we have an interest in ensuring that the record is not tarnished in the post-independence phase.

57. In the case of Papua New Guinea, Australia contends with the special situation where our former colony is also our nearest neighbour. Thus, that part of the relationship which derives from the colonial connection is interwoven with and to some extent complicated by the existence of more ordinary geopolitical interests.

58. Papua New Guinea's perceived significance in Australia's strategic environment is less than it was in the early 1950s when Western control ofthe whole island was regarded as vital for our security. Nevertheless, given its proximity to Australia, we retain an important interest in avoiding a situation where a potentially unfriendly power establishes influence in or control over any part of Papua New Guinea's territory. It is not inconceivable that, in changing circumstances in the future, Papua New Guinea's perceived strategic significance could increase as rapidly as it has decreased during the lasttwenty years. We want Papua New Guinea to stay united, both to avoid the emergence of an unstable situation in which Australia might find it hard not to be involved and to avoid Papua New Guinea's becoming more susceptible to foreign intervention. Given the likelihood that Australia would be unable to dissociate itself completely from a serious dispute between Papua and New Guinea and Indonesia, we have an important interest in the maintenance of friendly relations between those countries and, in particular, in the avoidance of friction over their common border. So as to enhance Papua New Guinea's political viability as a nation-state and to reduce in time its dependence on Australian aid (which accounted in 1977-78 for about 52 per cent of our total overseas assistance), Australia is concerned that Papua New Guinea's economic and social development proceed as smoothly as possible.

59. Australia's direct economic interests in Papua New Guinea are not especially large. In mid-1977, the cumulative book value of Australian private direct investment in Papua New Guinea was $A279 million or about 24 per cent of Australia's overseas direct investment stock. In 1977-78, Australian exports to Papua New Guinea-comprising mainly machinery, rice, canned meat, petroleum, iron and steel, and chemicals-totalled $A237 million or about 1.9 per cent of total exports, while

117

imports from Papua New Guinea-comprising mainly coffee, cocoa, timber, rubber and coconut oil-were only about $A74 million or about 0.6 per cent of total imports. Australian aid to Papua New Guinea, which was $A219 million in 1977-78, is not tied to the purchase of Australian goods although it enables Papua New Guinea to import more goods than it would otherwise be able to do, both from Australia and

from other sources. Australia's aid, of course, is requited by the export of more goods and services than would otherwise be necessary in the absence of the aid.

60. Apart from their symbolic significance in Australia's general relations with the Third World, as described in paragraph 56 above, Australia's main interests in the island states of the South West Pacific involve security considerations. Because it is very important from Australia's point of view that the United States maintains its strategic advantage over its superpower rival in the general Pacific area, we wish to

avoid a situation where any of the independent states becomes susceptible to predominant influence by the Soviet Union. Disproportionately prominent activity in the area by China is also undesirable, both in itself and because it would most likely induce the Soviet Union to seek to establish countervailing influence. In this sense, the

achievement of independence by a number of small, economically weak and fragile island societies,. though welcome in itself, carries strategic implications which Australia and its allies cannot afford to ignore. One motivation for Australia's active support for. the South Pacific Forum and other forms of sub-regional collaboration is to encourage a sense of collective identity among these small countries, which may

serve to lessen.their vulnerability to inimical external influence.

61. Although obviously limited in scale from our point of view, Australia's economic relations with the independent island states have a considerable impact on their small economies. In 1977, Australia's shares of the two-way trade conducted by Fiji and Western Samoa were respectively 20.0 per cent and 13.0 per cent. In the case of Nauru, Australia purchases about 90 per cent of its phosphate rock exports and

supplies about 85 per cent of its imports. In 1977-78, the total value of Australia's exports to Fiji, Nauru, the Solomon Islands, Western Samoa, Tonga, Tuvalu, 1 the Gilbert Islands2 and the New Hebrides2 was $Al26.5 million and imports from those countries and territories were worth $A54.3 million. In the same period , Australia's official assistance to the same countries and territories was worth $A55.0 million. In

mid-1977, the cumulative book value of Australian direct investment in the indepen­ dent South West Pacific island states and the New Hebrides was approximately $A5l million.

PART C: OTHER THIRD WORLD REGIONS

SOUTH ASIA

62. The priority given to South Asia in Australian foreign policy has varied con­ during the last three decades.

3

As indicated by the references to the. New

Delhi Conference on Indonesia and the Colombo Plan in paragraph 23 above, m the early post-war period when India, Pakistan and Ceylon were among the very independent countries in Asia, they were regarded as very much part of our regwn.

I Formerly the Ellice Islands. 2 Not independent. 3 Taken here to comprise India, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Nepal, Bhutan and the , Maldives.

118 Chapter VI

During the late 1950s and 1960s, however, our ties with the countries of the Indian sub-continent, though always cordial, became somewhat attenuated as we became increasingly preoccupied with events in South East Asia while their attention was fo­ cused on internal problems and the often tense relations among themselves. In recent times there have been signs to suggest that our ties with India may acquire new substance.

63. While it must be allowed that Australia's direct interests in South Asia are more limited than those in most other parts of Asia, some aspects of our relations with this group of countries warrant special mention. At the most general level, we must take account of the Indian sub-continent's significance in the strategic balance between the superpowers and as an area of Sino-Soviet rivalry. Along with other Western nations, we want India to retain its symbolic importance as the world's largest democracy. We are obliged to recognise the problems of acute poverty and malnutrition in India, Bangladesh and other countries of the sub-region, both in terms of our own moral precepts and, as mentioned earlier, because of the possible international expectation that Australia and other grain exporting countries should volunteer large quantities of grain in times of famine. India's dominant position on the sub-continent, its influence in Third World forums and in the Commonwealth of Nations, and the sheer size of its population and economy provide more than adequate incentive for Australia to main­ tain our traditionally friendly relations with that country. It is important to remember, for example, that India's population accounts for about 30 per cent of that of the whole Third World.

64. In terms of narrower interests, the most convenient and economic air links with Western Europe currently rely, inter alia, on access to Indian airspace and airports. In 1977-78, Australian exports to all South Asian countries were worth $A 172 million ( 1.4 per cent of Australia's global total) and imports from those countries were worth $A 12 7 million ( 1.1 per cent of Australia's global total).

MIDDLE EAST

65 . In the Middle East (which area is taken to include Egypt but not the other Arab countries in North Africa), Australia must take account of vital Western interests in maintaining access to the area's oil supplies, in preventing the Soviet Union from threatening Western access to the Gulf, and in containing the Arab-Israeli conflict at least to the extent that any future hostilities do not involve directly either superpower. In tams of direct Australian interests, we currently depend on Middle East oil for about 30 per cent of our domestic consumption and this dependence will probably in­ crease throughout the next decade as domestic supplies gradually run down. It is desirable-though not essential-that ships carrying Australian trade be allowed access to the Suez Canal. The maintenance of the most convenient and economic air links with Western Europe depends on access to Middle East airspace and airports.

66 . Australia's bilateral trade with Middle East countries is now quite significant. In 1977-78, Australia's total exports to the region were worth $A 737 million and im­ ports were worth $A878 million. Between 1972-73 and 1977- 78 the Mi?dl.e East's share of Australian exports increased from 2.4 per cent to 6.0 per cent, while Its share

Jf Australian imports increased from 3.4 per cent to 7.9 per cent. This growth in value

119

in each direction reflected an increased demand for Australian rural products on one hand, and the sharp increase in world oil prices since 1973 on the other. The main category of Australian exports to the Middle East is foodstuffs, with wheat, meat, live sheep, dairy products, flour and feedgrains being the main items. But there is also de­ mand for some manufactured items including metals and agricultural machinery. In

1977-7 8, Egypt was Australia's third largest wheat market and purchased 11.4 per cent of our total exports in that commodity. Australia's imports from the Middle East are nearly all petroleum and petroleum products.

67. The current tenor of Australia's relations with the Arab Middle East countries is generally very good, but they are naturally sensitive to the attitude of any Western country towards their conflict with Israel. In addition to the politico-strategic interest in encouraging reconciliation between Israel and its Arab neighbours, the prospect of further growth in trade with the Arab states on the Gulf, Saudi Arabia, Iraq and Egypt provides a firm incentive for Australia to maintain its even-handed policy

towards the Arab-Israeli conflict.

AFRICA

68. Whereas Australia's direct interests in Africa are very limited, the large number of Third World countries located in this continent and their collective influence in the United Nations, the Commonwealth of Nations and other multilateral forums of value to Australia generate an interest in remaining in good standing with these

nations as a group. Their achievement in reducing South Africa and the Smith regime of Southern Rhodesia to the status of international pariahs and the serious embarrass­ ment they have caused New Zealand for allowing sporting contacts with South Africa are evidence of the Black African countries' collective influence.

69. Australia also shares an interest with other Western nations in avoiding a situ­ ation where inherent instability in Africa, including that generated by increasing pressure on the white minority regimes in southern Africa, allows the Soviet Union to expand its influence to the extent of being able to establish military bases and of con­

trolling access to natural resources and communications facilities. Of particular sig­ nificance to Australia is the fact that Soviet fortunes in East Africa may have a direct bearing on the feasibility of maintaining a balance between the superpowers' naval deployments in the Indian Ocean. Soviet naval supremacy in the Indian Ocean should not of itself be directly damaging to Australian security (because, for example, Soviet interdiction of Western shipping seems extremely unlikely except as a prelude to or as

part of general war), but it could lead to a shift in the global strategic balance and would enable the Soviet Union to influence or intimidate the weaker littoral states and improve its capacity to intervene militarily in situations where it saw reason to do so.

70. The critical situation now emerging in southern Africa, as pressure on the white minority regimes increases, may present Australia with serious problems. The possi­ bility must now be taken seriously that widespread violence may erupt in either Southern Rhodesia or South Africa or both during the next decade. If a situation emerged where perhaps hundreds of thousands of whites were fleeing either country,

pressure could easily come from humanitarian concern within the Australian com­ munity or from other Western governments for Australia to accept large numbers these people as permanent residents. We shall probably be prepared do so . But 1t will be desirable, so as to minimise the chance of unfavourable reacuon at home or

120 Chapter VI

abroad, that such persons are received within the framework of some wider inter­ national understanding. 1

71. Excluding trade with Egypt, South Africa and Southern Rhodesia (the latter in any case being negligible), in 1977-78 Australia's exports to the African continent were worth $A97 million and imports from Africa were worth $A59 million. By way of comparison, in the same period Australia's exports to South Africa were worth $A66 million and imports from South Africa were worth $A58 million.

LATIN AMERICA

72. Australia's relations with Latin American countries (including the Caribbean area) are not now of great consequence, but there are signs that this may change. The expansion of industrialisation in Mexico and Brazil, the emergence of the former as a major oil exporter and the likelihood that both will become increasingly involved in trans-Pacific commercial relations suggests that Australia's political and economic re­ lations with these two countries will become gradually more important. Brazil is already an important competitor for Australia in the sale of iron ore to Japan and China and may become a significant market for Australian coking coal and some other raw materials.

73. In 1977-78, Australia's exports to Latin America were worth $A 182 million and imports from Latin America were worth $A84 million. Australia's leading export markets in the region were Argentina, Venezuela, Brazil, Mexico and Cuba.

74. There are good medium-term prospects for expanded Australian trade with the major Latin American countries. There appear to be significant export opportunities in Venezuela, Ecuador and Colombia in the areas of agricultural machinery and manufactured goods, including steel products, industrial chemicals and automotive parts. As a whole, Brazil appears to offer the best long-term prospects for Australian trade.

PART D: MULTILATERAL SITUATIONS

75. Because the Third World's impact is naturally felt most directly when it is able to act in a collective capacity, it is important to take account of the ways in which Aus­ tralian interests might be affected by Third World influence in multilateral forums.

76. An indication was given earlier in this Chapter of ways in which Australian interests can be affected by proceedings in the United Nations General Assembly. But there are other multilateral situations where Third World influence can have a direct bearing on Australia. Pressure from Third World countries for increased represen­ tation on the Boards of the International Monetary Fund and the World Bank may pose difficulties for Australia in maintaining its present Executive Director positions in those institutions. Negotiations on international commodity agreements, such as those recently conducted for sugar, can also present situations where Australian com­ mercial interests are subjected to concerted pressure from competing Third World producers who sometimes invoke the notion that Australia's position as a developed country obliges it to make disproportionate concessions. The attitude of Third World countries is also very important in a wide range of multilateral arrangements designed

I See Chapter VII-Part J: Southern Africa.

121

to facilitate international cooperation in various specialised fields . These include Law of the Sea Conferences, maintenance of the nuclear non-proliferation regime, and multilateral arrangements dealing with shipping, civil aviation, refugees, environ­ ment protection, infectious diseases, terrorism and narcotics.

77. The foregoing observations are not meant to suggest an inevitability of Aus­ tralian retreat before concerted Third World pressure in multilateral forums. In the past we have acted successfully to defend important interests at the risk of antagonis­ ing Third World opinion and there is no reason why we should not be prepared to do so again in the future. What should be borne in mind in this context is simply that Australia's general standing in the Third World and the general tenor of our relations

with individual Third World countries will be important factors in determining our scope for manoeuvre in situations where the Third World's numerical advantage is relevant.

78. The Commonwealth of Nations is another multilateral forum of value to Australia where Third World countries wield considerable influence by virtue of their numerical advantage. In contemporary international relations, the value of the Com­ monwealth lies in its character as a forum for regular and informal meetings at the Head-of-Government level among thirty-six nations which belong by voluntary as­

sociation. It encompasses about one quarter of the world's population and embraces a great diversity of races, cultures, languages, religions and economic conditions. It is one of the few large multilateral forums where East-West ideological confrontation and much of the rancour and posturing of the North-South debate can be avoided.

Maintenance of general harmony within the Commonwealth has sometimes required concessions and general tolerance by Western members on issues of particular con­ cern to Third World members, including, for example, racialism in southern Africa and some of the proposals for a new international economic order. At the same time, the smaller numbers and more relaxed atmosphere at Commonwealth meetings pro­ vides opportunities for Australia to test and gather support for its own proposed in­ itiatives on international issues before launching them in wider forums. 1

PART E: CONCLUDING REMARKS

79. Considered in terms of the broad sweep of international politics, what are the important ways in which the Third World can affect Australian interests?

80. Our location in a region in which the overwhelming majority of other countries are members of the Third World means that events within that part of the Third World have the potential to affect profoundly, for better or worse, our strategic environment. In this sense, a significant portion of the Third World , whether united or in disarray, always has been very important to Australia and will remain so .

81. But what of the Third World as a force for change in the international sys tem? The previous Chapters of this Report described two basic aspects of the Third World's challenge to the international status quo. First, the Third World exploits so li­ darity and numbers in campaigns aimed at extracting concessions from the estab­ lished powers. Secondly, not by campaigning for anything but rather by their own

I See Chapter VII- Part L: Australia and the Commonwealth of Natio ns.

122 Chapter VI

national efforts, some individual Third World countries are slowly but surely chang­ ing the international distribution of wealth and power by acquiring for themselves greater shares of both things. How does this affect Australia?

82. The record so far indicates that while Third World campaigns have not achieved any marked success for members in terms of extracting tangible economic concessions from Western countries, they have had their impact on the international system in other ways. One of these has been the effect of causing severe diplomatic embarrassment to three or four states like South Africa and Israel which are in dispute with some Third World countries. Another has been to win grudging acceptance by the established powers of new norms for international behaviour and transactions so that, for example, colonialism has become completely discredited and the idea of poor nations having some claim on the resources of the deep sea-bed has become part of the received wisdom of international politics.

83. Certain quite important things for Australia are at stake here. As a minimum, we clearly want to avoid any situation where Australia itself becomes a target of real or imagined grievance for a radicalised Third World. As long as Australia does not be­ come conspicuously provocative on some issue over which several Third World coun­ tries are exercised, there should be little likelihood of this happening. Over and be­ yond this purely defensive objective, however, we need to look carefully at the values and standards we subscribe to in international affairs.

84. One of the most striking things about the Western response so far to the Third World has been the lack of resolve in maintaining certain 'moral' positions and this has been mainly because, under pressure, Western countries have had to admit that they were falling down on their own professed values. The reluctant adjustment that has taken place under Third World pressure has done little to protect the self-esteem of Western countries or to improve their scope for maintaining values or standards whose defence might be considered imperative.

85. All this applies directly to Australia too, because we have undergone our fair share of adjustment to 'international realities' on such questions as colonialism, racialism and southern Africa. Especially as we are a democratic country, one of our most important interests is maintaining our sense of national self-respect and acting in accordance with the standards we subscribe to in international affairs. In dealing with the Third World, therefore, it is important to decide for ourselves the standards and values we want to observe and not become caught in situations where, through not knowing what we stand for, Third World opinion becomes the main determinant of our policies.

86. The other basic aspect of the Third World's impact mentioned above was the process whereby some Third World countries are gradually acquiring, through their own efforts, greater shares of wealth and power. This aspect too carries direct impli­ cations for Australia which are probably positive in their overall effect.

87. While there are undoubtedly various features of the prevailing international sys­ tem that are very much in Australia's interest to preserve, we are not a status quo power in the sense of wanting to maintain every element of the existing order. Indeed, we stand to gain in important ways from a process whereby certain developing coun­ tries in our region become more prosperous and achieve more status for themselves. Just as in an earlier period Japan replaced Britain as our leading trading partner, so Australia stands to benefit from expanding economic relations with a more prosper­ ous developing Asia.

123

88. Whatever new challenges might be presented to us, on balance it will be very much in Australia's interest that, through sustained economic growth, the South East and East Asian area acquires an increasing relative weight in the international system.

124 Chapter VII

CHAPTER VII

Selected Policy Issues

This Chapter deals with a number of policy issues in Australia's relations with the Third World which warrant more detailed discussion than is provided elsewhere in the Report. The selection of issues is not meant to be exhaustive. The various sec­ tions describe the relevant background to the formulation of Australian policy, indi­ cate the available policy options and, where appropriate, record the Committee's recommendations. The following issues are dealt with:

A. Australia's Posture Towards South East Asia B. Trade c. Aid

D. Australia and the United Nations E. Immigration and Refu gees F. Food and Agricultural Technology G. Human Rights H. Energy I. Cultural and Information Activities J. Southern Africa K. Antarctica L. Australia and the Commonwealth M. Private International Capital Flows

A: AUSTRALIA'S POSTURE TOWARDS SOUTH EAST ASIA

It is in our daily dealings with the countries of South East Asia, more than anywhere else, that the Third World becomes a living reality for Australia.

2. The importance of the region to Australia stems from the direct interests we have in it, interests which exist independently of wider Third World considerations. These have been spelt out at some length in Chapter VI. The question to be addressed here is what Australian posture towards the region is required in order to protect and ad­ vance those interests under existing conditions.

3. Whatever opinions are held about the particular policies which flowed from it, the basic stance which Australia adopted towards the region in the quarter century following the Second World War did reflect Australia 's perceived vital interests. It was an activist one, based on the premise that Australia's interests in the security and stability of the region justified giving undertakings, stationing military units in there­ gion and, when necessary, fighting. It assumed that in making these commitments Australia was not acting alone but in the company of major Western powers.

I'

125

4. It was The countries of the region were new, weak and poor.

They were dtVIded both mternally and among themselves. Australia's response, dic­ tated both by perceived interests and idealism, was in terms of aid, guidance, protec­ tion and, in some instances, forbearance.

5 .. To a considerable. 's current problems in relation to the region

anse the cond1t10ns underpinned that posture have now largely disap­ peared, while some of the atutudes and habits associated with it persist, unconsciously if not consciously.

6. As the region's concern for military assistance, the commitment of our erstwhile Western partners to it and domestic support in Australia for an active 'forward' role have all diminished, our capacity to affect events in the region and our relevance to it have also changed. We now wield very little military influence, but, potentially, have a greater, if still limited, capacity to influence the economic life of the region. While these changes have registered in some quarters in Australia and adjustments have

been made to accommodate them, earlier perceptions and complacencies are still widely prevalent.

7. There is reason to doubt whether the growing economic strength, the increased internal political stability and the developing self-confidence of the member states of the Association of South East Asian Nations (ASEAN) have fully registered on the Australian consciousness. Having become used to thinking of the region primarily in

terms of security, defence and aid, it has not been easy to recognise the significance of the changes and what they purport in terms of policy and-even more-states of mind. Attitudes of patronage, at least understandable in earlier circumstances but now com­ pletely inappropriate, have still not entirely disappeared. They lurk behind the still current ideas of a 'special relationship' and of Australia as a ' bridge ' between there­

gion and the world. They are evident in exaggerated views of the importance to the region of both our aid and of our opinions. The inappropriateness of these older atti­ tudes is highlighted by the fact that increasingly they coexist uneasily with doubts and uncertainty about our role and standing in the region.

8. Again, having become used to dealing with the countries of South Eas t Asia essentially on a bilateral basis, we have not fully absorbed the consequences of there­ cent move of the ASEAN states to greater unity. While we recognise those co nse­ quences at some levels-and, quite properly, have been quick to register support for ASEAN-some of our behaviour suggests that their full implications have not yet

been understood.

9. The upshot of this state of affairs is apparent in various ways. A range of both official and unofficial opinion supports the view that our standing and influence in the region have slipped quite significantly in recent years. There has been serious friction between Australia and some South East Asian countries. This should not be exagger­

ate<;! and it should be remembered that such friction is to some extent inherent in re­

lations between sovereign states as they pursue their respective interests. As th ese ne w states have become more established and confident it is perhaps in evitable that fri c­ tion between us and them has increased and that our influence on them has diminished somewhat. But insofar as there is so me evidence of a ge neralised disil­ lusionment and impatience with Australia in the re gion- and there is such evidence-we need to consider the extent to which in appropriate and dated attitud es , a failure to match aims with action and an inability to coordinate procedures in term s of'clear priorities may be contributing to them.

126 Chapter VII

10. Australia's approach to the region in the 1970s suggests that there are two par­ ticular dangers to guard against: at the general level a stress on 'good relations' almost as an end in itself; and at the particular, substantive level, an uncoordinated ad hoc approach in which issues are approached purely 'on their merit' without taking full account of all relevant Australian interests. Both these responses are inadequate.

11. Relationships do not exist in a void but are essentially a function of interests. If foreign policy is not to degenerate into a public relations exercise, or a vague effort to 'get on' with other countries, they must be related to clearly formulated interests and priorities among interests. It is only in these terms that it is possible to determine what level of relationship is appropriate and sustainable, and what level of effort should be allocated to developing it. The point is very relevant to a consideration of whether Australia should, as is sometimes asserted, seek a 'special relationship' with one or more of the countries of the region: unless there is a substantial basis of shared interests, such an effort will be neither desirable nor successful. Engaging in it is likely

1

to result in a worse outcome than would have followed from accepting more modest goals.

12. An ad hoc or case-by-case approach which focuses narrowly on the merits of a I particular case is deficient, in that where many serious interests are at stake and where they intersect, more is involved than those 'merits'. It is particularly deficient in deal­ ing with governments whose ideology causes them to see a wide range of issues as linked. Unless full account is taken of the range of interests and goals involved­ foreign and domestic-the answer is likely to come out wrong. Some-though not all-of Australia's dealings with the region during this decade have produced uncoor­ dinated and incoherent policy for this reason. To some extent the problem has now

been recognised by the Government and special arrangements have been made to strengthen coordination and consultation. Whether they will be adequate will depend largely on the political will which animates them.

13. In Australia, dissatisfaction with the existing state of affairs expresses itself in different ways. In some quarters, there is some hankering after a return to Australia's earlier stance towards the region, usually on the assumption that only an effort of pol­ itical will at the top is required to do so. Such an approach overlooks the changes in tbe region, in the interests and commitments of other Western states, and in Australia itself. Australia does not have-or at least shows no preparedness to allocate-the re­ sources to sustain such a posture in present circumstances.

14. Others, realising this and aware of the unreality of a 'special relationship' ap­ proach, advocate a drastic scaling down of the priority given to the region, even to the point of dealing with it as 'just another region'. But this is unrealistic in a different way, in that it does not come to terms with the uniquely important interests Australia has at stake in South East Asia and Australia's relative isolation from all other im­ portant groupings.

15. A valid and sustainable Australian posture towards South East Asia must:

(a) Be derived from a sound appreciation of Australia's interests. If we get our interests right, relationships will largely take care of themselves. But 'getting our interests right' is not a simple task. It involves not merely identifying indi­ vidual interests but relating them to each other-and to wider interests both at home and outside the region-in order to determine priorities in particular cases. It also involves relating them to the interests of other countries in the region and identifying points of harmony and conflict.

127

(b) Be based on an accurate appraisal of the power and resources Australia has to deploy towards the region. A foreign policy in which posture and commit­ ments were allowed to be at variance with power and resources would be at best empty, at worst dangerous. Either one should be lowered or the other raised.

(c) Be based on very good information on what is happening in the region. Over the last 25 years, Australia's gathering of information has concentrated on political and strategic areas, reflecting our main preoccupations during that time. In these areas it has been and remains impressive. In a time of sig­ nificant change in the area, when new issues are emerging-particularly econ­ omic ones-there is a need to extend the available information base, and to ensure that information is properly disseminated to and registered by both the relevant arms of government (some of whom are seriously involved in South East Asian questions for the first time) and the community at large. This is especially the case with information necessary to facilitate extended

economic contact. But even in strategic terms, new developments require a substantial upgrading of our surveillance capacity around our own sea and air spaces.

(d) Involve a continuous effort to eliminate outdated and inappropriate attitudes towards the region and Australia's role in it, both in the community at large and in the minds of decision-makers. Precisely because of our past close in­ volvement in the region there is a danger that habitual and unexamined atti­ tudes may result in a distorted vision and unnecessary frictions as circum­ stances change. The corollary to the need to eliminate such attitudes is the

need to stimulate an awareness of the challenges and opportunities which the significant changes occurring in the region present to Australia and of the dangers which will face us if we fail to respond to them.

16. The fact that these points are general and near truisms does not lessen their im­ portance nor ensure that they are always borne in mind. However, a posture which takes them into account may not always be easy to achieve. Interests are not static and the importance of a particular interest will change over time. The skill required will be

that needed to recognise that changes are occurring and to relate them to Australian policies. For example, we want to associate with the industrial revolution which is now taking place in East Asia and which is beginning to embrace South East Asia, not only or principally because we want to improve our relations with the region but be­ cause it is in our long-term economic and political interest to do so.

17. The second aspect of applying these guidelines is to recognise that we need to balance our interests one against another. For instance, if we recognise clearly that the stability, prosperity, self-confidence and unity of the ASEAN countries are them­ selves major Australian interests, we will be less inclined to justify contradictions in

our policy by saying that while of course we want better relations with ASEAN coun­ tries and we do not want to divide them, we also have our own interests to look after. It would be evident that what was involved was a conflict between particular (and often comparatively minor) interests and general long-term ones-a:1d that much of our friction with the ASEAN countries resulted as much from unresolved and gener­

ally unrecognised conflicts among our own interests as from a conflict between their interests and ours. Lastly, if we examined our own attitudes with greater care and honesty and informed ourselves more fully of what is happening in South East Asia ,

128 Chapter VII

we might be less inclined to exhibit, either explicitly or implicitly, the inappropriately patronising tendencies we have inherited from the past.

18 . What has been said refers to our direct relations and interests with respect to the region. But it is important that in our dealings with it we should also bear in mind the wider Third World aspects. Apart from the communist states of Indo-China, the countries of our region are not radical members of the Third World and they may not even be typical of it. Nevertheless, membership of the Third World is part of their national identity, and the largest of them, Indonesia, has strong historic links with the movement.

19. This is worth bearing in mind, for it can intrude into our dealings with these countries in at least two ways. First, although they stand on the conservative end of the Third World spectrum, they share many of the aspirations of their fellow members and give symbolic and · rhetorical support to virtually all of them. Indeed, precisely because they are on the conservative side, they are likely to feel the need to avoid actions and postures which would weaken their Third World credentials and to show a respectable measure of solidarity.

20. Secondly (and regardless of how 'genuine' their Third World commitment is considered to be), one of the options available to them in any dispute with a country like Australia is to play the Third World card. That is, they have it within their means to widen an issue by airing it in Third World forums, drawing on Third World sup­ port and solidarity, and attempting to link it with central Third World preoccu­ pations. There has been a recent indication of an inclination to move in this direction on contentious issues.

21. The point is not that there is any foreseeable likelihood of the region's leading a broad and sustained Third World campaign against Australia. While that is not in­ conceivable, it would require considerable ineptness on our part and substantial changes in the mood of the region to bring it about. What is more likely is that the ASEAN countries will increasingly appreciate the value of unity among themselves in their dealings with Australia and that they could see the value of some Third World pressure to supplement this. The policies we pursue towards the region and towards the Third World as a movement, and the standing we have in relation to each as are­ sult, should not be seen as two separate compartments of foreign policy but ones which interact on each other. The interaction needs to be kept well in mind in thinking about both policy areas.

22. While specific recommendations will be made in the next Chapter, it is worth indicating in general terms what the approach outlined above would mean in practice in some important policy areas:

As a country whose interests lie in having neighbours that are friendly and that are politically and economically stable, we would have to recognise that there is considerable potential for instability and conflict in the region and that we need to ensure that our defence force is strong enough to act as an effective deterrent against possible aggressors from within the region. Even in the age of interconti­ nental ballistic missiles and even though the threat to us from the existing regimes of ASEAN is negligible, our region is of prime relevance to our defence. The lodgement there of external hostile forces, the collapse of one or other of

129

the present friendly regimes, or an extension of the aggressions lately perpe­ trated in mainland South East Asia would all pose security problems to Australia. We have in the past built defence forces appropriate to participate in great coalitions (led by Britain or the United States) in distant theatres. Today,

our defence-while still dependent basically on the global power balance­ needs to take more account of our own neighbourhood and of the possibility that we might on occasion be alone in meeting threats originating in, or trans­ mitted via, that neighbourhood.

. On economic matters, we would have to consider carefully-in terms of eco n­ omic costs and benefits but also in the wider terms of our future relevance to and influence in the region-the implications of the changes which are occurring quite rapidly to our north and the adverse effects of maintaining the present

high effective rates of protection of our manufacturing industry in the fa ce of those changes. We would need to engage in a calculus of the opportunities and costs involved in associating ourselves in various ways with developments in the region and also in standing apart from them. We would have to consider

seriously the likely tempo of growth in the region, what time we would have available to make our decisions and the relationship of that time-frame to our other economic preoccupations. We would have to decide how seriously to take the predictions of a semi-autonomous economic region in East and South East Asia.

. On ideological, moral human rights questions we would have to give serious thought to the special problems we face as to how to conduct ourselves as a liberal, democratic Western country in a region in which liberal and demo­ cratic values are not prevalent. We would need to find a sustainable balance be­ tween the need to resist vigorously and without qualification any attempt by others to weaken our attachment to these values and to show restraint and sen­ sitivity in applying them to the behaviour of others whose conditions and prob­ lems are different from ours. We would need to consider the rel ative effec­

tiveness in different circumstances of demonstration and example, as opposed to criticism and publicity, in strengthening these values.

On immigration and refugees, we would need to weigh carefully the domes tic consequences, favourable and unfavourable, of taking in significa nt numbers of people from the region against the advantages that this co uld blunt possible criticism that our policies discriminatory, that we are not living up to the hu­

manitarian values we proclaim, or that we are not adequately should ering our regional responsibilities.

23. What conclusions we would reach on these iss ues wo uld depend more than any­ thing else on how we answered some long-standing questions about Au strali a itself and its future as a country. All too often we have avoided facing th ese questio ns and have used the ambiguities of our position- the celebrated tension betwee n our history

and our geography-to maintain a somewhat ambivalent pos ture toward s region. Events may not allow us to do this for much longer. The tempo of change m South East Asia, coupled with changes in other parts of the wo rld , is li kely t.o .require us to make decisions in the next few years which will go fa r toward s determmmg what so rt of country we are going to be and what kind of rel ations we are going to have with our neighbours.

130 Chapter VII

B: TRADE

24. Third World developments are especially relevant to the following four issues in ·Australia's international trade policy:

(a) implications for Australia's trade of Third World industrialisation;

(b) efforts to stabilise international markets for primary commodities;

(c) possible movement towards regional trading arrangements; and

(d) Third World pressure for preferential trade treatment.

Third World Industrialisation 25. The industrial revolution taking place in parts of the Third World is particularly concentrated in East and South East Asia and presents Australia with opportunities of very great magnitude. The relatively high rates of economic growth in these areas have been reflected in rapid expansion of their foreign trade. Between 1965 and 1976, while world exports grew by an average rate of 16.6 per cent per annum, the com­ bined exports of the ASEAN states, South Korea, Hong Kong, China and Taiwan grew by an average rate of 21.1 per cent per annum. Between 1970 and 1976, they grew at the very high rate of 28.2 per cent per annum. The combined GNP of the ASEAN states, South Korea, Hong Kong and Taiwan is now substantially greater than Australia's.

26. Both in terms of geographical proximity and complementarity of trade interest arising from Australia's resource and technological endowment, Australia should be well placed to take advantage of expanding markets in developing Asia. Authoritat­ ive government and academic specialists are of the view that the East and South East Asian regions offer a set of market prospects distinctly oriented towards Australia's resource and technology endowments. 1 Demand for beneficiated forms of ores, and for energy resources, can be expected to increase steadily and long-term prospects exist for processed foodstuffs. The region should also be attractive as a location for the establishment of Australian owned manufacturing operations.

27. But the recent trade record shows that our share of the imports of the group comprising the ASEAN states, South Korea, Hong Kong and Taiwan has been declining; from 3.3 per cent in 1968-69 to 2.6 per cent in 1976-77. In the same period, the share of total exports from the same countries and territories purchased by Australia has remained steady at about 2.2 per cent.

28. Not least because of Australia's own experience as an exporter of items subject to arbitrary restrictions in major Western markets, we have supported the calls of Third World countries for more liberal and reliable access to developed countries' markets. But our advocacy of this Third World cause has been compromised by our own import policies. We too have had to resort to tariff barriers and quantitative restraints to mitigate the effect of increased Third World, and especially Asian, competitiveness against our own labour-intensive manufacturing industries. Some measures have been intended to reduce the absolute levels of imports as well as to restrain growth. Such policies have generated serious friction with some of our Third World neighbours.

I Including the views of Working Group III of the Crawford Study Group on Structural Adjustment, 1979.

131

29. In our defence, we have pointed out that our restrictions on products of major interes.t to Asian countries are less -severe than those of the major industrialised countnes measured in terms of relative levels of importation and that barriers to our agricultural exports are a factor inhibiting our capacity to import at a higher rate.

Such a defence puts aside the consideration that the character of Australia's relations with its developing neighbours is different from that of the relations maintained with them by the major industrialised powers. But the question is whether we can continue indefinitely to postpone decisions on serious action to implement the undertaking in

the White Paper on the Manufacturing Industry to progress towards a lower and more stable tariff. Can we ignore the adverse effects on our economic position in the region of continuing to use our resources in ways that are inhibiting our longer term growth prospects? Can we overlook the adverse effects on our political and economic relations with our developing neighbours arising from the contradiction between our continuing rhetoric of regional friendship and cooperation and our failure to move to improve the access of these countries to our markets?

30. In broadest terms, the available options for Australia seem to be to apply trade and domestic policies in one of the following ways: (a) to seek to use our trade policies to isolate ourselves from the consequences of Third World industrialisation;

(b) to maintain the position that the appropriate rate of industrial adjustment within Australia should be no faster than that indicated by the perceived difficulty of effecting transfers of economic resources within the economy; or (c) to set out deliberately and energetically to facilitate the transition to a more

outward-looking Australian industrial structure.

31. The Committee's firm view is that Australia should adopt the third option. The growth rate of the economies in our region has such momentum that its impact on Australia is likely to be accelerated over the next five to ten years. Adoption of the first or second options would have the likely consequence that the governments of these

countries would become increasingly disillusioned with Australia's performance as a trading partner and investor. These governments could well take an increasingly restrictive line against Australia's exports, sourcing their requirements elsewhere. Since many of them follow policies of aggressive marketing, offering investment opportunities in return for more liberal trade treatment, Australia would be placing itself in a position where it could draw only limited benefits, if any, from these

potentially lucrative economic exchanges. By our inability to meet these marketing challenges we would lose essential markets to our competitors, with relative economic stagnation in the long term as a result.

32. The design of policies which would be required if it were decided to opt for this third option is not within the province of this Committee. If it is to be effective , the restructuring process must be responsive to the pattern of external trade pressures, and take account of what is likely to occur in overseas industrial development

especially in the region. It should aim to take advantage of opportunities for a significant degree of integration of sections of Australian industry with the rapidly growing industries in Asia, such as participation of Australian industries in regional complementation schemes and provision of Australian mineral resources for Asian

processing industries.

33. Clearly, the necessary restructuring of Aust.ralian will the

support and cooperation of the Australian commuruty. If this 1s to be achieved , 1t will

132 Chapter VII

be necessary for there to be a full explanation of the strategy and policies to be adopted and consultation with those sections of the community directly affected. Such a process of consultation would enable the Government and the private sector to identify jointly, and on a continuing basis, prospective rises in levels of market penetration in product lines and industries hitherto relatively unaffected by pressures

for rapid adjustment. It might require the Government's assuming an unprecedented leadership role in enlightening the community, and in signalling well in advance its broad intentions.

Stabilisation of Commodity Markets 34. Because of Australia's continuing dependence on the export of agricultural and mineral commodities, a long-standing objective of our international trade policies has been to reduce the chronic instability of the markets for many of these products. As part of this, we have been concerned to minimise the uncertainties surrounding the levels of access to markets in the principal industrialised countries. As a small economy outside the major blocs, often competing with their temperate farm industries, Australia is particularly vulnerable to their restrictive agricultural policies

and the consequences of their subsidised surplus disposals and the protection of their mineral processing industries.

35. The growing interest among Third World countries over the last two decades in the regulation of international commodity trade has meant that the initiative for multilateral action has tended to shift away from Australia and other developed com­ modity exporters to the Group of77 in the United Nations Conference on Trade and Development. While there are various similarities between Australia's approach towards commodity issues and that of the Group of77, it is important that we not lose sight of the following significant differences:

(a) Not far below the surface of the Group of 77's campaign is the desire that in­ ternational commodity arrangements somehow maintain prices above long­ term equilibrium levels. Australia's view is that such arrangements should even out price fluctuations around the long-term trend.

(b) Australia's position becomes more difficult to the extent that major devel­ oped countries and the Group of77 conceive of international commodity dis­ cussions as between North and South rather than between consumers and producers, and because developing countries often seek preferential treat­ ment. In those circumstances, we run the risk of having to oppose at some political cost an outcome which takes insufficient account of our legitimate commercial interests.

(c) Although there are some agricultural commodities Australia and Third World countries produce in common, Third World interest falls heavily on tropical products whereas Australia is much more concerned with temperate products. ·

(d) Some Third World countries could be expected, should an occasion arise, to attempt to use their position as commodity suppliers as a lever in a political confrontation with Western consuming countries.

(e) Australia's position is quite different from that of some Third World com­ modity producers who rely heavily on the export earnings of one or two cash crops or mineral products.

133

36. While it might be argued that these differences are more latent than actual, they confirm that Australia's scope for collaboration with Third World countries is not unlimited ..

3 7. On the other hand, it is prudent, for both political and commercial reasons, for Australia not to give undue prominence to differences between its approach towards commodity issues and that of Third World countries. Both Australian and Third World interests can be served by the conclusion of commodity agreements which op­

erate to reduce fluctuations in prices and in the incomes of producers in developing countries, and which lead to better access to industrialised countries' markets. Australia's support for the Common Fund proposal and our independent initiatives to make the proposal more feasible have helped to narrow differences in the North­ dialogue. This has been achieved without any harm to Australia's own econ­

omic interests.

Possible Regional Trading Arrangements 38. Australia's firm support during the post-war period of an open and non­ discriminatory trading regime has been entirely consistent with our overseas trade interests. Our geographical separation from the main centres of economic power (with which we still conduct the bulk of our total trade), the particular composition of our exports and our imports, and our limited scope for independent bargaining mean

that our interests are best served by a trading regime which ensures minimum impedi­ ments to our access to the widest range of markets and suppliers. This is confirmed by the _ current fairly even spread of our trade among the main trading nations and blocs around the world.

39. Nevertheless, while the general trend over the past 30 years has been to reduce significantly restrictions on international trade, there has re cently been a disturbing increase in pressures. So far, these pressures have, in general, been suc­ cessfully resisted but the following developments carry the potential for eroding the organising principles of multilateralism and non-discrimination, to the point of re­

version to trading blocs and discriminatory trading arrangements:

(a) Growing competitiveness of Third World manufac tures and the protecti ve responses it is provoking in developed countries are placing serious strains on the observance of non-discriminatory rules.

(b) A tendency to favour regional or eco nomic ' bl oc' arrange ments and to co n­ ·clude bilateral deals works against the thrust of an open and non­ discriminatory regime.

(c) Developing countries, both inside and outside the region, are requesting Australia to provide particular fa vours, so metimes in return for co ncessions they are prepared to grant us .

40. So far, while there have been instances of it , there has been no sign of a generalised movement away from global arrange ments and Au strali a should ce r­ tainly do nothing to .encourage a movement aw ay fr om mfn arrange ment s. At th e ·same time, we should monitor carefully the direction of change and be ready to act

promptly to defend our interests in new circumstances .

41. It seems unlikely that there will be a major breakdow n in th e ge neral mul tila t­ eral pattern of international trade. However, the pos ib ili t ca nnot be rul ed_ out th at there will be a move toward s more re gional trading bl ocs ba ed on prefe renual tanff

134 Chapter VII

between trading partners. In that event, Australia would need to give serious con­ sideration to joining a trade grouping embracing the major developing and devel.,. oped trading countries of the Asia-Pacific region. This would have the merit of en­ couraging a degree of economic integration with some of the countries with which our

political relations are especially important. For example, if serious proposals were to emerge for a 'Pacific Basin' trading group comprising the United States, Japan and South East Asian countries, or some significant combination among them, that would provide a sufficiently large market and have a sufficiently large membership to justify reducing trade barriers between members of the group. Such proposals have in fact

been mooted in some political, commercial and academic circles. 42. Short of that, however, Australia would seem better advised to avoid smaller re­ gional trading blocs and to concentrate on reducing trade barriers on a non­ discriminatory basis. There is real danger that discriminatory trading blocs that main­ tain high barriers against trade with non-members will simply perpetuate uneconomic and inefficient industrial structures, or encourage the development of such structures. Such arrangements could, moreover, create very difficult political re­ lations with countries not included in the trading group. We should take care, there­ fore, that any widening or deepening of free trade arrangements with New Zealand and Papua New Guinea should not function as a handicap to us in that regard, or in negotiating our participation in some wider regional trading arrangement should that prove necessary.

Preferential Trade Treatment 43. Australia's trade policy has been responsive to demands by developing coun­ tries for preferential trade treatment both with regard to access to developed markets and release from the reciprocal obligations of the GATT system. Australia pioneered the idea of a generalised system of preferences (GSP) for developing countries and encouraged its adoption by other members of the Organisation for Economic Cooper­ ation and Development (OECD). We supported 'special and differential treatment' for developing countries, where appropriate, as an objective of the recent Tokyo Round of multilateral trade negotiations. 44. Whether the GSP and other schemes giving preference to developing countries' trade have resulted in any significant trade benefits to them is a matter of some de­ bate. There is also continuing controversy as to whether they provide an economically appropriate basis for the development of industry in Third World countries. How­ ever, as a matter of practical politics, Third World countries clearly want trade preferences to be continued and they have become an important aspect of relations

between OECD countries and the Third World. Australia should continue to partici­ pate in GSP schemes and other trade preferences for Third World countries as long as the benefits offered by various developed countries are roughly equivalent.

45 . In this context, three particular issues require new Australian assessments: (a) the desirability of continuing concessions for developing countries whose manufacturing sectors are becoming increasingly competitive; (b) increasing criticisms by developing countries of the narrowness and arbi­

trariness of concessions allowed under GSP schemes; and (c) requests for special trading arrangements with South Pacific island states.

46. The first issue revolves around the search, which has so far been unsuccessful , for an internationally acceptable definition of' graduation' from the status of develop­ ing country. Not surprisingly, relatively advanced deve1oping countries are inclined to

135

resist a reclassification which would deprive them of tangible benefits. There is little need for Australia to make itself conspicuous in international debate of this question, but we should be prepared to support efforts to encourage Third World countries with some internationally competitive industries to participate in multilateral negotiations on the reciprocal reduction of trade barriers.

47. With regard to Australia's GSP arrangements, there appears to be scope to in­ troduce modifications to make these arrangements more useful to the beneficiaries. It is inevitable in non-contractual arrangements that concessions will be reduced or withdrawn from time to time, but we can do more to avoid unnecessary friction by en­ gaging in consultations whenever changes are contemplated. A related action which would bring some benefits to developing trading partners would be the accelerated removal of all residual Commonwealth preferences, and the preferential primage duty arrangements, except those which are part of valuable reciprocal arrangements with Commonwealth trading partners.'

48. Requests from the small island states of the South Pacific that Australia (and New Zealand) enter into special trading arrangements with preferential benefits will probably increase in frequency from now on. In view of the political and strategic sig­ nificance to Australia of these countries, and the smallness and frailty of their econ­ omies, we should be prepared to consider some one-way preferences to them either within a multilateral scheme or through bilateral agreements. However, we will need

to consider these requests against the background of our support for global multilat­ trading arrangements as being in the economic interests of developed and

developing countries alike. We will also need to take account of the implications of any preferential arrangements with such countries for our political relations with other Third World countries, including those in our region.

C: AID

49 . Development aid is the transfer of resources and technology to developing countries on concessional terms, with the aim of contributing to their economic and social development.

50. Although private capital flows are not generally regarded as a substitute for aid , the limited extent of flows of Australian private capital to devel oping co untries adds significance to our official aid effort, as compared with that of other OECD co untries.

51 . With our major contribution to the launching of th e Colombo Pl an we were early practitioners of aid, and we were early advoca tes of its benefits intern ationall y. Since 1945 , we have provided some $A4 billion in offi cial development assistance (ODA). The annual aid budget is now at around $A0.5 billion, th e tenth largest ap­ propriation in Australia's budget. In comparison with the ODA perform ance of oth er

countries our record is good, although it has slipped a little in rece nt years. 2

l We should seek to achieve this by placing non-Commonwealth co untries on th e sa me tariff basis as th at currently enjoyed by Commonwealth countries benefitting from the preferen ce s.

2 See Appendix N .

136 Chapter VII

Why Aid?

52. There are many reasons for giving aid, and the mix of them is likely to be different from case to case. As noted in Chapter VI, humanitarian considerations are part of the rationale for giving aid; some would argue that they are central to it. As inhabitants of a sparsely populated, affluent Western country located in a region which contains much poverty, many Australians feel it to be a proper part of their country's ethical makeup that it accept responsibility to improve the living conditions of poorer people in Third World countries.

53. Approached from another perspective, aid plays a role in serving Australia's national interest, insofar as that interest requires regional and international stability. Balanced economic and social development of the less advanced countries, especially of those in Australia's region, will help to ensure continued prosperity for Australia. Aid can make some contribution to that end, though it can only ever be supplemental

to efforts independently made by developing countries, and to the contribution of pri­ vate capital and trade.

54. In particular instances, aid may be a useful tool in developing relationships which are considered desirable for broader foreign policy reasons.

55 . Furthermore, with the growth of the Third World's economic and political influence, it is to Australia's advantage to be clearly seen to be assisting development, and furthering interdependence between countries of varying stages of development. While aid can be only one element in this process, and while it can be no substitute for other actions necessary to remove impediments to interdependence, such as trade

barriers, its role is not negligible.

Aid Quantity 56. The yardstick accepted by most Western aid-giving governments for measuring the adequacy of the amount ofODA has been the United Nations' target of0.7 per cent of GNP. After early hesitation, Australia accepted the target. However, many donor governments, including Australia's, have resisted the calls made by the Third World for target dates for achieving this percentage.

57. Australia could continue to follow the line of generalised' best endeavours' com­ mitments to reach the 0.7 per cent target. Such an approach would be consistent with the view that, if aid is to make an effective contribution to development, it is import­ ant to try to ensure that it is appropriately utilised - to concentrate on quality rather than quantity. It would also be consistent with treating aid on the same basis as other items of budgetary exp nditure, the amounts of which are normally determined each year in accordance with the Government's assessment at the time of the economic situation and of relative expenditure priorities. Our ODA of0.45 per cent in 1977 was not ungenerous compared with the average of 0.31 per cent for Western countries, which has not increased in recent years despite the large increases by a few Western countries which have been concerned to see the 0. 7 per cent target attained.

58. Alternatively, we could take the bolder step of making a formal commitment to increase our aid with the aim of achieving the 0. 7 per cent target by a specified time . If such action were to be contemplated it would need to take account of the importance of ensuring that rapid increases of disbursements of aid could be made in forms that would make an effective contribution to development. Subject to that, the giving of a greater priority to aid than to other items of budgetary expenditure might be justified

by reference to the distinctiveness of Australia's stake in the Third World and by our concern to see the decline of Western aid performance (measured as a proportion of

137

GNP) arrested. It might also be seen as a means of improving our relations with re­ gional countries, although care would need to be taken here that it was not seen as a substitute for action to reduce trade barriers, which is generally regarded as more im­ portant by developing countries.

Sectoral Targets of Aid

59. There are various but not necessarily exclusive schools of thought as to where aid should be directed.

60. One approach-that of focusing on 'basic human needs' -has acquired inter­ national prominence in recent years. Partly in response to disillusionment among Western communities about the effectiveness of aid, partly in reaction to the spectacle of continuing and even increasing polarisation in many aid-receiving countries be­

tween the very rich and the very poor, and partly in response to the advocacy of inter­ national secretariats, the concept has emerged of aid as an instrument to meet the needs of the poorest people for food, shelter and health care. This ' basic human needs' strategy has become an important influence on the aid policies of many Wes­ tern donors, especially of European countries.

61. In some of its forms, the basic needs strategy is explicitly or implicitly redistribu­ tionist, and it is thus surrounded by political sensitivities within Third World countries whose privileged elites and governments regard it with some scepticism . A further aspect of the strategy which has provoked criticism from different quarters in both developing and developed countries is its relegation of economic growth as such to the status of a secondary objective.

62. Australian interests would not appear to be served by giving our aid program­ ming a basic needs orientation. Apart from the interventionist st ance with which such a policy would associate us, our aid funds would in general be best employed where they are likely to have maximum effectiveness in terms of promoting overall growth.

63. On the other hand, it should be possible to select projects which can co ntribute to economic growth by helping to improve labour productivity through, say, better education and health. Basic needs would then, at least in part, be met si multaneo usly. '

64. In addition, Australia's talents and experience are well suited to the provision of assistance in developing the agricultural capabilities of Third World re cipients in cer­ tain areas. Rural sector aid is both appropriate for Australia, and desirable in eco n­ omic terms; and is likely to assist in raising the living standards of the poo r.

65. In this regard there are benefits to be gained fr om making partic ul ar use of se r­ vices, training and education, both within Australia and on the spot, to improve prac­ tical and usable skills in the Third World, rather than simply transferrin g capital or commodities (emergency food aid apart). The provision of train ing, the mountin g of

research programs (see paragraphs 79 and 80 below ) and the direct tra nsfe r of tec h­ nology and technical skills represent optimum cos t-effe cti ve means of usin g Australia's aid dollar.

66. An important way of ensuring that Australian aid is so use d as to maxi mise its contribution to economic development would be to deploy it in project-type aid . This could be provided bilaterally or multilaterally through international develo pment in­ stitutions. In Australia's case, historical fa ctors me a n th at ge neral pu rpose assi tance

to Papua New Guinea constitutes a significant proportion o f to tal aid . Su bject tO the

I For further discussion of the Basic Human Needs approach see Part G: Hum an Right s.

138 Chapter VII

possibility of Australia's taking over general purpose budget support in Pacific coun­ tries recently dependent on such support from metropolitan powers, the Committee is generally of the view that this type of aid should not be extended.

Geographical Distribution

67. Both because it is the region of the Third World which is of particular interest to us and because it contains some countries whose aid needs are very pressing, Australia's aid effort should continue to be concentrated in the Asia-Pacific region.

68. The unique position in our program of Papua New Guinea, which at present still absorbs more than half our aid, is clearly a distorting element in its geographical bal­ ance. While Australia's responsibilities for Papua New Guinea mean that it should continue to have first claim on our aid resources, at least until it becomes considerably more self-reliant than it is at present, its dependence on Australia for aid should con­ tinue to be reduced as quickly as possible. The moves already made by both Papua New Guinea and Australia in that direction are welcome and we might examine what scope might exist for speeding up the process. The budget support grant might be complemented by project aid and technical assistance, so as to place Papua New Guinea on a less dissimilar footing to that of other recipients.

69. The South West Pacific will continue to be a prime area of concentration for our aid efforts. Its special problems and its sensitivity to Australia as the dominant country in the region mean that Australia will need to continue with a relatively large aid program that is specially tailored to the needs of the island states. Substantial in­ creases in recent years mean that the present size of the program is probably adequate to present needs. Changes might, however, be considered to make the program more responsive to the islands' needs. Thus, for example, requests for some of the aid to be given in the form of all-purpose budget support might be accorded sympathetic con­ sideration, at least in the case of those countries which have been, until recently, de­ pendent on such support from other metropolitan powers.

70. As the proportion of the program going to Papua New Guinea declines over time and as the size of the overall aid program increases in real terms, resources will be freed for application elsewhere. This would enable us to consider mounting a program in South East Asia more consonant with the focus of our interests; giving

more assistance to the least developed countries in the Asia-Pacific area; expanding programs of assistance to other regions; and increasing our assistance provided through multilateral bodies.

Multilateral Aid Institutions 71. An adequate level of multilateral aid is important for Australia's global relation­ ships with Third World countries, and to provide us with 'credit' with other aid donors to encourage their continued aid interest in our own region. Present pro­ portions between bilateral and multilateral commitments-roughly 80/20-would appear to strike a nice balance between the two forms of deployment of aid. The need for Australia to give primary attention to the region is a sufficient ground for us to de­ viate from any OECD norm in this regard.

72. The need for a regional emphasis should cause us to give some favour to re­ gional multilateral institutions, and to regional programs of the global bodies. But it should not exclude us entirely from participating in bodies serving other regions. Indeed, there would be merit in our considering joining other regional development

banks apart from the Asian Development Bank, particularly given that membership

139

is a precondition to eligibility for procurement purposes, provided membership could be achieved at reasonable cost.

Terms and Conditions of Aid 73. There is little doubt that Australia has been well served by its policy of providing practically all its aid in grant form. Australian policy should continue to be based on grant aid. There is, however, increasing recognition of the need for diversity in our re­ sponse to the Third World. Certainly the countries to which we have traditionally given aid should be given grant aid. An argument can, however, be made for provid­ ing loans on occasion, particularly to higher income countries, and especially for pro­ jects that produce high economic rates of return.

The Tying of Procurement 7 4. Australia's project aid has been the only element of our aid program to be tied to procurement in Australia. 75. Because the larger proportion of our aid is untied budget support granted to Papua New Guinea and, because, since the early 1970s, our contributions to multilat­ eral bodies have been untied, some 80 per cent of our program is now untied. Even within the project aid element, a series of decisions taken recently has resulted in 'in country' untying, untying among ASEAN countries, and payment of a portion of local costs for South Pacific projects.

76. The trend away from tying is to be welcomed. The more that aid-financed pro­ curement is opened to international competition, the more the aid will actually buy for recipient countries. Whether tied or not, aid is a subtraction from the goods and services available to Australians. That is, in one way or another we have to export

more goods and services than would otherwise be the case. Tying is no more than a means of achieving that compensation by inefficient subsidy. 77. The alternative, that of moving towards greater tying, is frequently canvassed by Australian industry interests. Calls to ensure that more Australian goods and ser­

vices be used on aid projects have increased, presumably as a consequence of present overcapacity in Australian industry. While more tying could have the advantage of increasing the level of public support for the aid program, it is doubtful whether the increase in support would be significant enough to warrant the costs of securing it. The beneficiaries of tied aid comprise a very small proportion of the community, the

magnitude of the aid program representing only about 0.5 per cent of our national product. 78. Without any retraction from the commitment to further untie, there would nonetheless be advantage in our taking steps to maximise the Australian identity of our aid projects and technical assistance. Furthermore, we should try to facilitate the involvement of the wider Australian community, including industrial and business interests, in the shaping of the aid program and in the execution of its activities.

Research 79. The desirability of special emphasis being given to agricultural research within the Australian aid program is dealt with separately in this Chapter.1 There exist a number of other fields of both pure and applied research in which Australia possesses expertise of high calibre. A sustained program of science and technology cooperation with developing countries could put these capabilities to effective use as part of our aid effort.

l See Part F : Food and Agricultural Technology.

140 Chapter VII

80. We have not so far supported research by Australian institutions on particular scientific and technology problems that need to be overcome in Third World coun­ tries. Such 'mission-oriented' research would be directed at major identifiable bottle­ necks in scientific and technological knowledge which impede productioninc.reases. Measures should be taken to rectify this situation. The deployment of funds for this purpose, based on advice from the Consultative Committee on Research for Develop-ment, should significantly improve the quality of our aid. . . ·

Non-Governmental Aid Organisations 81 . Private and voluntary aid organisations play an important role in A_ustralia 's national aid effort: in the transfer of material goods and services ( wotth more than $A30 million in 1977) and in the contribution they make to the con-

sciousness of developmental issues. · · ·

82. While there are suggestions that the Government should a pro­

portion of its public aid funds through these bodies than the $A2 million or so whiCh it is currently providing annually, the case for doing so is not strong. Decisions on the disbursement of aid funds are not different from decisions about the spending of other taxation revenue. They must be taken against assessments of. .national interest which it is the Government 's final responsibility to perform. The Government 's.finan­ cial support of the non-governmental organisations should be maintained at a level so that the funds provided serve as a catalyst for the generation of wider prh:ate support.

83. An important aspect of the aid program is goodwill and it should be a ex­ pression of Australian interests. To help ensure this, it is important that as many Aus­ tralians as possible be involved in the aid program. This would include the seeking of advice from eminent Australians in specialist fields , the use of Australian consultants, the greater involvement of the commercial sector in efforts to assist the Third World and continuance of support for the activities of non-governmental organisations. As with any government program, its success is dependent largely on the will of the Aus­ tralian public and public participation is an important means of maintaining such support.

D: AUSTRALIA AND THE UNITED NATIONS

84. Apart from our relations with our Third World neighbours, Australia 's main point of contact with the Third World is the United Nations (UN) system. It is th'ere that the Third World behaves most clearly and consistently as a movem& nt and exhibits the greatest degree of solidarity and ideological coherence, thovgh even at this level there is a great deal of diversity and division beneath the public surface. The two related aims of the movement are to make maximum use of the UN as a platform for its causes and to extend the reach and authority of the system in ways which will serve its broad interests.

85. In the UN context more than any there is a danger that ' good rel ations ' will be seen as an end in themselves and that the 'game ', played in terms of insti­ tutional know-how and inside-dopesterism, will take on a life of its own. To guard

141

against this, it is particularly important to bear in mind the intrinsic limitation of the Organisation and the need to relate our UN policies clearly to our wider interests.

86. For the purpose of analysis, at least, it is possible to distinguish four broad stra­ tegies vis-a-vis the Third World which are available to Australia in the United Nations: (a) A conservative, legalistic approach based on a strict interpretation of the

Charter and the intentions ofthe United Nations ' founders. This would tend to limit the initiatives of the Third World by opposing intrusions on the sover­ eignty of members and supporting the pre-eminence of the great powers and the Security Council. This was the approach followed by Australia through

the 1950s, even to the point of being prepared on occasion to take up min­ ority positions in the company of a few states like South Africa and Portugal. (b) A pragmatic, tempo rising policy which does not attach great importance to forms, procedures and rhetoric, but proceeds in terms of tactical consider­

ations and short-term political advantage. This involves a certain amount of cynicism about the United Nations-which is not difficult to justify-and may be described as a 'damage limitation' approach, more concerned to prevent a position from deteriorating than to use the Organisation creatively. It is essen­

tially the policy which the majority of Western countries, including Australia, have moved towards since they lost assured control of the General Assembly in the 1960s. (c) A policy of ideological counter-attack, such as that advocated by D aniel

Moynihan in the mid-1970s.• This maintains that a merely tactical approach is inadequate and results in concessions which are cumulatively damaging to Western interests and values. It assumes that the symbolic and ideolo gical politics of the UN are important and that the Organisation should be seen as

an arena in which a vigorous and organised defence of the Western position is required. As far as Australia is concerned, Sir Robert Menzies' own intel­ lectual position was in some ways in sympathy was this view and on occasions the approach adopted in the 1950s was tinged by it. (d) A consciously pro-Third World and anti-power politics a pproach which

works to expand the powers of the UN, to increase the role of the General Assembly at the expense of the Security Council , and to make active use of the instruments of the UN to promote changes in the existing distributio n of power in the interests of 'justice' and 'peace '. With so me reservations, Australia followed such a policy under Dr Evatt in the 1940s . (To an extent,

Evatt anticipated and pioneered the approach to the UN subsequently devel­ oped by Third World spokesmen. ) Some fl avouring along these lines dis ­ tinguished the basically pragmatic approach of the Labor Government of 1972-75 from those of its Liberal!N ational Country Party predecessor and successor.

87. Australia's position in relation to the major fo rces present and the na ture of the UN itself are too complex for any one of these strate gies in its pure fo rm to serve our interests. But each has something to offer and it is in terms of a j udiciou and varia bl e mix of them that we should think of our posture toward s the UN. We cannot affo rd to isolate ourselves by taking a legalistic approach, but a strong re pect for rule and

1 See Chapter III paragraph 10.

142 Chapter VII

procedures is something which a country which does not belong to the natural ma­ jority should work to encourage. Too opportunistic and 'pragmatic' an approach, and a consequent neglect of our long-term ideological and moral position, would result in the erosion of the idealism and public support which are among the significant assets of a democratic foreign policy. But realism requires some flexibility and compromise in the UN milieu. The confrontation which would result from the third option is not in the interest of a country placed as Australia is. Even so, we should be prepared to de­ fend our own values and interests robustly and resist any general assumptions of Western ' guilt'. Similarly, we should resist' semantic infiltration' -the careless accept­ ance of language prejudicial to one's own position and interests-which often pre­ pares the ground for such assumptions. Last, while any attempt to identify Australia as a Third World country is unsustainable and undesirable, we should not only be moderate, sympathetic and cooperative in reacting towards Third World proposals, but should actively anticipate them and seek to put forward sound proposals that offer mutual benefit.

88. Australia should recognise the importance of the UN for Third World countries-that for many of them it is the only available and effective forum outside the Third World itself and that sheer paucity of diplomatic resources means that many of them have no choice but to concentrate their efforts on it.

89. But we should also recognise the limitations of multilateral diplomacy at the glo­ bal level and the fact that group pressure causes countries to behave differently when they are engaged in it.

90. Without in any way trying to split a Third World front (usually a counter­ productive exercise in any case), we should welcome and support those Third World countries which are independent and moderate, we should stress the practical aspects of Third World proposals, and we should encourage working through smaller func­ tional groups when that is appropriate to the issue involved.

91. Of the particular questions raised by Australia's participation in the UN, per­ haps the one most relevant to this Report is that relating to which electoral group we should belong. Since 1965, and following the demise of a separate Commonwealth Group, we have belonged to the Western European and Others Group (WEOG). This Group also includes Canada and New Zealand, though not the United States and Japan. It exists primarily for electoral and procedural purposes with only mar­ ginal caucusing and policy functions. 1

92. It is open to Aust alia to stay in this Group or, when the occasion should present itself, to move to the Asian Group, to which all our neighbours other than New Zealand belong.

93. The arguments for moving are: That it would be much more consonant with our claim to be part of the region and to be increasingly committed to regional affairs. As long as we, as a matter

Our present electoral position is riddled with inconsistencies. We are included in WEOG as far as the United Nations Development Program, the United Nations Environment Program, the United Nations Scientific, Educational and Cultural Organisation ( Group I) and the World Food Council are concerned. In the United Nations Conference on Trade and Development ( UNCTAD) we are members of Group B. But we belong to Region E (Asia and Australasia) in the International Telecommunication Union; Zone 4 (South East Europe, Southern Asia and Oceania) in the Universal Postal Union; the Western Pacific Group in the World Health Organisation and Region V (South West Pacific) in the World Meteorological Organisation.

143

of choice, prefer to be associated with Western countries in the UN system, the suspicion attaching to our regional claims for historical reasons will be strengthened and we will be thought to be hedging our bets in relation to the region.

. That our regional environment has changed greatly, and in ways which have a UN significance, since the time when we decided to join WEOG. At that time the People's Republic of China was not a member of the UN, there were no South Pacific island states in the UN, Papua New Guinea was not independent

and ASEAN had not come into being. More changes are likely and will very probably result in more Pacific members in the UN .

. That the growing cohesiveness among the members of the European Com­ munities, and the direction in which relations between Australia and the Com­ munities have been moving, make our membership of WEOG increasingly anomalous at the symbolic level and increasingly unprofitable at the practical one.

. As far as electoral advantage and access to Western discussions on policy issues are concerned the switch would make very little difference. 94. As against these arguments it is maintained that:

A move to the Asian Group would be cosmetic and misleading in that we are not truly Asian.

. We would do better to show up as a liberal, sympathetic and informed Western country (an appearance facilitated by the general conservatism ofWEOG) than as an uncomfortable and imperfect Asian, frequently unable to subscribe to Asian positions and in danger of being seen as a spy in the camp.

. In fact, our access to influential posts and offices in the UN system would suffer, in that the greater instability and political conflict in the Asian Group would work to our disadvantage.

A move from WEOG to the Asian Group might be seen to be incongruous with continued membership of Group Bin UNCTAD and might weaken our pos­ ition in the latter. (The fact that Japan continues membership of the Asian Group and Group B without difficulty cannot be taken as conclusive evidence

that we could do so.)

95. The validity and weight of these arguments depends very much on some other central decisions about Australian foreign policy. To the extent that Australia commits itself to greater involvement in and identification with the region-and this Report will go on to recommend that it should-the arguments for subscribing to the Asian Group gain in strength.

96. One further question which deserves consideration is the possibility of seeking to establish in Australia the headquarters, or some other major office , of an international organisation, particularly one of interest to the Third World. In both UN and Third World terms this could have considerable symbolic significance. For example, given

that we have been the most forthcoming and positive of the Group B countries over the issue of the Common Fund and that we are ourselves a major commodity trader, for example, we might give serious consideration to offering to house the body established to administer the Fund. Or, again, if the Law of the Sea Conference

concludes with an agreement to establish an international regulatory body, Au stralia, as a country which borders on two major oceans and which has one of the largest

144 Chapter VII

coastlines in the world, might consider it appropriate to offer to have that body located here.

E: IMMIGRATION AND REFUGEES

97. Australia's immigration policies interact with our relations with the Third World in significant ways. First, we wish to ensure that there is no reasonable basis for charges that our immigration policies involve racial discrimination. The need to pay attention to this aspect is evident when one recalls the offence caused to our Asian neighbours by the White Australia Policy, which operated well into the post-war period. Secondly, assuming we want to continue using controlled immigration as a supplement to an otherwise stagnating population, the prospect of declining flows of skilled migrants from traditional sources in Europe means that we need to consider the desirability and feasibility of admitting and assimilating increasing numbers of migrants with appropriate skills from sources in the Asia-Pacific region. Thirdly, in terms of both humanitarian considerations and our responsibilities as a member of the region, we are obliged to address seriously the continuing problem of Indo-Chinese refugees. These people are not likely by any means to be the last such distressed group to emerge from the region.

The Current Position 98. Since 197 4, Australia's immigration policies have been closely defined under four main categories of migrant entry: (a) family reunion;

(b) refugees; (c) persons with occupational skills in continuing demand in Australia; and

(d) New Zealanders entering under a special reciprocal arrangement. The various criteria of current policy are applied without discrimination in terms of race or nationality. The provisions for family reunion involve a natural bias in favour of those nationalities already well represented in Australia's migrant intake, but migrants of other nationalities admitted as refugees or on the basis of occupational qualifications are later able to take advantage of the same provisions for family reunion.

99. Between 1970-71 and 1973-74 the average number of settler arrivals per annum was 130,711 , but in the following four-year period the annual average fell to 72,704. Within this declining total, the number of non-refugee migrants from Asia has remained fairly steady at around 9,000 per annum and the number of refugee mi­ grants from Asia has increased markedly since 1976 with the result that the overall share of migrants from Asia has increased from 8.1 per cent in 1973-74 to 22.0 per centi in 1977-78. Apart from Asia, other important Third World sources of migrants entering Australia in 1977-78 were the Middle East ( 5.8 per cene), Latin America ( 4.5 per cent), and the South Pacific (2.2 per cene). Altogether, the Third World accounted for 35.0 per cent of settler arrivals in 1977- 78.

1 This figure includes 113 migrants from Japan. 2 Excludes migrants from Israel. 3 Excludes migrants from New Zealand.

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Constraints and Options for Australian Policy 100. A basic premise of our immigration policies is that the Australian Government alone should determine who will be admitted to Australia. But in exercising our national sovereignty in this regard, what deference should we pay to the attitudes of other countries, and especially to those of our Third World neighbours? There are very good reasons why we should apply policies which are non-discriminatory in

terms of race and nationality. First, we need to do so to live up to standards to which we have committed ourselves internationally and to avoid repetition of the past offence we have caused our Asian neighbours and other Third World :ountries. Sec­ ondly, we need to take account of a possible future situation where Australia came

under strong pressure to accept more migrants, refugees and guest workers than it wanted from over-populated parts of Asia. In terms of both domestic resolve and sup­ port from other Western countries, we would be better placed to resist such pressure if we had hitherto maintained non-discriminatory and relatively liberal immigration policies.

101. But there are also more positive considerations. If Asian applicants continue to be considered on their merits under non-discriminatory policies, their share of the total intake is likely to continue at historically high levels, resulting in increased har­ mony between our immigration policies and our foreign policy posture towards the region. In addition, the quality of many Asian applicants for migration is high in terms of occupational skills, initiative, adaptability and financial assets. This being the case, they serve to balance in the total intake the relatively poor occupational

qualifications of many migrants entering in the family reunion and refugee categories.

102. There are also important numerical constraints limiting the available options for immigration policy. During the current period of persistent high unemployment, a substantial increase in the number of new workers entering Australia could become controversial. Nevertheless, it would seem highly undesirable to restrict migration too severely. For one thing, permanent departures from Australia averaged over 26,000

per annum between 1974-75 and 1977-78. This outflow includes considerable numbers of people with valuable skills and, if not compensated for by immigration, would represent an important loss to Australian society. For another thing, Australia's fertility rate has now fallen below the long-term replacement level. 1 While

there is no economic basis for assuming that one population level is intrinsically better than any other, it seems preferable in Australia's circumstances that the population continues to grow, even if only slowly, rather than remain stationary or decline. This will help to retain mobility and flexibility in the workforce and contribute generally to

the steady expansion of the national economy. In this sense, a steady migrant intake including workers with appropriate skills can serve as a useful supplement to an otherwise stagnating or declining population. At the other end of the scale, there is an upper limit on the number of migrants which can be absorbed smoothly into the com­

munity. The 1977 Green Paper on Immigration Policies and Australia's Population suggested, for example, that in the prevailing economic climate gross annual intakes of over 200,000 would exceed Australia's absorptive capacity. 2

103. Because a basic principle of our immigration policies is that the size and co m­ position of migrant intakes should not jeopardise the social cohesion and harmony of Australian society, community attitudes have an important bearing on the desirable

I Parliamentary Statement by Minister for Immigration and Ethnic Affairs, 7 June 1978. 2 See Green Paper, pp. 7 and 95 .

146 Chapter VII 1

level of migration from Asia and other parts of the Third World. During the early 1960s there was evidence in opinion polls that public attitudes towards Asian mi­ gration were somewhat more liberal than Government policies at that time, but the findings of a recent poll suggest that the situation may have reversed. In June 1978, 80 per cent of people covered by a poll conducted by McNair Anderson Associates said that they opposed taking more migrants from Asia and Africa and 77 per cent said that they opposed giving special preference to the people of Vietnam.

104. It is not clear, of course, whether most of those responding to the poll were aware of the recent increase in migrants from Asia and thought that current levels were about right or whether they were opposed to any significant migration from Asia or Africa and would have been shocked to hear the actual figures. In either case, the issue of non-European migration is one on which the Government should be prepared to lead the community. It is sometimes lost sight of, for example, that, apart from whatever obstacles are presented by racial prejudice, English-speaking middle-class citizens of most Asian countries have the capacity to assimilate into our community at least as well as many Europeans.

105. It is also important to note that if Asian migration continues at or even some­ what above its current historically high level for a further twenty years, the proportion of Australians of Asian descent will still be fairly small. The total number of Asian mi­ grants who entered Australia between October 1945 and November 1978 is about 201,000, which is equivalent to approximately 1.4 per cent of the total population. If it were assumed, for example, that for the next 20 years Asians accounted for exactly half of a net annual migrant intake of 60,000 and that both the Asian migrants and all other Australians maintained exact replacement through births and deaths, then at the turn of the century Australians of Asian descent would account for 5.2 per cent of a total population of 15.4 million.

106. Economic and social constraints on the size of Australia's migrant intake are directly relevant to the thesis sometimes advanced that a fairly rapid expansion of the Australian population will be necessary to pre-empt future demands that we accept large numbers of migrants from over-populated parts of Asia. Even a cursory glance at the figures shows that any level of migration to Australia which did not undermine our standards of living and social cohesion would do virtually nothing to ease popu­ lation pressure in places like Java and the Indian sub-continent. Regardless of whether or not we deliberately seek to expand our population, there is no guarantee that we will be able to avoid invidious comparisons of population density and stan­ dards of living between Australia and over-populated Asian countries. Our best de­ fence against such comparisons will be to demonstrate that the limited numbers of migrants entering Australia each year are selected on a basis which is non­ discriminatory in terms of race or nationality.

107. To what extent should we be inhibited by complaints from ·Third World governments that our searching for well-qualified migrants constitutes a' brain drain' on their countries' skilled labour force? Certainly, we do not want to be seen as deliberately luring away the very people on whom the hopes of Third World coun­ tries' advancement depend. But there are other relevant considerations. First, some Third World countries have an over-abundance of trained people for certain occu­ pations and, in some of those which do not, there is discrimination against well qualified members of ethnic minorities. Even when such special circumstances do not apply, it is not clear that we should always refrain from admitting someone. whose skills are needed more in his own country. Our political values embrace the Idea of

147

of choice for each individual and we, therefore, have no wish to deny our

own citizens or those of other countries opportunities to travel or migrate to any country willing to receive them. Secondly, it has already been mentioned that Australia suffers from its own 'brain drain' and the acceptance of suitably qualified people wishing to migrate to Australia from both developed and developing countries helps to cover this loss.

Guest Workers

108. Another issue closely related to immigration and which may attract more attention in the future is Australia's attitude to guest workers. It is sometimes sug­ gested, for example, that Australia might follow New Zealand's practice of allowing persons from the South Pacific Islands to enter for specified periods as temporary

workers. While such programs are obviously attractive to workers from low-income countries and can be useful to the host country in filling particular labour shortages, on balance they do not seem desirable from Australia's point of view. While initially we might gain favour from governments of neighbouring developing countries which would be pleased with the transfer of resources as guest workers sent home their savings, there would almost certainly be great dissatisfaction should it become necess­ ary to wind up such schemes because of changed economic conditions. More import­

antly, the experience of guest worker programs in Western Europe indicates that the host community tends to regard the guest workers as second-rate citizens, whose liv­ ing conditions and general well-being should be no concern of the host government. All in all, it seems much better for Australia to maintain the explicit orientation in existing policies towards permanent settlement.

Indo-Chinese Refugees 109. Australia has long experience of accepting refugees as migrant settlers and our intake of such persons has averaged around 10 ,000 per annum since the Second World War. Nevertheless, the recent wave of Indo-Chinese refugees has raised prob­

lems we have not had to address so directly before: (a) For the first time, Australia is required to respond directly to a large-scale refugee problem in our region, involving the resettlement of hundreds of thousands of non-Europeans whose distressed circumstances come in the

aftermath of a war in which Australia was directly involved. (b) The number of refugees who have fled Indo-China since 1975 is estim ated to be around 800,000 and seems likely to continue growing. Countries of fir st refuge such as Thailand and Malaysia are unable to absorb such a large

influx and insist that countries outside their immediate sub-region, such as Australia, which are better placed to do so should accept the gre ater bulk of these people. Australia's regional standing is , therefore, directl y affe cted by the qvality of our response. (c) The arrival on Australian shores of 1,749 boat refugees between April 1975

and January 1979 has demonstrated the inadequacy of our coas tal surveillance and our vulnerability to future ' peace armadas' of disa ffected or distressed persons from South East and South Asia. (d) The cynical action of the Vietname se G overnment in faci li ta ti ng, at a price

the departure of politically undesirable perso ns has underlined the possibility that in future some other South East Asian government mi ght take imilar action against unpopular or politically undesirable ethnic minoritie .

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(e) The continuing problem of resettling large numbers of Indo-Chinese refugees seems likely to overlap with a sharp acceleration in white emigration from Southern Rhodesia. Should this occur, comparisons will be made by our regional neighbours of Australia's responsiveness to the two situations-one involving non-European refugees in our region and the other involving white refugees from an area far more distant. 1

110. Australia's response so far has been both compassionate and sensible. Since April 1975, we have admitted a total of 16,000 Indo-Chinese refugees and have undertaken to admit that number again between now and June 1980. Australia has, therefore, been taking more refugees per capita than any other country. However, the situation still warrants serious concern and has the potential to become a source of tension among the non-communist countries of South East Asia or between them and recipient countries such as Australia.

111. We have to bear in mind too that Australia's responsibility towards the refugees we agree to accept does not end on their arrival in Australia. Both in the interests of the refugees themselves and in the interests of the Australian community at large, including its international reputation, it is important that these people are assimilated smoothly into Australian society. To this end, continued provision of some public resources will be necessary.

112. There is still perhaps scope for Australia to accept even more Indo-Chinese refugees and some people maintain that we should do so because their demonstrated courage and perseverance show that they would be an asset to any society. Nevertheless, we need to take account of the unbalancing effect such an increase would have on our overall migrant intake. In a situation where the total numbers are tightly controlled, a steadily increasing component of Indo-Chinese refugees means that the intake of migrants from other countries, including other parts of Asia, is proportionately reduced along with the number of migrants qualifying for entry on the basis of their occupational skills and adaptability.

113. Whenever Australia has the capacity to respond to particular refugee situations in our region, including, for example, small-scale crises where boats carrying Vietnamese refugees are refused entry into South East Asian ports, it is preferable that Australia act on its own initiative rather than by way of reaction to international pressure. Unsolicited Australian offers of assistance are likely to win more credit from our Asian neighbours most directly affected by the movement of refugees and, by responding promptly to any situation, we are likely to have more scope for selecting those people most suited for assimilation into Australian society.

F: FOOD AND AGRICULTURAL TECHNOLOGY

114. Food production, and the generation and diffusion of agricultural know-how to facilitate it, assume particular significance in Australia's relations with the Third World because: Most of Australia's food production is destined for world markets, and, to an

important extent, for developing country markets, and Australia must therefore

1 See also Part J: Southern Africa of this Chapter for further discussion of this issue.

149

be sensitive to major changes in the world food situation as it affects those countries.

Australia is situated relatively close to certain Third World countries in which the possibility exists of adverse weather causing serious short-term shortages or of food production falling behind population growth over the longer term. This could lead to an increased need for food imports, which at present are

equivalent to only about 5 per cent ofThird World production.

. Crises in the food situation in the world or our region have commercial and political significance for Australia.

· The efficiency of Australian agriculture and the level of technology employed are among the highest in the world.

There exists substantial capacity to increase production of foodstuffs in Australia, subject to satisfactory financial returns to producers.

115 . The rate of food production in developing countries increased by over 50 per cent between 1960 and 197 5 and stayed ahead of population growth. However, the rate of growth of food production per capita fell from 0.8 per cent in the 1950s to 0.3 per cent in the 1960s and, over the past 20 years, there have been a number of periods when sudden severe food shortages have occurred in developing countries, e.g. in the Sahel. The huge American stocks of grain in existence early in the period, which made

an important contribution to overcoming famines, have now disappeared. Although average nutritional intake per head in developing countries, as a percentage of requirements, has increased considerably since 1960, the number of people with a food intake below the 'critical minimum limit' has risen to an estimated 445

million-over 60 per cent of them in Asia. The improvements in agricultural production and in average nutritional intake reflect a 30 year effort to improve world agriculture. This has involved advances by the developing countries themselves; vast multilateral and bilateral external agricultural assistance (currently running at over $5 billion annually); food aid (in cereals alone about 74 million tonnes between

1970-71 and 1977-78 ); and significant quantities of food imports by developing countries (which increased from 12 million tonnes in 1949-51 to over 60 million tonnes in 1977- 78 ).

116. Looking to the future , world population is likely to rise from 4 billion now to more than 6 billion in the year 2000, an increase of 50 per cent. In order to feed this population at current dietary levels, world food production would have to increase by up to 60 per cent, or by about 3.1 per cent per annum compared with the rate of in­ crease of2.9 per cent per annum in the period 1960- 75. Supplies in developing coun­ tries would have to increase by about 75 per cent. This estimate indicate s the magni­ tude of the problem of increasing food production in the Third World-quite apart from that of meeting the large and rather unpredictable demand for foo d by the Soviet Union and China.

117. There is a range of opinion as to the prospects of succes sfull y co ping with this problem, a problem which looms large in Australi a's own region where population growth rates are high, nutritional le vels low and agricultural skills and reso urces limited.

118 . The success of Third World countries as a whole in increasin g food output per capita by a small margin over the pas t 25-3 0 years appears to reflect incre asing em­ phasis by some important food importing countries (and others) on the de veropment

150 Chapter VII

of the agricultural sector, with consequent beneficial results. Some individual coun­ tries have made considerable progress, e.g. India and, more recently, Indonesia, which has significantly reduced its rice imports. The 'Doomsday' predictions of a few years ago have thus tended to give way to more cautious optimism as to the capacity of the world to feed itself.

119. Following the World Food Conference of 1974, an improved international mechanism for monitoring the food situation, seeking an enhanced level of food se­ curity and promoting agricultural betterment in developing countries, has been insti­ tuted, though results are appearing only slowly. There seems to be agreement that there is adequate potential, in terms of availability of land and scope for increased productivity in respect of existing land, for food production per capita to be increased. If the necessary political will, application of technical know-how, provision of requi­ site capital, and improvement of agricultural practices are applied universally through food producing areas in the developing countries, the prospect for avoiding general or widespread food problems should be good. The removal of bureaucratic controls over production and distribution would greatly improve those prospects.

120. It is difficult at this stage to make a judgment as to the likely outcome. The prospect of adequate improvement among the developing countries generally is prob­ ably greater than in some individual countries, a number of which (including some in our own region) have special problems. Some would argue that the most likely out­ look is for food shortfalls to occur from time to time in individual countries as a result of uneven or spasmodic economic progress, unfavourable weather, political disturb­ ances or the failure to sustain over the necessary period the appropriate policies bear­ ing on agricultural production. At the other extreme could be a situation where chronic famine or near famine conditions develop in important countries, or a sig­ nificant number of developing countries either fail to increase production comparably with population or find themselves deficient in foreign exchange for commercial pur­ chases. Between these two possibilities there is a range of others and, depending on their gravity, the food situation could become a matter of higher or lower priority in Third World objectives and general world concern.

121. Of course, one way of mitigating food shortages in the developing countries is through imports, the total volume of which has been rising. They still represent only a small-though not insignificant-proportion of total imports. To food exporters, like Australia and even some developing countries, the possibility of rising international commercial demand could provide important export opportunities. However, co n­ sideration also needs to be given to the impact on developing countries if they have to incur increased expenditures on food imports. Such a development could have ad­ verse effects on their longer term rate of economic growth and development, unl ess there is sufficient flexibility to reduce imports of other goods, to increase exports, or to give greater emphasis to agricultural production. It might be noted that the devel op­ ment of food shortages would tend to push up food prices, thus naturally inducing increased plantings in both developed and developing countries as well as reducin g demand in some traditional markets.

122 . However, to the extent that adjustments could not be made to increase developing countries' production or imports and especiall y if developing countries as a group have major food shortfalls, developed food exporting countries (Au strali a, the United States, Canada and some parts of Western Europe) would come und er strong pressure to increase their food production and/or to soften the financial term s under which available supplies are sold. Regularly occurring shortfalls, maj or natural

151

disasters or a series of bad seasons would tend to strengthen the pressure on devel­ oped countries to assist also by providing food aid or cash to finance additional pur­ chases. If there were a widespread deterioration in economic performance of develop­ ing cou.ntries resulting in their agricultural production not keeping pace with growth the pressures to step up food aid would undoubtedly be consider­

able. It 1s noted that an answer has yet to be found-and it is not easy to envisage one being found-to the serious problem of effecting the transfer of food from areas of abundance to areas of major food deficiency in quantities for which commercial transactions and conventional aid have been inadequate.

123. How severe these pressures would be would depend upon the number of coun­ tries affected, the gravity of the problem, and the extent to which it might be solvable through adjustments to policies of developing countries themselves. But the politics of food are such that, in really difficult circumstances, the pressures for alleviation of hunger from available and potential supplies could be intense.

124. To the extent that multilateral arrangements involving non-food exporting de­ veloped countries can be negotiated, the less will be the pressure likely to be imposed on food producing and exporting countries individually or collectively.

125. Australia has been a leader in multilateral food aid under the Food Aid Con­ vention. Australian food aid has increased from 225 ,000 tonnes in 1973 - 74 to 325 ,000 tonnes in 1978-79 and will be further increased in 1979-80 to 400 ,000 tonnes of grain per year. Such aid is allocated on the basis of assessment of the poten­

tial recipient's needs for consistent grain imports and the proposed amount of total Australian aid for the country. The factors taken into account include food pro­ duction, foreign reserve holdings and imports of food and, as these tend to flu ctuate from year to year, Australia has generally avoided longer term specific food aid com­

mitments so that it can respond to pressures which develop from time to time and from country to country. In 1977-78, Australia provided food aid to Indonesia, Bangladesh, Pakistan and Egypt.

126. The increased quantities now involved in the Food Aid Convention reflect the growing pressures brought to bear during and since the 197 4 World Food Conference on the developed countries, especially on food exporters (but not specifically Australia) to do more. These pressures can be expected to continue but would become

sharper if the world food situation visibly deteriorated. The policy of the Group of77 on food is embodied in the NIEO and the mechanism for pressure is in place in the World Food Council and in the complex structure of the Food and Agricultural Organisation.

127. It is important from our point of view that multilateral arrange ments to meet difficult situations should exist so that Australia, located close to an area th at imports part of its food requirement, does not come under particul ar press ure . It nee ds to be recognised that Australia has only a limited capacity to ass ist: Australian exports of

wheat, flour and coarse grains constitute le ss than 10 per ce nt of wo rld total ex ports for these commodities compared with over 65 per ce nt for North America and it ca n­ not deploy the financial resources that Western Europe and North America ca n to support concessional commercial sales.

128. In considering multilateral food aid, especiall y in circumstances where th e ge n­ eral objective of increased production in devel oping co untries not bei ng me.t, a balanced approach is needed. On the one hand, increased food aid helps to all eviate the hunger inevitably being suffered by people of the co untry or co untne co nce rn ed.

152 Chapter VII

On the other hand, some forms of food aid can have the unintended effect of inhibit­ ing production and encouraging recipient countries to postpone the adoption of ap­ propriate policies. At the same time, it has to be recognised that agricultural develop­ ment is a long-term operation and the relief of suffering, maintenance of nutritional levels and alleviation of hunger may require international measures, pending increased food production, as part of economic development.

129. As far as Australia's own bilateral aid is concerned, international circum­ stances could make it difficult for us to reduce the proportion of food aid in our aid program-the pressures are for the level of food aid to be increased. In any case, care­ ful attention will be needed to strike a balance between short-term relief of hunger and the longer term aim of helping to increase agricultural production in developing countries.

130. Our basic objective at the multilateral or bilateral level should be to try to ensure an increase in food supplies per capita, in order to improve nutritional levels both in terms of total availability and of internal distribution. We should be conscious of the needs of both the urban poor and the rural landless, but we should recognise

that increased production may require more than redistribution and may involve modern farming operations with increased incomes for farmers in developing coun­ tries who possess larger than minimal landholdings.

131. Australia needs to be alert to the possibility that its role as a developed food ex­ porter with only middle-ranking influence in world councils might lead to its being called upon to bear a disproportionate share of the burden of meeting any worldwide shortfalls in food that may occur, or, as may be more likely, localised supply I demand imbalances in particular countries and regions. One aspect of this unfair burden which should not be forgotten is the tendency, already present, for Australia as a competi­ tive supplier of some food products to developing countries' markets to be excluded

by heavily subsidised sales from other developed countries.

132. It seems to the Committee that the implications of possible periodic food short­ ages, particularly in the Asia-Pacific region, are sufficiently important to warrant this aspect of our relations with the Third World being kept under regular review by the Government. Early recognition by Australia of a shortage developing in countries in our region could assist in its alleviation and in avoiding excessive pressure on Australia.

133. If we are to minimise pressures on Australia to solve problems which are be­ yond our capacity, we should take appropriate countermeasures as far in advance as possible.

134. As part of this, we should seek to have it widely accepted internationally that food assistance is the responsibility of the world community-not just of the fo od exporting countries and certainly not of single countries.

135 . Having subscribed to the major recommendations of the World Food Confer­ ence on food security, Australia should be active in international action in formul ating the necessary measures. This applies particularly to a substantial reserve grain stock plan, properly administered to safeguard normal commercial transactions. The exist­ ence of such a stock would at least provide a bulwark to meet a sudden deterioration in the world food situation and the possible consequent undesirable press ures on Australia and other food exporters.

153

136. Related to this is the possibility of an International Wheat Agreement whose aim would be to reduce fluctuations in wheat prices and to improve the reliability of supplies. If such an agreement could be negotiated, it could provide greater assurance of supplies to developing countries while at the same time reducing fluctuations in Australia's export income and in the incomes of Australian producers.

137. Australia should not shrink from taking strong leadership in seeking these and other long-term solutions. We have a good record in this field, and there is recognition of Australia as a progressive country with advanced food production technology of its own.

138. However much we may look for the expansion of commercial sales in the developing countries, we should recognise the prime importance of their increasing food production themselves, especially in those countries in Australia's region. These countries' own efforts will need to be given proper encouragement and support from outside and there will need to be increased external assistance for this purpose. While the financial resources for larger projects are of such a scale that they are better tackled multilaterally-and here we should seek to promote productivity-improving

projects in the vulnerable countries in our region-we should increase the number and scope of our bilateral projects. Necessarily, this would involve longer term commit­ ments by Australia. Perhaps the greatest assistance which Australia can render is in the provision of appropriate agricultural technology to promote the production in­

creases necessary to keep pace with consumption requirements.

139. It has been represented to the Committee by several persons who have appeared before it that Australia has special qualifications for assisting the Third World in agriculture. There are numerous examples of successful Australian assist­ ance in this field. The possible significance to Australia's relations with the Third World of shortfalls in food production, together with our technological capacity in

this area, would seem to imply the need for Australia's aid program to pay particular attention to assisting food production in developing countries.

140. While Australia has a good record of sending practical people to assist the developing countries in their agricultural projects, it would appear that unused poten­ tial exists for Australia's scientific resources to be put to more effective use in assisting to expand the technological efficiency of agricultural production in developing coun­ tries by stepping up the quality of available knowledge and devising innova tive ways of effecting its transfer, especially to those countries most in need. The Consult ative

Committee on Research for Development, which has been established by the Minis­ ter for Foreign Affairs to advise on science and technology, should provid e a use ful source of advice to enable greater use to be made of Australia's scientifi c and techno­ logical skills.

141. A number ofproposa1s for major agricultural re search programs we re brought to the attention of the Committee. One such proposal envisaged the es ta blis hment of a re search institution in;Australia to examine some of the basic scientific probl ems which will need to be overcome if agricultural production is to co ntinue to increase in

developing countries. Another proposal envisaged building more spe cifi ca ll y ing programs and facilities , such as those provided by the Commonwealth Se1e nufic and Industrial Research Organisation.

142. While not itself competent to investigate these questions in detail, the Co m­ mittee considers that they offer a possible basis for an initiati ve to be taken which

154 Chapter VII

would advance Australia's relations with the Third World and make a positive contri­ bution to economic development. The Committee recommends that the Government should consider the funding of agricultural research in Australia, specifically directed at overcoming agricultural problems in developing countries, by the establishment of a separate appropriation within the aid budget. This could supplement the support which is already being provided for research in overseas countries through the exist­ ing aid program.

G: HUMAN RIGHTS

143. Few Third World nations are democracies. Some have totalitarian communist regimes; many have one-party systems of supposedly 'socialist' bent; many are governed by the military; most have authoritarian governments of one sort or another.

144. It might seem inevitable that a democracy like Australia, situated where it is, would have difficulties in its dealings with such countries. Is it really inevitable? Australia's relations with the totalitarian communist regimes long ago settled down to normal diplomatic practice, only occasionally disturbed by human rights campaigns. The community has understood and reluctantly accepted that our government must do business with other governments whose policies are quite undemocratic and it re­ quires veritable genocide, as in Kampuchea, or flagrant aggression, as by Vietnam,

before communist behaviour affects Australia's diplomacy or public opinion.

145. Oppression in the great majority of Third World countries falls well short of totalitarianism-and not simply because their governments are not strong enough to be effectively totalitarian. Authoritarian rule in the Third World is often directed pre­ cisely at combating communist totalitarianism, which is represented by local conspiracies abetted by the Soviet Union or China. To be sure, this anti-communism is sometimes used by ruling elites for their own ends, notably when it comes to secur­ ing American money and support. But aside from such exaggeration, there are sound political reasons for believing that 'strong government' or frankly authoritarian rule, is a necessity for the preservation of basic social peace and cohesion in nations that are so insecurely founded that our democratic practices would soon lead them to anarchy, tribalism or provincialism-and eventually, in some cases, to communism.

146. The inclination to rush to judgment on these regimes might be curbed by reflection upon the long path our Western societies had to follow before our democracies were as safe as they are-which is not so safe that we can be complacent. It is hypocrisy, in Australia and elsewhere in the West, to overlook that democracy spread slowly in the advanced countries, that there has been serious backsliding in even the most civilised nations, that universal suffrage came late upon the sure foun­ dations of long historical traditions and national loyalties and, finally, that education and prosperity are still the guarantors among us of democratic sentiment. When none or few of those conditions exist in Third World countries, it is overweening to require them to meet our' democratic standards'.

147. Despite all that, Australian democrats are tempted to be particularly intolerant of violations of human rights in certain Third World countries. This is commonly explained as the duty to denounce oppression 'wherever it occurs', when in reality it

155

betrays a double standard, indeed a series of double standards. For example, commu­ nist oppression is no impediment to diplomatic and commercial relations, but anti­ communist authoritarians merit isolation. Or again, distant injustice is no worry, but strong, paternalistic government in our neighbourhood is reprehensible-whereas a

thought for the progress of communism might lead to the opposite conclusion. Or further, we need not concern ourselves with oppression by governments that we only trade with, but once we give a modicum of aid to a nation we have a right, a duty even, to wage ideological war on it, lest we be guilty of'shoring up tyranny'.

148. Inconsistency, selective indignation and outright cynicism abound in judg­ ments of other nations' democratic performance, but even if Australians could be cured of such sins, we would still be faced with hard cases. We live on the rim of a re­ gion where democracy is a new idea whose hour has not yet come, where at best it is one aspiration among a host of others no less urgent.

149. There is no simple way of judging such societies, if only because there is no one absolute moral standard that has pre-eminence over all the others. Individual human rights are nowadays often presented as one such absolute, but so too, and no less plausibly, are the causes of international peace and cooperation, economic ad­ vancement out of poverty and hunger, national unity and independence, and so forth. A care for these latter will upon occasion have to take precedence over respect for in­

dividual human rights. Our own domestic history demonstrates that abundantly. So must our diplomacy, notably in dealing with Third World nations.

150 . . None of this is to deny that a concern for who the friends of democracy are must be a constituent element in Australian foreign policy. It would have to be, even for the most dry-eyed practitioner of global Realpolitik, because ruthless authori­ tarians (as the recent experience of the Shah of Iran shows) cannot hold power indefinitely; only ruthless totalitarians can manage that. Our diplomacy must assess the solidity and durability of the elitist regimes that rule most Third World countries,

and it will note that those that most flagrantly violate human rights are insecure; we can afford to treat them as such.

151. But more is involved than this. For the fact is that in the last decades of this century no person in charge of the foreign policy of a democracy can afford to be a thorough-going practitioner of Realpolitik. The events of the last decade have demortstrated-most dramatically in the United States, but also in this country-that a

foreign policy which cannot command substantial domestic support is likely to be ultimately unsustainable, and that it is only likely to command such support if it is deemed morally acceptable in that it reflects the central values of society.

152. Democratic policy-makers face the problem that while the conditions of inter­ national power politics do not allow a purely 'ethical' approach if interests are to be protected, a policy which does not give due weight to moral considerations is likely to fail domestically. Handling the tension between these two considerations is a necess­

ary skill in the conduct of contemporary foreign policy. The first requires working to ensure that moral claims and expectations are not pitched excessively high, that the validity of competing claims and interests are widely appreciated, and that it is under­ stood that what a government is able to achieve beyond its boundaries is limited. The

second requires that the moral dimension both of our policies and of the activities of those with whom we have dealings should be one element in our calculation, i.e. that our approach to foreign policy should not be amoral in the power-political sense. In cases where the behaviour of other states-even states wah whom we have important relations-is morally outrageous, our own integrity may require us to say

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so, even while making it clear that we intend to maintain the relationship. But in most cases the moral consideration will not be overriding, but will be one consideration to be weighed against others; and what we do in relation to it-and how we do it-should be determined more in terms of practical outcome than of our own moral satisfaction.

153. In approaching the 'problem of human rights and foreign policy' it is import­ ant to bear in mind the limited contribution that government-to-government dealings can make to the defence and illustration of democracy and liberal values. What Australia can do in the neighbouring Third World is not-happily-limited to the pro­ nouncements of its foreign minister and its diplomats, nor to the impact of its modest aid program. It is people-to-people relations, and, singularly, individual contacts and friendships in education, business, cooperation and travel, that will most effectively acquaint our neighbours with the merits of our conception of human rights and a free society. Incidentally, those same relations, contacts and friendships will convince Aus­ tralians of the difficulties our neighbours would have in following forthwith our prac­ tice let alone our preaching.

154. What has been said to this point refers to individual, political human rights; the ones normally expressed in the West. Another dimension is added to the question by the Third World tendency to stress collective and economic rights at the expense of political ones. One way of seeing this is as a concern to emphasise the priority they give to nation-building and development; another is as an implicit and defensive ack­ nowledgement that their performance in terms of traditional human rights is unsatisfactory.

155. Some Western opinion has been highly critical of this Third World emphasis, claiming that the notions of collective and economic 'rights' extend the term human rights to the point where it becomes largely meaningless. But it is worth recalling that these notions are not foreign to the West-that, on the contrary, they represent one important strand of Western political thought.

156. More recently there has been a Western tendency, in the polemical context of North-South exchanges, to accept the notion of economic human rights-in the guise of'basic human needs '-and to use it to turn the flank of Third World elites. Thus, for example, it is argued that aid should be directed at the poorest countries and the poorest sections of the population within particular countries; that conditions should be attached to aid which will ensure that this happens; and that if such conditions are not acceptable this should be taken into account in drawing up aid programs.

157. This line of argument involves a mixture of cynicism and misplaced humani­ tarianism. Politically, it has more to do with the need to justify falling or languishing aid performances and to take the initiative away from the Third World than with human rights principles. (Some of those who accept it find no problem with supplying arms to Third World elites.) Economically and socially it amounts to a 'band-aid' ap­ proach and overlooks the fact that long-term growth prospects will depend on re­ sources being directed not in terms of suffering but of the capacity to use them produc­ tively. Within the Third World the approach is often viewed with deep suspicion as one calculated to divide the ruling elites from the people they govern.

158. There seems to be no good reason for Australia to follow such an approach. While we should resist very firmly any suggestion that individual , political rights are

157

unimportant or subordinate-our own values require us to do so-we should be sym ... pathetic to the Third World's stress on economic 'rights'. While we should be con­ cerned with the suffering of the very poor, we should not make its alleviation the over­ riding test of our aid and should recognise that any attempt to do so would be likely to involve objectionable and unwarranted intrusion into the affairs of recipient countries.

159. Finally, it is important that we recognise that, as an issue, human rights does not operate in one direction and that Australia's own record may on occasion attract attention in our dealings with Third World countries. Given the Third World's central preoccupation with racialism, as practised by whites against non-whites, the two

aspects of that record most likely to attract criticism are our immigration policy and our treatment of Aboriginals. Historically, we are vulnerable on both counts and although we have made many amendments to earlier policies, the effects of these poli­ cies and the ingrained attitudes and habits which accompanied them have by no means disappeared. (We may expect the international community to overlook the ill­ treatment of Aboriginals which occurs in some Third World countries. But Australia is not expected to be so favoured.) Even if neither of these issues were in itself to at­

tract sustained Third World fire, it is not at all improbable that, should sustained and serious friction arise between us and one or more Third World countries, use will be made of them to embarrass us and to gain support from other Third World members.

160. Both principle and prudence require that we do three things with respect to these policy areas: first, give as full and honest an account as possible of the present situation, including the imperfections which result from earlier policies; secondly, ensure that current policies are clearly understood and that the changes which have taken place in recent years are registered; and thirdly, ensure that any remaining

faults in current policy which would make us vulnerable to fair criticism are quickly removed.

H: ENERGY

World Situation 161. The 'oil crisis' of 1973-74 highlighted for the first time the importance of en­ ergy matters to world economic growth. It moved the Third World, or at least certain parts of it, from a relatively impotent international actor to the status of a substantial, if uncertain, force in international relations. Oil has played a central role in the evol­ ution of the North-South dialogue even if it has not always been an explicit one. The crisis emphasised the collective power deriving from the oil exporting capacity of the OPEC countries and demonstrated the interdependence of nations in the energy field .

162. It also gave rise to a growing awareness throughout the international co m­ munity that reserves of oil and gas are becoming depleted at a fairl y rapid rate and that alternative sources of fuel will progressively be needed over the years ahead. As the relative price of oil rises it will become increasingly economic to utilise other

means of obtaining petroleum and of switching to other sources of energy. However, the processes will take time to develop, in some cases poss ibly decades.

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163. At this stage, it is difficult to assess whether the supply of oil is likely to run out before adequate processes are developed. In the meantime, of greater concern, per­ haps, is the possibility that political instability in major oil producing countries, or sudden decisions by those countries to withhold supplies, could cause severe disrup­ tion to Western economies and to many Third World economies too. The recent inter­ ruption of oil supplies from Iran has certainly increased the world's vulnerability to future supply dislocations.

164. The importance of Third World countries as a source of supply of oil is obvi­ ous. As their industrialisation proceeds they will become increasingly important con­ sumers of oil and other forms of energy. This in turn will require increasing emphasis on the development of indigenous energy sources, as well as the promotion of new en­ ergy consumption patterns and technologies which are less oil-intensive and wasteful than those practices employed in recent decades by developed countries. Their essen­ tial requirements for oil will need to be met and this can be assisted through expanded domestic exploration for petroleum (both through private enterprise and with the as­ sistance of the World Bank). However, they will also need to make greater use of re­ newable energy sources such as hydro-electric power, wind power and solar power­ especially at the rural village level. Use of such energy sources would have particular advantages in that they would be applied domestically, would reduce problems of im­ port dependence and would facilitate the process of global energy transition.

Australia's Trade in Energy 165. While, with the exception of uranium, Australia's total proven energy re­ sources are not large by world standards, we will continue to have the resources to meet our domestic energy requirements with the exception of oil, and we have the potential to become a major net energy exporter in the future. Australia is already a major exporter of coking coal and also exports petroleum products. It is expected to become a substantial exporter of uranium, steaming coal and liquefied natural gas (LNG) from the early 1980s onwards. The Government has already made clear that it is prepared to assist its energy-deficient trading partners in meeting their essential energy requirements. Australia is, therefore, well placed to exercise an influential role in assisting other countries to lower their dependence on supplies of imported oil.

166. While Australia's major export markets for energy resources are mainly in other industrialised nations, particularly Japan, we are also developing substantial markets in Third World countries, especially in the South East Asia-North Asia re­ gions, because of the trade advantages we enjoy in these areas. We have already entered into substantial long-term contracts for the sale of coking coal, used in steel­ making, with South Korea and Taiwan and these markets are expected to develop further in the future. Coal exports have also been supplied to Brazil, Mexico and India on a smaller scale. Australia has also exported small quantities of steaming coal to Fiji on a regular basis. There are good prospects for a substantial increase in our steaming coal exports in future for use in power generation. We have recently supplied South Korea and the Philippines on a trial shipment basis, which may lead to long-term contracts in the future. Other promising developing country markets include Sin­ gapore, Hong Kong and Taiwan. Australia has also supplied petroleum products on a modest scale to a number of its developing regional neighbours including Fiji, Papua New Guinea and Singapore. Among the potential customers for Australian uranium, developing countries which have expressed an interest in purchases include South Korea and the Philippines.

159

167: The Government has sought stability in trade in energy resources, for example, uranium and coal, by supporting long-term contractual arrangements. Such arrange­ ments have provided assurances to importing countries over access to supplies while also providing for continuing market access, assuming fair and reasonable prices can

be agreed upon. The Government maintains export controls in respect of minerals, in­ cluding energy resources, which are aimed at ensuring that satisfactory conditions of sale are arrived at rather than at restricting such trade. These arrangements have operated without undue difficulty in the past and therefore seem unlikely to create problems in our relations with Third World countries in future. However, the safe­ guard conditions which Australia intends to impose on its uranium exports could give rise to potential difficulties in our relations with certain Third World countries over the longer term.

168. Australia is currently 67 per cent self-sufficient in oil. While further exploration is being undertaken in Australia both onshore and offshore, official estimates suggest that by 1985 Australia's self-sufficiency in oil will fall to 50 per cent. Australia is, therefore, likely to become increasingly dependent on Third World sources in meet­ ing its future oil requirements. Our import requirements are handled mainly by sub­

sidiaries of the major international oil companies operating in Australia. Supplies are arranged in accordance with normal commercial practice and have been sourced ac­ cording to the availability of grades and varieties of oil suited to Australian market re­ quirements (90 per cent of imported supplies originate from the Middle East region). Oil has also recently been supplied to Australia from Indonesia. Other potential sources of supply in future, outside the Middle East region, include China, Malaysia

and Mexico, although there may be problems in handling oil from these sources with­ out adjustments to refineries in Australia. A possible future option, already pursued by a number of other governments, would be for Australia to consider the possibility of direct government-to-government umbrella arrangements on oil supplies with

producing countries, even though the detailed negotiations might involve the oil companies. 169. Relative to most other OECD countries (and many developing countries) Australia is fortunate in the degree of self-sufficiency in oil which it possesses at

present, and is likely to possess in the future even if to a reduced extent. However, in view of the very great uncertainties surrounding the future stability of overseas oil supplies to Australia, we should be taking urgent steps, over and above the move to import parity pricing, to encourage less dependence on overseas oil supplies. To the extent that it is consistent with other policies we should give emphasis to the develop­

ment of our own energy resources. This would include the encouragement of conver­ sion of important sectors of the economy to utilisation of fuels available abundantly in Australia. Measures might be taken to promote the conversion of road transport to LNG; rail transport to coal-fired systems and electric power generation from diesel to coal and/or nuclear power.

Energy Cooperation 17Q. Substantial scope exists for enhanced cooperation on energy matters, particu­ larly with Third World countries. Since the termination of the Conference on Inter­ national Economic Cooperation (CIEC) in mid-1977, there has been no global inter­

national forum for conducting a dialogue on energy. Australia has been active, especially within the United Nations, in promoting the resumption of a dialogue. So far, Third World countries have resisted this suggestion, partly because of OPEC sen­ sitivities and also because of their insistence that any such discussions should be

linked with general progress towards a 'New International Economic Order '. Recent

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events in Iran serve to demonstrate again the desirability that a dialogue, aimed at facilitating an orderly energy transition and convincing Third World countries that this is in their longer term interests, should be resumed.

171. Australia's recent decision to join the International Energy Agency (lEA) reflects its desire to step up energy consultation and cooperation with other indus­ trialised countries which are its major trading partners, given that the focus of the Agency's activities nowadays has shifted in a manner more in tune with Australia's overall energy policy interests. It does not, however, represent any shift in Australia's long-standing position in favour of a broader dialogue, including the participation of developing countries. In addition, through certain of its programs (e.g. energy re­ search and development projects, provision of energy data) we believe the lEA will play a useful role in gradually promoting contacts with the Third World. Through its membership, Australia can encourage the lEA to move further in this direction.

172. Australia has a good deal of expertise and technology available which can pro­ vide the basis for expanded cooperation with developing countries in the energy field. Opportunities for commercial sales of Australian energy technology may also eventu­ ally result from such cooperation. Given the relatively limited resources available for this purpose and our overall foreign policy interests, there are advantages in concen­ trating our efforts at the regional level. Australia has in fact concentrated its efforts on the United Nations Economic and Social Council for Asia and the Pacific and the Commonwealth Regional Consultative Group on Energy. It is also seeking closer cooperation with ASEAN to this end. Bilaterally, it has been active in identifying areas of possible cooperation with India.

173. There would be scope for Australia to suggest extending the cooperation already foreshadowed with Commonwealth regional countries and ASEAN countries to the remaining countries represented on the South Pacific Forum and possibly those territories represented on the South Pacific Commission. Furthermore, while such co­ operation as exists thus far relates mainly to exchanges on energy data, trends, and re­ search and development, there may be scope for Australia to assist regional Third World countries, if they so desire, in other areas such as in carrying out energy re­ source surveys, energy policy planning and training personnel. There is also scope for Australia to play an active part in the United Nations New and Renewable Energy Sources Conference due to be held in 1981 in those areas where it has particular ex­ pertise to contribute (e.g. solar, biomass conversion and hydro-power).

1: CULTURAL AND INFORMATION ACTIVITIES

174. A much discussed aspect of Australia's international situation is the inherent tension between our history and geography. This is nowhere more evident than in the cultural differences between our society and neighbouring Third World countries. Whereas most countries around the world tend to have greatest cultural affinity with nearest neighbours and least of all with countries which are most distant, Australia's position is almost the exact opposite. Apart from New Zealand, whose uncommon circumstances are very much like our own, there are sharp differences between

161

Australia and its neighbours in terms of cultural traditions, religious beliefs and moral values, and patterns of behaviour.

175. These differences are not something that we need lament or seek to disguise. It is both impractical and needlessly self-abasing to imagine that we should try to earn a place in the region by striving to acquire a more Asian orientation in our culture. Rather, we should recognise the cultural differences between ourselves and Third

World neighbours as part of the objective background against which we are required to conduct both official and non-official relations with them. It is to our advantage, of course, that neighbouring societies have absorbed some important aspects of Western culture and institutional practice.

176. A number of written submissions received by the Committee dealt with the general subject of cultural and information relations with the Third World. The pre­ vailing view among these submissions was that cultural exchanges and other people­ to-people contacts with the Third World should be encouraged by the Government

because of their contribution to improved understanding and friendship. The Com­ mittee supports this view as a general proposition, but considers it necess ary to regis­ ter one or two qualifications.

177. While mutual ignorance and insensitivity certainly do often give rise to un­ necessary misunderstanding and friction, we should not assume that friendship and understanding between two countries at the people-to-people level can do much tore­ strain clashes over fundamental conflicts of interests when they occur. Cultural exchanges and other contacts are very worthwhile in themselves and it is desirable that they continue, but it is debatable how active the Government should be in using

public funds for their promotion. Moreover, it is necessary to keep a sense of pro­ portion about the extent to which any government can hope to stimulate its people to take more interest in foreign countries than they would be inclined to do anyway of their own accord .

. 178. In fact, some quite significant progress has been achieved alre ady. During the past three decades Australians' knowledge and interest in co untries of the Asia­ Pacific region have improved markedly. Through the revolution in international travel, hundreds ofthousands of Australians have had so me fir st-hand experience of Asia. Although the sample involved is not especially representative of the re gio n 's

nationalities and ethnic groups, Australia 's acceptance of Asian and South Pacific students for study at Australian institutions does much to improve mutual awareness and understanding. Similar advantages are gained from participatio n by Australi an students in Asian studies at schools and universities.

179. But a less encouraging indication of the degree of interest in Asian affairs is the recent decline in the number of secondary and tertiary students studying Asian languages, which has taken place after ste ady incre as es until the early 1970s. The coverage of Asia in the Australian public media also remains uneve n in terms of both

scope and quality, but the situation has at le as t improved over the pas t decade in the sense that there are now a handful of Australian co rrespondents , located at main centres throughout the region. At present, it is probably true to say that th e majori ty of Australians are at best only dimly aware of developing Asia's growing eco nomic

significance for Australia.

180. In the reverse direction, there is clearly much scope fo r improving awareness and understanding of Australia in neighbouring Third World co untrie and for that matter, throughout the Third World co untries at large. Much more co uld be done to

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demonstrate that, whatever our cultural connections with Western Europe and North America, Australia has considerable creativity in its own right in fields such as litera­ ture, painting, music, films and theatre. We need to remove any lingering misunder­ standing about our immigration policies being discriminatory in terms of race or nationality. We also need to explain to anyone concerned about the circumstances of Australian Aboriginals that, though many problems remain, successive Australian Governments have been active in trying to improve the situation in various ways.

181. Friction sometimes arises in relations with regional Third World governments over critical coverage their countries receive in the Australian pubic media and over demonstrations or other forms of political protest by private groups in Australia. While we should continue to explain carefully that in the Australian system there is no scope for the Government to control the media or restrain political protest, we should not be surpri.sed if foreign governments prefer, for their own reasons, not to differen­ tiate between Government policy and the political views of individual Australians. We should also be aware that regional governments expect the Australian Govern­ ment to make clear its position publicly when it disagrees with ill-informed or biased media reports on events in their countries.

Existing Programs 182. There are four organisations relying on public funds which are active in the broad area of cultural exchanges, people-to-people contacts and information activi­ ties with Third World countries-the Australia Council, the Department of Foreign Affairs, the Australian Information Service and Radio Australia.

183. The purpose of the Australia Council is to promote the development of the visual and performing arts in Australia. Its activities are, therefore, mainly based in­ side Australia, but about 5 per cent of its annual budget is spent on exchanges with foreign countries. The recent very successful showing in Australia of the Colombian Gold Exhibition is an example of its sponsoring cultural activities with Third World countries.

184. The cultural relations program managed by the Department of Foreign Affairs is intended to support the foreign policy of the Australian Government and funds are allocated between countries and programs on this basis. The total allocation for 1978 - 79 is $Al,565,000. Regional Third World countries account for about 45 per cent and Japan and China for about 40 per cent of approximately $AI.2 million which has been assigned for country programs. The main activities covered under the official program, in order of expenditure on a world-wide basis, are sponsored visitor schemes, academic exchanges, tours by performing groups, exhibitions and library activities.

185. While supporting the value of current programs, the Committee considers that a long-term objective of the Government's cultural and information policies should be to encourage in practical ways Australia's gradual emergence as a recognised re­ gional centre of intellectual exchange on Asian affairs. In another section of this Chapter dealing with human rights, the Committee states its view that Australia will often achieve more for political and academic freedom by demonstration and example than by public criticism of other countries. In the same vein, .we can win re­ spect for our traditions of free academic inquiry as well as help the regwnal exchange of views and information by supporting further collaborauon between Australia n academics and other professional specialists and their colleagues in neighbourin g

163

developing countries. Government support might be particularly effective in provid­ ing funds for joint research and comparative studies into aspects of Australia's re­ lations with its developing neighbours.

186. Australia 's past performances in accepting large numbers of Asian and South Pacific students for study at Australian institutions has won us considerable goodwill. As long as the demand continues, these programs should be continued at levels no lower than in the recent past, despite the occasional diffi culty caused by students who do not want to return home or who develop a penchant for public criticism of the governments of their own countries. The Government should ensure th at unnecess­ arily restrictive selection procedures are not the reason that the numbers involved fall

below the levels of the recent past.

187. Sport exchanges have also proved a very worthwhile method for Australia to develop people-to-people contacts and should be continued at an appropriate level in Government-sponsored programs.

188. The Australian Information Service (AIS ) has representatives at Australian diplomatic missions in the following Third World countries- Papua New Guinea, Fiji, the five ASEAN countries, India, Pakistan and Mexico. AIS activities are intended to assist the achievement of Australia's political and eco nomic o bj ectives by

fo stering a sympathetic awareness of Australia among the general public and by dis­ seminating specialised information on Australia's relations with the co untry co n­ cerned. The Committee considers that AIS representation in Third World co untries should at least be maintained at current levels.

189. Radio Australia provides an important link between Australia and the ordi­ nary citizens of neighbouring Third World co untries, for many of whom it is li ke ly to be the only contact they will ever have with Australia. Radio Au stralia's main target areas are South East Asia, East Asia and the South Pacifi c and its foreign language

broadcasts include, inter alia, services in Indonesian, Neo- Mel ane sian, Vietnamese and Thai. The Committee supports R adio Australi a 's se rvices and co nsiders it is very important that they should be as free as possible of all political bias. They should be seen to reflect neither official Australian Government policies nor th e views of atypi­ cal minority groups. Further, the Committee co nsid ers th at Radio Aus tra li a's trans­

mission facilities should be improved.

North-South Information Debate 190 . As information becomes a more vital resource , access to information is beco m­ ing an increasing concern of developing co untries. Third World co untries maintain that Western control over information sources co nstitutes a fo rm of neo-colonialis m. The issue is likely to develop into a rallying point in internatio nal affairs, the seeds

having already been sown in the Third World stand in the United Nations Edu­ cational, Scientific and Cultural Organisation (UNESCO ), and the West can expect increasing emphasis by the Third World on iss ues rela ting to in fo rma tio n dissemi­ nation. In future , these issues are likely to be raise d to greates t effect in international

organisations which are charged with regul ating ra dio frequencies, geostationary orbits, and telecommunications.

191. The focus of co ntroversy at las t year 's U ESCO General Conference was the protracted and diffi cult nego tiation of a Declaration on the Ma Media, which was eventually adopted by accl amation. Au strali a joined oth er We stern co un tri es m

164 Chapter VII

recognising that developing countries had an understandable grievance over devel­ oped countries' dominance of information and mass media systems, but resisted pressures to sanction greater government control of the news media. Australia has also supported UNESCO efforts to assist the development of national news agencies and regional news exchanges, as long as these efforts are designed to supplement coverage by existing agencies, diversify news sources and facilitate the exchange of news between developing countries themselves. Activities to improve communication systems already form a relatively large part of Australia's bilateral development as­ sistance programs, particularly within our region.

J: SOUTHERN AFRICA

192. Conflict and unrest generated by the existence of the white minority regime in Southern Rhodesia (Zimbabwe), by South Africa's administration ofNamibia1 and by the South African apartheid system raise several important issues in Australia's foreign policy:

(a) We have to decide the appropriate degree of Australian involvement in United Nations or Western efforts to resolve these conflicts. (b) We have to consider our response to a possible marked increase in white emi­ gration from the sub-region, which might in the extreme case reach exodus

proportions. (c) Continuing conflict presents opportunities for further expansion of Soviet bloc influence in the sub-region, with possibly significant damage to Western strategic and economic interests. (d) The southern African situation has serious implications for broader inter­

national relations because the West, through its past reluctance to apply effective pressure against either white minority regime, now finds itself on the defensive in relation to both the Third World and the Soviet Union.

193. Developments in southern Africa and our official response towards them are issues of considerable public interest and controversy within Australia. Many Aus­ tralians feel ties of kith and kin with the white populations of southern Africa and sympathise with their predicament. Many other Australians are equally vocal in ex­ pressing strong concern about racial and human rights issues, and the denial and suppression oflegitimate black aspirations.

194. It is extremely difficult to assess the likely course of events in southern Africa in the next decade. Key questions are obviously whether peaceful settlements can be achieved in Southern Rhodesia and Namibia and whether there will be any progress towards replacing apartheid in South Africa by a more equitable and less racialist sys­ tem. The following are indications of possible developments:

(a) The situation in Southern Rhodesia continues to deteriorate and continuing and possibly bloodier conflict seems the most likely scenario. As guerilla ac­ tivity increases and whites continue to leave in large numbers each month, the collapse of the Smith-inspired governmental framework has become an

I Formerly South West Africa.

165

increasingly serious possibility. If elections planned for April take place, the maintenance of sanctions against Southern Rhodesia may become increasingly controversial in Western countries, particularly the United States and Britain.

(b) There are prospects that Namibia will move towards independence through elections supervised by the United Nations later this year, though the possi­ bility of negotiations breaking down irretrievably cannot be discounted. A victory for the South Africa-backed groups would probably result in con­

tinued de facto control by South Africa, increasing contention in the United Nations, and an increasingly radicalised South West Africa People's Organ­ isation (SWAPO) which might turn to an even greater extent to the Soviet bloc for assistance. A SW APO victory would probably result in a militant

nationalist government of' African socialist' complexion, which would not necessarily preclude some degree of contact with Western countries.

(c) In South Africa, the Both a Government seems as unwilling as its predecessor to accommodate, in any meaningful way, the political aspirations of its black population. In the absence of meaningful concessions, we can expect continu­ ing and growing confrontation inside South Africa and, with time, a likely in­

crease in guerilla activity against South Africa from bases in neighbouring countries such as Mozambique, Botswana and perhaps later Namibia. Press­ ure for wider and more effective United Nations Security Council sanctions against South Africa is likely to increase.

195. Along a spectrum, the available options for Australia seem to be:

(a) supporting the policies of the white minority regimes in Southern Rhodesia and South Africa;

(b) maintaining diplomatic and commercial relations with South Africa and commercial relations with Southern Rhodesia, but keeping silent on their domestic policies;

(c) maintaining diplomatic and commercial relations with South Africa, with measured support for black aspirations in Southern Rhodesia, Namibia, and, to a lesser extent, South Africa; and with support for Western efforts to pro­ mote the resolution of conflict through peaceful means but without Australia

seeking to play a leading role;

(d) as in (c) but with Australia willing to play a leading role in attempts to re­ solve the conflict; and

(e) unequivocal support, including possibly material assistance, for black nationalist movements in all three areas.

196. · Given the current alignment of forces against the white minority regimes and the state of international opinion, adoption of option (a) or ( b) above would run the risk of Australia's becoming as isolated internationally as South Africa with no separ­ ate gain and probably much consequent loss for our national interests. Option (c)

matches existing policy. It is consistent with our commitment to hum an ri ghts, accord with the policies of the major Western powers and avoi ds a situation where the Soviet bloc is the only external source of sy mpathy for the black natio nali t force . Option (d) and (e) would involve Australia making itse lf unnecessaril y co n picuou and

committing more resources than warranted in a situ ation where important national interests are not directly involved.

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197. In 1977-78, Australia accepted 381 Southern Rhodesians and 2,924 South Africans as permanent settlers and we can expect that, in future, increasing numbers of whites from both countries will want to migrate to Australia} We should be pre­ pared to accept many of those suited for permanent settlement in Australia, but we will need to bear in mind certain potentially complicating factors. For example, our Third World neighbours might be resentful if Australia were more forthcoming in accepting white refugees from southern Africa than it had been in accepting Indo­ Chinese refugees from its own region. As for Black African countries, they are deeply suspicious of any signs of sympathy in Western countries for the white populations of southern Africa. Even so, at least in the case of Southern Rhodesia, they would prob­ ably consider the rapid evacuation of the white population to white Commonwealth countries such as Australia as the most convenient outcome of all.

198. These considerations indicate that if Australia is faced with the need to respond to a rapid outflow of whites from Southern Rhodesia, and perhaps later from South Africa, it is highly desirable that we do so as part of some widely-based international resettlement arrangement. It will also be important for Australia to have in advance a clear idea of what overall numbers will be appropriate for it to receive. In dealing with both refugees and ordinary prospective migrant settlers from southern Africa, or anywhere else, our overall approach should be to continue to avoid discrimination on the basis of race or nationality.

K: ANTARCTICA

199. Australian policy towards Antarctica is based on the premise that the region is an important one in which we have a history of involvement. As a consequence Australia has sought to maintain an adequate level of activity there and, as one of the twelve original signatories of the Antarctic Treaty of 1959, to have its position respected and its voice heard in international forums concerned with Antarctic affairs. Our policy interests are:

(a) to maintain Antarctica as an area free from strategic and/or political confrontation; (b) to provide adequate protection for the Antarctic enviroment, having regard both to its unique qualities and its possible effect on our own region; (c) to take advantage of the unique opportunities the region offers for scientific

research;

(d) to be informed and consulted about development in a region geographically proximate to Australia; and (e) to derive, if possible, economic benefit from the living and non-living resources of the Australian Antarctic Territory. Australia has sought to protect these interests through policies directed towards:

(a) the maintenance of sovereignty over the Australian Antarctic Territory (AAT); (b) the preservation of the Antarctic Treaty and the use of its consultative framework; and

The South African figure is likely to include some former residents of Southern Rhodesia.

167

(c) the maintenance of an Australian presence and the carrying out of a program of scientific research and exploration activity in the AA T.

International Interest in Antarctic Resources 200. The Antarctic Treaty contains no provisions specifically governing the exploitation of the resources of Antarctica. A significant recent development has been a growing international perception that the resources of Antarctica may be both

accessible and rich, and a corresponding growth of interest in the possibility of their exploitation. Interest in Antarctic resources has been shown by United Nations bodies, particularly the Food and Agriculture Organisation (FAO).

20 1. The concern of some Third World countries that the Antarctic Treaty Parties may act soon to exploit the resources for their own benefit could precipitate proposals to internationalise Antarctica. The recognition of the ' common heritage ' concept in relation to the deep sea-bed in the Law of the Sea Conference is likely to stimulate moves for application of a similar concept to Antarctica. There has already been evidence of such moves in both United Nations bodies and in the Non-Aligned Movement. These developments raise the basic questions of the longer term tenability of Australian sovereignty over the AA T; of the extent to which the maintenance of sovereignty over the AA T might jeopardise the continuance of the Antarctic Treaty, including its demilitarisation, peaceful uses and non-nuclearisation provisions; and of

what arrangements in the Antarctic would best serve Australia's wider foreign policy interests, including our concern about our relations with the other Treaty Parties and the Third World.

202. Third World interest in the living resources of the Southern Ocean has been mentioned at recent meetings of the FAO Committee on Fisheries ( COFI ). Moves have been made in COFI, supported by Third World countries, to give COFI an active role in the management of the living resources of the Southern Ocean. These have been opposed by the Antarctic Treaty Consultative Parties on the grounds that, while FAO and COFI have an undeniably legitimate interest in the living marine resources of the Southern Ocean, their proper role is one of information-gathering

and evaluation. Moreover, the Antarctic Treaty Consultative Parties have a demonstrable role in the management of Antarctica and are currently engaged in the preparation of a regime for the conservation (and therefore the re sponsible management) of Antarctica's marine living re sources . In response to this, COFI has

been prepared to modify its ambitions with regard to management. However, there is continuing pressure among the Third World countries in COFI and any failu re or undue delay on the part of the Antarctic Treaty Consultati ve Parties to co ncl ud e a responsible regime for the living resources of the Southern Ocean will undoubtedly result in further moves to have COFI more involved in the management of the livi ng

marine resources of the Southern Ocean. To date, the Antarctic Treaty partners have also been successful in heading off other Third World initiati ves , in cl ud ing those by Sri Lanka aimed at persuading the United Nations General Asse mbly to adopt a resolution for the internationalisation of Antarctica and that co untry ' efforts in October 1976 to have included in the Declaration of th e Non- Aligned Co nfere nce

words to the effect that Antarctica was the common heritage of mankind. But it wo uld seem likely that unless the Antarctic Treaty Consultati ve Parties ca n demon trate a capacity to develop satisfactory resource regimes the dangers of Third Wo rl d pres ure building up will increase.

168 Chapter VII

203. Australian policy must take account of the foregoing developments. However, other factors, which are difficult to assess, must also be taken into account. These in­ clude the outcome of the Law of the Sea Conference, the attitudes of the other Ant­ arctic Treaty partners, the economic/technological feasibility of exploiting Antarctic resources, and whether international pressures will strengthen among Third World countries in such a way as to require any change in our policy. Nevertheless, three possible policy approaches can be identified. They are:

(a) Strict Adherence to Sovereignty 204. Australia has so far adopted the position in discussions among Treaty partners that nothing should be done in relation to the resources question which is not basically compatible with our sovereignty. This has been possible in the past because there has

been little substantial discussion of resources in the Treaty context; such a position be­ comes harder to sustain as interest in resources grows.

205. The obvious advantage of a policy of strict adherence to sovereignty is that, if it were sustainable in political and enforcement terms, it would allow Australia to deter­ mine all aspects of the development of the AA T and its off-shore areas. We would be able to regulate exploitation, in the same way that we now regulate the mining indus­ try in Australia. Such a policy would also meet our environmental interests by en­ abling us to impose our own standards and controls. However, in view of the very lim­ ited international recognition of our claim, there must be doubt as to whether it would

be sustainable as it becomes feasible to exploit the resources in the region. At the least we would need to allow access on generous terms. If the sovereignty issue became contentious, we would have to consider whether the price, in terms of our inter­ national standing and broader political and economic interests and relations, would make a policy of strict adherence to sovereignty worthwhile. Such a policy would be seen by many developing countries as running counter to their ambitions; it could also run counter to the interests of the United States, the Soviet Union, Japan and other non-claimant Treaty Parties.

(b) Internationalisation 206. Another approach would be to accept the internationalisation of Antarctica if it is proposed, or, indeed, to promote it. The premises of this approach would be that Australia cannot hope successfully to assert exclusive control of the resources of the AAT and its off-shore area, that increasing Third World pressure is inevitable, that the Treaty itself, based as it is on a privileged position for twelve (now thirteen 1) countries, will not provide a long-term solution, and that a new and comprehensive international regime for Antarctica can be established. Australia might therefore anticipate this situation through a bold and generous initiative to propose the inter­ nationalisation of Antarctica and the preservation of Antarctic resources for all man­ kind. Australia's acceptance or sponsorship of internationalisation, and our geo­ graphical position, might enable us to retain a measure of political influence and a share of economic benefits (including possible use of Australian bases or entre po t fa­ cilities) under any eventual international regime for Antarctic resource exploita tion. But this is essentially conjectural and any international' appreciation ' might be short­ lived. However, to the extent that internationalisation could prevent Antarcti ca fr om

becoming a scene of international discord , our defence interests would be served. It

The thirteen Antarctic Treaty Consultative Parties are Argentina, Austra li a, Chile, Fra nce, Japa n, ew Zealand , N o rway, Po land , South Africa, the USSR, the United Kingdo m and th e United Sta te s.

169

might also be conjectured that such a policy would enhance Australi a's international standing, particularly among the Third World, with consequent advantages in other areas of foreign policy interest.

207. Such an initiative, if successful, would, however, mean the end of Australian sovereignty over the AA T, and domestic political repercussions could be expected. It would be highly desirable-some might say a prerequisite-for there to be full consul­ tation with out our Antarctic Treaty partners with the object of obtaining their agree­

ment. We should, however, have no illusions that the other Treaty Powers would be likely to support such an approach; and we would incur the displeasure, and indeed the anger, of at least some of them, for advancing it. It would also mean giving up to the international community most of any economic benefits and the exclusive environmental controls which sovereignty, in theory, gives us. Whether the 'spin-off' Australia might derive from participating in an international regime for Antarctica would compensate, and whether international environmental controls would meet our requirements, could not be forecast at this stage.

(c) To Build on the Antarctic Treaty

208. Another course-and the course in fact followed in current policy-is to seek to work within the Antarctic Treaty framework to develop new regimes to handle re­ source questions, together with the related questions of conservation and protection of the environment. In pursuing this course our basic objective is to derive as many as possible of the benefits of sovereignty rights over resources, including the living mar­ ine resources within Australia's future 200 mile off-shore zone, without sacrifi cing our other policy objectives. In the context of the Treaty it is necessary to nego tiate on the

basis of sovereignty; but, in the recognition that the full exercise of sovereignty is un­ likely to be sustainable, we have accepted that some flexibility is necess ary in order to encourage others to participate with Australia in promoting mutually bene ficial regimes for the exploitation of living resources and, at a later d ate, non-livi ng resources.

209. The draft regime for Antarctic marine living re sources, which is currently being negotiated by the Antarctic Treaty Consultative Parties, aims at the long-term co n­ servation of these resources, thus ensuring their preservation as a future wo rld foo d source. The establishment of such a regime by the Antarctic Treaty Consultati ve Par­ ties can be presented as a responsible action taken in the broader interests of the inter­ national community.

210 . The Committee has felt obliged to address itself to Australia's interest and policies in relation to Antarctica because they clearly have Third World dimensions which could become more important with time. However, it does not feel ca ll ed upon to make any recommendation in terms of the options canvassed.

L: AUSTRALIA AND THE COMMON WEALTH

211. The Commonwealth now has 39 members representing about 1000 million people. All but four of these are Third World co untrie , and the diver ity of the Third World as a whole is well reflected in the membership: so me are large and den el populated and· others are mini-states; eight of them are among the least developed co untries in the world, while a few are achieving very rapid grow th; th e radical and

the co nservative ends of the spectrum of Third World politica l attitu de are

170 Chapter VII

represented; and they are drawn from most Third World regions-Africa, South Asia, South East Asia, the Pacific and the Caribbean.

212. Under the present Secretary-General, Mr Ramphal, the Commonwealth Sec­ retariat has developed a pronounced tendency to concentrate on Third World issues and to campaign actively for the achievement of Third World objectives. This has meant that the Secretariat has to some extent developed a political personality of its own and that it tends to internationalise the work of the Commonwealth in such a way as to duplicate rather than complement the work of other inter-governmental or­ ganisations, particularly the United Nations.

213. In terms of Australia's relations with the Third World, the Commonwealth offers us several advantages. It gives us direct and sometimes intimate links with im­ portant countries beyond our region, links which would otherwise be difficult to establish. In particular, it provides the Australian Prime Minister with the only regular forum in which he meets Third World leaders as a matter of course. Moreover, it is a forum in which Australia is able to play a major role. We are rated among the top four or five countries at Commonwealth meetings and our influence and scope for taking initiatives are considerable.

214. Compared with United Nations deliberations, the Commonwealth's limited membership, the fact that most important meetings are held in private, and the com­ parative absence of bloc and caucusing activity make for more flexible and relaxed exchanges, less rhetoric and posturing and an atmosphere more conducive to the sub­ stantive discussion of issues. As a mixed forum of developing and developed countries the Commonwealth tends to cut across, rather than reinforce, established First World-Third World divisions. The informal character of the Commonwealth pro­ vides more opportunity for organisational innovation and improvisation than do more structured and 'constitutionalised' bodies-as Australia's initiative in proposing and organising the Heads of Government Regional Meeting in Sydney in February

1978 illustrated.

215. As against these advantages, it is important to bear in mind the limitations of the Commonwealth as a vehicle for our policies towards the Third World. With the possible exception of New Zealand and Australia itself, it is not the most important forum available to any of its members and their commitment to it is subordinate to their commitment to other organisations. Trying to make it bear more weight than it can sustain could destroy what usefulness it has. In this respect we need not only to limit our own expectations in relation to it but, when necessary, to discourage others from pressing policies based on an inflated view of its potential.

216. In terms of our general concern to present ourselves convincingly as an independent international actor, we also need to bear in mind the 'British' associ­ ations which the Commonwealth still, inevitably, carries. These associations, and the fact that the Commonwealth is a 'club' to which some Third World countries belong while others (including important ones in our region) do not, set limitations orr its pos­ sibilities as the main instrumentality for our Third World policies. Given our history of close association with Western powers and our extra-regional ties, an attempt to

make it such would be likely to arouse some suspicion and hostility.

217. Again, the weight of the African membership of the Commonwealth ( 12 out of 39) and the consequent tendency to focus largely on African issues needs to be kept well in mind. These issues are too serious and volatile for our attitude towards them to be determined principally by Commonwealth considerations. While Commonwealth

171

meetings can be useful occasions for discussing them and informing ourselves of the views of involved parties, we need to make independent and considered judgments concerning them.

218. At various times in the past Australia has both over-estimated the political im­ portance of the Commonwealth and tended to play down its usefulness. Currently, we are again taking a more positive approach, though one shorn of earlier sentimentality and focusing much more on the Third World than on the British aspect of it.

219. Subject to the caveats entered above, this is a sound approach. Australia should act in recognition of the value of the Commonwealth-in terms of contacts with and understanding of its Third World members; the opportunity to test our views on a range of issues in comparatively unpolemical circumstances; and the using of our influence to promote cooperation in a practical way-without allowing it to unbalance or prejudice our general posture (particularly towards our own region), or to draw us into commitments which we would not otherwise undertake.

220. We should resist any tendency (either by individual members or the Sec­ retariat) towards attempting to formulate uniform Commonwealth policy positions on major issues; attempt (without being offensive) to remove any impression that the Commonwealth is dominated and controlled by Britain, since such an impression limits its usefulness; and use our influence-as we did effectively in initiating the Com­

monwealth Heads of Government Regional Meeting-to ensure that the interests and views of non-African members (particularly the small countries of the Pacific) receive adequate attention.

M: PRIVATE INTERNATIONAL CAPITAL FLOWS

221. The growth of private capital flows to Third World countries in recent years has been accompanied by continuing controversy, which has centred on two main areas. First, questions are raised about the role of transnational corporations and foreign investment in the economic and political life of host countries, and about whether this role should be made subject to internationally agreed regulations. Sec­ ondly, the large increase in debt of many Third World countries has led some to query

whether this debt is a factor inhibiting economic development.

222. Because these are prominent issues in international discussion of development Australia is required to adopt a position on them. Of somewhat greater importance, the policies we ourselves pursue on transfers of investment funds to developing coun­ tries have international as well as domestic ramifications.

(a) Transna tiona I Corporations 223. Transnational corporations have played a major role in Australia's develop­ ment: about one third of manufacturing industry and more than half of the mining in­ dustry are under foreign control, with foreign involvement significant in many service industries. Outside the agricultural sphere, Australia's dependence on overseas tech­

nology is considerable. From our own experience, in view of the fa ct that Australia­ like many Third World countries and unlike some OECD screen­

ing procedures in respect of incoming foreign investments, we can appreciate that

172 Chapter VII

private international investment provides mutual benefits and that the benefits to in­ vestor and to host country can be appropriately balanced through the pursuit of cer­ tain policies towards foreign investment. Australia thus has some understanding of the advantages and disadvantages of transnational investment and of the policy issues involved in its regulation from a national point of view. It is, of course, ultima­ tely within the capacity of each country to decide in its own circumstances where the

balance of advantage lies.

224. At the same time, we need not be unsympathetic to the efforts being made, pri­ marily at the instance of Third World countries, to bring into being 'universal' codes regulating the conduct of transnational corporations and the conditions of technology transfer. Mandatory or discriminatory codes could unduly inhibit the important con­ tribution which private international capital can make to the development process, but there is merit in norms being devised to help reduce mutual distrust or suspicion about the activities of transnationals. They could play a useful role in supplementing the necessary domestic policies of host countries.

(b) International Debt 225. As a minor owner of public and private overseas debt, Australia clearly has little direct economic interest in this question and as far as is possible we should main­ tain a low profile in internationl discussion.

226. -Our broader interest, that of promoting economic growth within a stable inter­ national system of capital transfers, would seem to be:

. to encourage developing countries which are able to make productive use of borrowed funds to continue to increase their debt; and

to encourage developed countries to exercise a general supervisory role over lending to developing countries by their financial institutions, with a view to avoiding excessive commitments to particular countries.

227. It is, accordingly, important that developing countries retain and if possible im­ prove their credit worthiness. Proposals for generalised debt relief would appear to be counterproductive in this context. They raise doubts in the minds of potential inter­ national lenders about the performance of the borrowers and would thus reduce the availability of loans for development purposes. On the other hand, debt relief schemes for particular countries may become necessary from time to time if economic difficulties clearly prevent them from continuing to meet servicing costs. There may also be scope to soften the terms of official debt, especially for the poorer Third World countries, without damaging credit worthiness.

(c) Capital Flows Involving Australia 228. Australia's own policies towards international private capital flows must necessarily reflect the circumstances of Australia's own need to be a net importer of private capital now and in the foreseeable future.

229. Present policies permit the export of Australian capital when it is for direct in­ vestment purposes, and the government-owned Export Finance and Insurance Cor­ poration offers to Australian investors overseas investment insurance against non­ commerical forms of risk.

230. One option would be to continue the present liberal policy towards direct in­ vestment. Even granted the likely small amounts involved, Australian investments can assist the development of Third World countries as well as adding to our own

173

national income. They can also be to Australia's economic advantage because, given the limited market in Australia, investment in overseas countries opens up opportuni­ ties for expansion and can assist the growth of Australia 's exports. They need not affect adversely the level of employment, which is dependent on domestic economic conditions.

231. Scope may exist to develop this liberal option by encouraging Australian businesses to make overseas investments which would help Australian industry adapt to and draw advantage from the changing international trading enviroment. 1 While a need is not seen for encouragement additional to that already provided through the taxation system and overseas investment insurance, taxation and monetary policies should be generally consistent with the objectives of such a positive overseas invest­

ment policy. While Australian residents are almost invariably relieved of double tax­ ation by the provisions of the Australian tax laws, greater priority could be given than in the past to the negotiation of double taxation agreements with developing coun­ tries, especially those in the Asia-Pacific region which seek such agreement. (It would

be necessary to ensure that the Australian taxation authorities possessed adequate staffing and other resources to permit this.) Consideration of such devices as bilateral investment guarantee arrangements might form part of such an approach, particu­ larly as regards the encouragement of Australian investment in less developed coun­

tries in our region.

232. Another option would be to re-examine the current restrictions on the export of Australian capital for purposes other than direct investment.

233. It is understood that these restrictions are designed to ensure that the limited supply of Australian capital is available to meet Australia's own developmental needs, including the capital requirements of Australian governments and their authorities, and to assist the Government in managing the economy, particularly the exchange rate. The restrictions will presumably be review_ ed by the of !n­

quiry into the Australian Financial System. In the meantime ,_ however, while n_ otmg the limited capacity of the Australian capital market to provide loan funds at mter­ nationally competitive interest rates, consideration might be to limited access to the Australian capital market for governments ofneighbounng Th1rd World countries seeking to raise loans for developmental purposes. Care would need to be

taken to ensure that access was limited in a way that did not disrupt political relation­ ships with countries excluded.

I See Part B: Trade in this Chapter.

174 Chapter VIII

CHAPTER VIII

Conclusions and Recommendations

PART A: GENERAL CONCLUSIONS ABOUT THE THIRD WORLD

The Third World exists in several senses: as the non-aligned; as a political pressure group pursuing both general and particular goals; as an economic pressure group; and, in the passive, descriptive sense, as a state of affairs. All these facets have to be kept in mind and related to each other. The political, economic and strategic issues which the Third World raises interact in important ways. Focusing on any of them in isolation will distort unde standing of its significance.

2. The countries of the Third World are, and always have been, very diverse in pol­ itical, economic and cultural terms. In economic terms, while the overall rate of growth of developing countries has been unprecedentedly high over the past 25-30 years, rates of growth have varied widely, ranging from the few which have made ex­ tremely rapid economic progress to the few which have stagnated. There are wide differences among Third World countries in levels of income and poverty. They range from a large group of countries, containing about half the total population of the Third World, which have very low average incomes to a small group with per capita incomes comparable with or above those of some developed countries. The political and strategic implications of the rapid economic progress which some have enjoyed are uncertain but are likely to be complex; it should not be assumed that greater stab­ ility will result from it. While this diversity does create considerable differences in the economic interests of Third World countries, and while these differences need to be taken into account in forumulating Western policy on Third World issues, diversity by no means disposes of the notion of a Third World or of the strong solidarity of its members in dealing with the West. Moreover, given the likelihood that a consider­ able, if somewhat reduced, proportion of the population of the Third World is likely to be still living in grinding poverty 20 years or so hence, it seems likely that Third World issues will remain on the international agenda.

3. Its diversity means that the Third World has difficulty in formulating policies which are acceptable to over 100 countries and in maintaining the unity and enthusi­ asm of its ranks. It is able to do so most effectively in some international forums , when numbers and solidarity can be used to greatest effect, and when it is able to use its ideology to link issues (e.g. anti-colonialism and development, Zionism and racial­ ism) in order to build the widest possible consensus.

4. The dynamics of the Third World as a movement, campaigner and pressure group derive from (a) a shared sense of injustice and unfairness concerning the econ­ omic condition of its members; and (b) a concern to acquire political respect and re c­ ognition. Both make it concerned to increase its power and influence, and this concern

175

is reinforced by a tendency to project its domestic frustrations on to the international scene. Individual weakness causes its members to pursue these goals collectively as well as individually, though their unity is more impressive at the level of general claims than in detailed negotiations.

5. The Third World's record as a campaigner is uneven. It has had marked success in some respects (colonialism, racialism, maintaining its non-alignment, and on some trade and economic issues) and very little in others (NIEO). The specific campaign for the New International Economic Order (NIEO) appears to be losing its drive. However, insofar as the essence of the NIEO is a demand for a transfer of resources, it will never disappear from the international scene.

6. The prospect of the Third World acting in unity in a military sense is negligible. But many of its members have a significant regional military presence and have demonstrated a capacity for initiating conflicts which have led to the intervention of outside powers.

7. The extent to which the Third World achieves its goals-both economic and political-will depend primarily on its own efforts. Economically, the main impedi­ ments to growth exist in Third World countries themselves and their removal will de­ pend on the adoption of sound policies. To recognise this is not to deny that there are

some changes which could be made in the policies of developed countries and in exist­ ing international arrangements which would help Third World countries. Politically, power, influence and respect are not things which will be conferred on them but which they, like all other states, will have to gain for themselves.

8. A significant and growing degree of economic interdependence exists between the Third World and the West. Both sides benefit from this and its disruption would be costly for both. On the other hand, the more interdependence there is, the more potential there is for disruptive behaviour should either party decide on it. In this re­ spect it is important to note that, by and large, the interdependence is asymmetrical in

character and that the economic and political power of the West is greater than that of the Third World. In some circumstances, however, this imbalance could be offset by a greater willingness to bear damage on the part of some Third World countries.

9. Membership of the Third World movement constitutes only a part of the foreign policy of its members. They also have their individual interests and problems, as well as regional ties and commitments which are reflected in a structure of regional organ­ isations. Their commitment to the movement varies with time and circumstances. So does the degree of their moderation or radicalism within it. The relationship between

their distinctive, individual policies, their regional policies and their Third World policies is important. When either of the first two are linked with the third, bilateral relations with them assume an additional dimension of considerable significance.

10. In terms of Western policy responses to the Third World, the distinction be­ tween the radical and moderate forces within it is important. While the former are concerned to change the existing international system in basic ways , the aim of the lat­ ter is to achieve improved conditions and opportunities within that system. Policies which simply resist all change are likely to strengthen the radicals; those which are re­

sponsive to limited and practicable proposals, while firmly resisting extreme claims, are likely to strengthen the moderates.

176 Chapter VIII

11. As well as existing as a movement which engages in deliberate behaviour, the Third World exists as a state of affairs and a predicament-or rather a series of pre­ dicaments. The affairs of its individual members and relations between those members are characterised by great instability and disruption. Most of the wars fought since 1945 have been fought in the Third World and by Third World members. Through what happens in and among Third World countries they have a capacity to exert an impact on international affairs in unintended but major ways, quite independent of their concerted campaigns. The effects of population increases, rapid social and cultural changes and rising expectations suggest that the Third World will continue to have this capacity.

12 . Most of the Third World's claims-political and economic-are claims on the West. Those claims are often based on appeals to Western values and they receive some support within Western societies. Western responses have varied but have been firmest when Western governments have been surest of their moral ground. When they have not (as on the issues of colonialism and racialism), morale and resolution have tended to wilt in the face of sustained Third World pressure and they have yielded ground over a period of time.

13. Up to the present, most Third World countries have set themselves modernising and developmental goals which reflect Western influence. To some extent these have always conflicted with indigenous values. Recent evidence of an 'Islamic revival' raises the prospect that, as the period of direct Western dominance recedes and the tensions attendant on the attempt to achieve rapid modernisation are experienced, there may be an emerging trend to reject-or at least to be more discriminating in accepting-elements of the Western 'package' and to reassert traditional values and practices.

14. Third World questions intrude on the East-West conflict very significantly. While most of the Third World wishes to remain non-aligned, many of its members are prepared on occasion to make use of Western or communist powers to further their causes. On their part, communist and Western powers compete for influence on the Third World, which has been and is likely to continue to be a major arena for the working out of superpower rivalry. In this competition the economic advantage in terms of aid, trade, investment and the transfer of technology lies overwhelmingly with the West. Militarily, it is much more evenly balanced and currently the Soviet Union has fewer inhibitions about intervening in Third World affairs than does the United States. Politi ally, the advantage has varied both in time and place, but the fact that the Soviet Union shares with much of the Third World the aim of changing the status quo which the West is concerned to maintain gives it a basically strong pos ­ ition (though the changes which the Soviet Union seeks are ultimately incompatible with those which most of the Third World would welcome). Both deliberately and unintentionally the Third World has a capacity to influence the balance between East and West.

15. As a presence in international affairs , the Third World is likely to have staying power through the rest of this century. While some of its members are likely to achieve rapid growth and while regional groupings, drawing together some devel­ oped and developing countries, may assume importance and cut across First- Third World divisions, a number of factors seem to indicate that the distinguishing social, economic and political features of the Third World - and the attitudes which ac­ company them-will remain substantially in being. These factors include the low

177

economic base from which Third World growth will proceed, the continuing momen­ tum of population growth, the difference between their levels of wealth and those of First World countries which even optimistic projections anticipate, and the likelihood that key Third World issues such as South Africa and the Arab-Israeli dispute will re­ tain their salience.

16. The intensity of differences between the developing and developed world over the coming years will depend on a variety of factors and the way they interact. On the economic side, the success or otherwise of Western industrialised countries in main­ taining sustained, non-inflationary growth at a reasonable rate; the preparedness or otherwise of those countries to adjust their own economies so as to allow developing countries to continue the development of their own industries and overseas trade; and whether or not developing countries themselves pursue domestic policies conducive to rapid economic development will be important. In the political sphere, the kind

and quality ofleadership which will emerge on each side may be crucial.

PART B: RECOMMENDATIONS

AUSTRALIA'S GENERAL POSTURE

1. Australia's general approach to the Third World should reflect awareness that while we are a Western country, we are Western with a difference; that we are geo­ graphically isolated from the Western centres of power in Europe and North America; that in our region, as commonly if generously defined, there are over 20

countries which belong to the Third World and very few which do not; and that be­ cause of this the internal state of the Third World and the state of its relationship with the First and Second Worlds are of at least as great co ncern to us as they are to any other Western country.

2. Australia should not perceive the Third W orld simply as a problem or so mething towards which our normal state should be one of anxiety. It also offers us opportunities-to associate with its growth, to derive benefits from expanding trade, to exercise political initiatives, to demonstrate our te chnological skills and special ex­

perience, to exercise our idealism and to enrich our culture. We should also bear in mind that, unlike many Western countries, we h ave few maj or inves tme nts in Third World countries to protect, and can afford to be relatively relaxed a bout many of the is sues which agitate other Western countries in this regard.

3. Our posture on Third World iss ues should be a moderate and con tructive one. We should seek to facilitate compromise and cooperation and to ensure that Third World views receive fair and re asoned consideration in the co uncils of the developed countries.

4. Faced with impractical Third W orld proposals, or ones which we believe would seriously threaten Australi an interests, we shoul d not only point ou t their deficiencie and register our opposition but should actively seek al.ternate .wa of at.i .r 0g needs which underlie them. We should be resourceful mnovauve and po mve m thi

respect.

178 Chapter Vlll

5. Our relations with Third World countries are likely to be most productive when those countries achieve a balance of economic growth, social development and politi­ cal stability. Concentration on any one of these at the expense of the others is likely to be self-defeating. Insofar as it is within our means, Australia should seek to facilitate such a balance and to avoid courses of action which hinder it.

6. The Third World is too diverse for Australia to have a single foreign policy towards it. We need a variety of general, regional, individual country and issue poli­ cies. These policies will have to take into consideration both the merits of the case in each instance and their connection with wider and continuing aspects of the Third World movement, where such connections exist. That is, in dealing with a movement which has a significant ideological content and which itself emphasises linkages, a case-by-case approach which attempts to deal with issues as if they were essentially discrete is in itself inadequate.

7. In dealing with the Third World we should strive to behave in a way consistent with the standards and values we profess. This means that we should not be simply re­ active or allow Third World opinion to become the main determinant of our policy; it also means that we should avoid hypocrisy and the taking up of positions we cannot ultimately justify. Self-respect, as well as the 'moral' dimension of the Third World and its demonstrated capacity to exploit discrepancies between proclaimed values and practice in others, make this important. It is we who should observe our proclaimed standards; in applying them to others, different circumstances should be taken into account.

8. Bearing in mind the potential importance in the Third World context of the ques­ tion of the treatment and conditions of Aboriginals, Australia should (a) be frank about the continuing problems which result from past policy, or its absence; (b) ensure that present policy is fairly presented and properly understood; and (c) work to remove any remaining deficiencies in that policy as quickly as is practicable.

9. In formulating our policies towards the Third World, and particularly towards the region, we need to give full recognition to the growing interaction between foreign and domestic policies and the need to coordinate them which flows from this. It has to be faced that if some of our foreign goals, particularly but not exclusively economic ones, are to be attainable they will require significant adjustments at home. To the extent that we find this unacceptable, we should recognise that those goals will be­ come increasingly unattainable. To the extent that we find such adjustments accept­ able, we should commit ourselves to preparing the ground for change and to actively building up support for it in advance.

10. We should support the principle of open and non-discriminatory trade at th e global level and take steps to demonstrate our commitment in both declaratory policy and actual practice.

11. We should make a conscious effort to strengthen our relationships with some key Third World countries outside our immediate region- for example, India, Mexico and Brazil. We should do this because such countries are important in their own right and also because good relations with them could provide useful insurance in a variety of circumstances.

12. We should be concerned to avoid the linking of Third and Second World interests and policies-based on their shared opposition to the status quo-generally, but especially in our region. We should avoid, where possible, presentmg Third

179

World countries with no option but to turn to the Soviet Union for support; where that is not possible, we should support efforts to establish that becoming the Soviet Union's client does not pay.

13. Three Nots:

(i) While making no bones about the fact that we are a Western country, we should not proceed on the assumption that we have no option but to follow the prevailing Western line towards the Third World on all occasions. That line sometimes reflects circumstances and interests different from ours. We

must be as ready to disaggregate 'the West' as we are to disaggregate the Third World. Sometimes what is called Western policy reflects no more than the particular interests of one or two Western countries, from which Aus­ tralian interests may differ markedly. (ii) Australia should not present itself as a Third World country, an 'honorary'

Third World country, or one with a 'special relationship' with the Third World. This would be to put ourselves in a false and untenable position. Ultimately, it would not be acceptable either to the Third World or to Australians. (iii) We should not attempt to assume the general role of a 'bridge' between the

Third World and the West. To do so would be to overlook the fact that we have interests of our own to look after and that we cannot simply be a me­ diator between the interests of others. It also ignores the fact that our relation­ ships with the Third World and the West are not symmetrical: we want good

relations with the former, but we are part of the latter. This does not mean that we cannot on occasion play a useful and constructive interpretative and mediating role on particular issues, but merely that we should not enshrine it as an end of policy.

STRATEGIC-GEOPOLITICAL

I. Australia should keep firmly in mind that our basic strategic interests in relation to the Third World in general, and our region in particular, are that instability and conflict in the Third World should not be allowed to endanger Australia's security. We should be concerned to prevent this happening either directly, as a result of the development of unmanageable disputes between us and one or more Third World countries, or indirectly, by the extension of the influence of non-Third World coun­

tries whose interests are inimical to those of Australia in areas of importance to us. Our policies should be framed with these aims clearly in mind .

2. We should continue to maintain in clear and unequivocal terms our opposition to aggression across international borders in our region. We should make it clear that this opposition applies regardless of the ideology of the co untry involved.

3. Australia should distinguish clearly between st rategic and political judgments with respect to the Third World. The ideological character of a co untry should not in itself be the basis of strategic judgment- particularly in the Third World , where ideo­ logical positions are often fluid and uncertain. Ideologic al positions o ft en do have geopolitical relevance, but its nature and extent ca nnot be assumed without close

examination of particular cases.

4. Australia should distinguish between general Western interests in the Third World and the particular interests of particular Western co untries. We should re cog­ nise that on occasion the latter may conflict with, or be irrelevant to, the for mer.

180 Chapter VIII

Australia should not, therefore, strive to defend every particular interest of Western countries as if it were equally our own.

5. While recognising that it is in Australia's interest that the West's influence and standing in the Third World should be strong, and that the industrial democracies need access to Third World oil, minerals, waterways, canals, ports and airspace, Australia should also distinguish between general Western interests and its own 1 interests in relation to the Third World. We should recognise that, given Australia's distinctive position, these may not coincide on all occasions, with the result that Australia will not always be able to accept the general Western position on an issue or

be able to depend on Western support for its own policies.

6. In supporting the defence of Western interests in the Third World, we should sup­ port and help frame policies which are as sensitive as those interests allow to the atti­ tudes of Third World countries on the issues about which they are most concerned. We should seek to have emphasised those areas of agreement and common interest which exist between the West and the Third World.

7. Recognising the importance which the Soviet Union currently attaches to the Third World as an area of activity and the extent to which its influence is apparent in Third World trouble-spot , Australia should support Western and Third World poli­ cies which would contribute towards preventing the Soviet Union from exploiting such situations in such a way as to secure significant strategic gains in the Third World. In terms of the long-term geopolitical drift, it is particularly important that Soviet support should not come to be seen as the condition for success in Third World disputes. All this applies with particular force in our region.

8. Australia should base its expectations concerning China's relations with the Third World on what is known about the Chinese leadership's current view of geopolitical factors and China's interests, rather than allegedly 'inherent' Chinese or communist characteristics. We should do so bearing in mind the record of discontinuity in China's foreign policy over the last thirty years and with an awareness of the changes which could accompany further leadership turnover. We should support the develop­ ment of more stable and productive relations between China and non-communist re­ gional countries, and continue to make clear our views about Chinese support for in­ surgency movements.

9. From Australia's point of view, it is preferable if disputes among and inside Third World countries can be isolated from Sino-Soviet rivalry. Any temptation, on the part of others or ourselves, to exploit that rivalry in the context of regional affairs should be firmly resisted. To the extent that rivalry occurs, we should seek to work closely with those countries which seek to contain its effects.

10. Australia should assess Vietnam's actions and policies in the region both in terms of Vietnam's own interests and its relationship with the Soviet Union. In both respects we should be concerned to limit the extension of Vietnam's influence, though we should also be concerned that our policies do not diverge sharply from those of the ASEAN countries. We should not give up the hope that Vietnam will progressively in­ tegrate itself peacefully into the life of the region. If that does not happen, it should be, and should be clearly seen to be, as a result of Vietnam's own choice.

11. Given our location and the volatility of Third World politics, Australia mu st expect that there will be friction between us and some Third World countries from time to time. We should learn to live with this in a reasonably relaxed manner, while

181

ensuring that avoidable friction does not arise due to lack of coordination in our own policies or to misunderstanding.

12. When friction does occur, Australia should bear in mind the inclination of Third World countries to strengthen their position by linking the particular issue in dispute to questions of general Third World concern. We should work to minimise the chance of this happening by (a) concentrating on defining the difference as narrowly as poss­ ible and containing it within those limits; and (b) more generally, ensuring that on the issues of central concern to the Third World we are no more exposed to criticism than other important interests require us to be.

13. The general thrust of the conclusions and recommendations of this Report underline the need for a defence policy more clearly related to developments in the region. While our defence will still depend basically on the global power balance, we need to take more account of the instabilities in our own neighbourhood and of the possibility that we might on occasion be alone in meeting threats originating in, or

transmitted via, that neighbourhood. We should ensure that we have a defence force which can effectively deter any possible aggression against Australia originating from within the region. It is important, too, that our intelligence be entirely adequate to our security needs. In particular, we should give immediate attention to effective surveil­

lance of Australia's coastal waters and air space.

RELATIONS WITH THE REGION

1. In conducting relations with the five ASEAN countries, Australia should continue to emphasise our shared interests in the security, independence, political stability, prosperity, growth and development of their region.

2. Consistent with these goals, Australia should support the maintenance of har­ monious relations and unity among the ASEAN countries. In our bilateral dealings with these countries, we should adopt the general principle of not following policies which depend on the exploiting of differences which may exist among them.

3. Our policies towards the region need to pay closer regard to the implications of the rapid changes that are taking place there; to the relationship between our goals and the resources we are prepared to make available to achieve them; and to the con­ tinuing validity of the assumptions and attitudes relating to the region which we have accumulated over the years. On the basis of a broad and long-term interpretation of our own interests, Australia should exploit every opportunity for cooperation and co l­ laboration with the region. We should be outward-looking and participatory.

4. Australia should not, however, strive for a so -called 'special relationship ' with any of its ASEAN neighbours. The conditions to sustain such relationships do not exist and attempting to achieve them will raise expectations and impose strai ns which will be co unter-productive.

5. Australia should recognise that, given the increasing tendency of ASEAN co un­ tries to coordinate and link their own policies, their demonstrated wil lingness to give a contentious issue a Third World dimension, and the increasing overl ap between our own domestic and foreign policies, we cannot conduct our relation hip with them at­ isfactorily on a piecemeal or ad hoc basis. Care should be taken that particular poli­

cies are related to each other within a general framework to ensure that avo1d able frictions are minimised.

182 Chapter VIII

6. Australia should not be merely reactive and defensive in responding to the econ­ omic growth now taking place in Third World countries to its north. It should take im­ mediate steps to identify the opportunities offered to it by this growth and should ad­ dress itself to devising policies for seizing these opportunities in ways which will best serve Australia's long-term interests.

7. Australia should encourage major Western powers-particularly the United States and Japan-to play an active role in the political and economic development of the region.

8. Bearing in mind that at present our non-Governmental relations with a region of great importance to us are quite thin, and bearing in mind also the formidable differences between us and our neighbours, we should be very active in seeking to promote cultural and intellectual relations with the region.

9. We should continue to accept large numbers of Asian and South Pacific students, both privately and officially sponsored, for study at Australian institutions. The Government should ensure that unnecessarily restrictive selection procedures are not the cause of any decline in numbers.

10. Radio Australia's services, directed mainly at neighbouring Third World coun­ tries, should be continued and its transmission facilities should be improved. It is par­ ticularly important that Radio Australia 's services shou!d be as free as possible of all political bias and should be seen to reflect neither official Australian Government policies nor the views of atypical minority groups.

II. The Australian Government should seek to encourage greater public awareness in Australia of the challenges and opportunities confronting us in relations with re­ gional neighbours. In particular, there is an urgent task to be undertaken in making the Australian public more aware of the implications for us of sustained economic growth and prosperity in parts of South East and North East Asia, and, in particular, in ensuring that Australian business and industry have the best and most detailed in­ formation available on the economic life of the region and its prospects.

12. In the South West Pacific, Australian policies should take account of our stra­ tegic interests in the area and the continuing expectation by local governments that Australian economic and technical assistance will be forthcoming. Because of the in­ herent frailty of the island societies we should continue to encourage the development of regional solidarity through institutions such as the South Pacifi c Forum.

UNITED NATIONS AND MULTILATERAL DIPLOMACY

I. Australia should consider specific Third World dem ands advanced in the United Nations and other international forums bo th in the wider context of the Third World's general grievances with the prevailing international order and on their own merits in terms of justice and practicability. We should see k to be moderate, sympath­ etic and cooperative in reacting towards Third World proposa ls , and sho uld be pre­ pared to take initiatives in advancing so und propos al s th at offer mutual benefit to th e First and Third Worlds.

2. While defending our interests when th e occasion requires it , Australia should generally seek to avoid provocative or co nspicuo us attitudes towards the Third World. We should avoid beco ming the spokes man for ge neral Western interests.

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3. While recognising the special importance which the United Nations has for many Third World countries- in practical and symbolic terms-and responding to their actions in it accordingly, we should by our own actions strive to promote a realistic ap­ preciation of the inherent limitations of the Organisation.

4. Australia's flexibility in relation to the Third World in the United Nations should never extend to an endorsement of the flouting of important rules and procedures, expecially when that is directed towards restricting the rights of unpopular countries.

5. In deciding how 'pragmatic' our behaviour should be in the United Nations, we should bear in mind the long-term effect which a neglect of our moral and ideological position is likely to have on idealism and public support for the United Nations in Australia.

6. With the Third World, as with other ideological groupings, we shoul d avoid adopting as our own concepts and formulations which do not truly reflect our percep­ tions of the issues being discussed. Bearing in mind th at the uncritical acceptance of terms like 'liberation', 'exploitation', 'patriotic ', 'neo-colonialist', as these are fre ­ quently used by Third World spokesmen, can prejudice discussio n and undermine

positions unnecessarily; we should stick to our own language.

7. Australia should continue to support the principle that voting rights in inter­ national financial and development institutions should be related primarily to relative contributions. Consistent with this principle, we should stand ready to support de­ mands of certain Third World nations for better representation whenever thi s is jus­

tified by shifts in their relative economic strength.

8. More generally, Australia should not regard the composition of, and the distri­ bution of rights within, various United N ations bodies as fi xed and immuta ble, but from time to time should be prepared to support adjustments which would reflect changing international realities.

9. Our tactics for use in dealing with the Third World co untries in the United Nations and in other multilateral negotiations might refle ct the foll owing precepts: (a) Without trying to split a T hird World front (which is usually counter­ productive), welcome those Third World nations that choose to take an

independent, moderate line; encourage reasonable, cooperative attitudes. (b) Instead of confrontation, treat Third World suggestions in terms of practi­ cality, workability and mutual benefit. Indeed, it is better to anticipate Third World suggestions, rather than to react defensively to the m, by putting for­

ward sound proposals that promote mutual benefi t. (c) Get down to brass tacks as quickly as possible. Third World spokesmen li ke to stay at the level of grand generality, because that is whe re their solidarity is greatest. Once a question is transferred to th e practical pl ane , it emerges that

interests are diverse, that certain T hird World countries have no special interest in the matter and that so me T hird Wo rl d interests ac tu ally conflict. (d) While being active in the United Natio ns, si mu lt aneously seek bilateral co n­ tacts with policy-makers in Third World co untries, for these peopl e are

usually more re alistic and less concerned with international oratory. (e) Seek better, more efficient and less theatrical forums for dealin g with the Third World , whether these be within the United ations framework or out­ side it.

184 Chapter VI II

I 0. In order to register our interest in and positive attitude towards matters of Third World concern, Australia should seriously consider offering to house the headquarters of an international organisation. The administering organisation of the Common Fund or an international sea-bed authority are two bodies likely to be set up in the

next few years which could be considered in this light.

II. A move to the Asian Group in the United Nations would be consistent with the general thrust of the recommendations in the Report. But any such move would need to wait on and be part of a broader reshuffling of groupings, and we would need to recalculate the balance of advantage and disadvantage in the circumstances prevail­ ing, if and when such a reshuffling took place.

COMMONWEALTH OF NATIONS

l. We should continue to participate in and promote the Commonwealth as an aspect of our Third World diplomacy, but without exaggerating its importance. We should bear in mind the reservations which some non-member countries have towards it and make an effort to dispel misconceptions derived from its British imperi­ alist origins.

2. Australia should discourage the Commonwealth Secretariat from developing as an independent Third World actor or pressing Commonwealth members to adopt uniform policies on Third World matters.

3. Australia should continue to use its influence to ensure that the interests of Com­ monwealth members in its region-and in particular those of small states- receive an adequate hearing in Commonwealth meetings.

SOUTHERN AFRICA

I. We should assume that Third World pressure on South Africa will intensify rather than abate after the replacement of the Smith regime in Southern Rhodesia. Demands for strengthened sanctions against South Africa seem likely to become an increasingly contentious iss ue between the Third World (or at least Black Africa) and the West during the next decade. Australian policies should recognise this. In particu­ lar, we should continue to oppose racial discrimination in South Africa as elsewhere and to pursue policies towards sporting and other contacts with South Africa that are consistent with that opposition.

2. Australia should avoid any prominence in so uthern African affairs but should not withhold support for efforts to find settlements and to prevent the growth of Soviet influence in the region.

3. Both to avoid widespread suffering and to prevent a si tuation from developing which might result in direct military intervention by great powers, Australia should continue to oppose recourse to armed force to settle the problems of southern Africa.

4. We should expect th at in future increasing numbers of whites from Southern Rhodesia and South Africa will want to migrate to Australia. We sho uld be prepa red to accept many of th ose we co nsider suitable, while bearing in mind possible compli­ cations in our relation5 with Third World countries. If we need to respond to any rapid outflow of whites from either country, it is highly desirable th at we do so as part of some widely-based international resettlement arrangement.

185

IMMIGRATION AND REFUGEES

I. In its immigration policy, Australia should continue to apply selection criteria which are non-discriminatory in terms of race and nationality, accepting that the probable result will be that the Asian component of our population will gradually mcrease.

2. Australia should not admit any significant numbers of persons from Third World countries as temporary or' guest' workers, but rather maintain the explicit orientation in existing policies towards permanent settlement.

3. Within the limits imposed by our total migrant intake, Australia should continue to give high priority to accepting refugees from Indo-China. While doing so , we should make clear to neighbouring governments that there are firm upper limits on the total numbers we can be expected to absorb. We should also continue to stimulate international efforts to solve the problem.

4. The Government should continue to ensure that adequate public resources are made available to help assimilate Indo-Chinese refugees into Australian society.

5. Whenever, Australia has the capacity to respond to particular refugee situations in our region, including, for example, small-scale crises where boats carrying Viet­ namese refugees are refused entry in South East Asian ports, it is preferable that Australia act positively on its own initiative rather than by way of reaction to inter­

national pressure.

INTERNATIONAL ECONOMIC SYSTEM AND NORTH-SOUTH DIALOGUE

l. Australia should continue to support an international economic system involving minimal on flows of trade and long-term capital between nations as being most conducive to sustained economic growth in both developed and developing countries. Those elements of the New International Economic Order which seek to

disrupt this system should be resisted; those which would promote it should be supported.

2. In responding to Third World proposals which are unacceptable, at least in their initial formulation, we should direct our efforts towards devising constructive modifications or finding more practical alternatives. As with the Common Fund, there will be occasions when it will be productive for Australia to respond indepen­

dently of the general Western position.

3. As an affi.uent country at a relatively advanced stage of economic development, Australia should be prepared to participate actively in the continuing North-South dialogue, but should not seek a leading role.

4. With regard to the domestic economic policies of Third World co untries, Australia should continue to encourage in general terms the application of market­ oriented policies, while recognising that different cultural and political co nditions in Third World countries are likely to mean a more planned approach to economiC

management.

5. Given Australia's own continuing concern to achieve gre ater predictability and security in its international economic transactions, we should be sy mpathetic to simi­ Jar concerns among Third World countries. When they advance proposal s wh1ch are

186 Chapter VIII

meant to achieve these ends but which are considered unworkable or exorbitant in cost, they should be resisted on those grounds and not solely on the basis that their adoption would involve perversion of the free market system.

6. In defending Australia's political and economic interests involved in relations with Third World countries, we should bear in mind the disadvantage for us which arises when bilateral differences are linked to general Third World positions.

INTERNATIONAL TRADE AND PROTECTION POLICY

1. Australia should give its strong support to policies directed at reducing barriers to international trade both as a contribution to achieving more rapid economic devel­ opment and as being necessary on grounds of equity and better political relationships. To be taken seriously in this regard, however, we must ourselves take action to liberal­ ise progressively our own restrictions on imports.

2. It is in Australia's long-term interests, both in terms of its own economic devel­ opment and in terms of assisting Third World countries, to reduce tariff and other re­ strictions on imports into Australia. Determined action of a substantive nature should be initiated quickly to move in this direction so as to facilitate the transition to a more outward-looking Australian industrial structure and to take advantage of the oppor­ tunities offered by the economic growth now taking place overseas, particularly in the Asian region. We should give priority to reducing restrictions on imports of major interest to Third World countries in the South East Asian region and we should not make our reduction of restrictions conditional upon concessions from Third World trading partners.

3. Australia should join other developed countries in encouraging Third World countries, particularly those which have become internationally competitive, to re ­ duce their own trade barriers in their own interest and in the interest of export expansion.

Non-Discrimination 4. Australia should continue to give firm support to the maintenance of an open and non-discriminatory international trading regime, except insofar as we support the continuation of general preference schemes for developing countries by Western countries.

5. In the event of a move towards establishing more regional trading blocs, Australia should only consider joining a preferential trading group if it has firm prospects for a large enough market to allow the development of an economically vi­ able industrial structure and if it does not present serious political problems with non­ members. Such an arrangement might embrace the major developing and developed trading countries in the Asia-Pacific region, or a significant combination among them.

6. Australia should take steps to ensure that any widening or deepening of free trade arrangements with New Zealand or Papua New Guinea do not handicap us in any eventual negotiation of participation in a wider regional trading arrangement.

Preferences 7. Australia should continue to participate in preference schemes for developing countries, provided the benefits offered by the various developed countries are roughly equivalent.

187

8. To make Australia 's system of tariff preferences for developing countries more useful to beneficiaries and, to avoid unnecessary friction, we should engage in consul­ tations with relevant beneficiaries whenever changes are contemplated.

9. Australia should accelerate the removal of all residual Commonwealth preferences, and the preferential primage duty arrangements, except those which are part of valuable reciprocal arrangements with Commonwealth trading partners. We should seek to achieve this by placing non-Commonwealth countries on the same tariff basis as that currently enj oyed by Commonwealth countries benefitting from the preferences.

10. Australia should be prepared to consider, bilaterally or multilaterally, one-way preferences intended to strengthen the economic position of the small states of the South Pacific, but against the background of our support for global multilateral trad­ ing arrangements and with a view to avoiding adverse repercussions for our relations with other Third World countries.

Commodity Trade 11. Australia should continue to advocate the conclusion of international com­ modity arrangements designed to stabilise trade in commodities for which this is feas­ ible, and to secure better access to industrialised countries ' markets. In their price pro­ visions, such arrangements should aim to achieve realistic prices which are

remunerative to producers and fair to consumers and in line with the long-term mar­ ket trend.

12. While maintaining the stand that such arrangements should be negotiated along producer I consumer lines, Australia should: (a) be sensitive to the N orth-South implications of commodity trade discussions; (b) make due allowance for the circumstances of Third World countries wishing

to participate either as producers or co nsumers; and (c) avoid a 'tough' line in relation to any reasonable concessions sought by them.

13. Australia should continue its active participation in negotiations to establish a Common Fund whose purpose is to assist in the financing of individual commodity agreements which are consistent with Australian policy; and the long-term improve­ ment of prospects for commodities. In addition, we should continue to follow an ap­ propriately independent approach to other elements of UNCTAD 's Integrated Program for Commodities.

PRIVATE INTERNATIONAL CAPITAL FLOWS

1. Australia should continue to support policies de signed to minimise re strictions on

the flow of long-term capital and of te chnology between nations, while re cognising that some national restrictions on foreign ownership and co ntrol may be in the mutual interests of both host country and investor.

2. Australia's general approach to proposals for international re gulation of direct foreign investment, including investment by transnatio nal co rporations (TNCs ), should continue to be that the formul ation of co ntrols is properly a matter for each country to determine, in the light of its particul ar ne eds, o bj ecti ves and values. At the same time, because the international nature of the operations ofTN Cs do pos e prob­ lems which justify an international approach, Australi an policy should th at

the development of non-mandatory guidelines for th e behaviour of TN Cs, achieved

188 Chapter VIII

by broad international consensus, could enable private capital to play an even more useful role in the growth process while also minimising international economic frictions.

3. As to the related proposals for the drafting of an international code of conduct on the transfer of technology, Australia should continue to support the development of a universally applicable, voluntary code which recognises the rights of private owners of technology and, in the case of such technology, the limited scope of governments to direct compliance with the requirements of an international code. In doing so, Australia should be sensitive to and supportive of opportunities to apply' appropriate technology' and scientific know-how (especially in agriculture) to Third World coun­ tries for mutual gain.

4. Australia should maintain its liberal policy towards outward private direct in­ vestment and should encourage Australian businesses to make overseas investments, particularly in the Asia-Pacific region, which would help Australian industry expand its operations while also contributing to the development of Third World countries. Consistent with this, it should ensure that its economic and taxation policies do not in­ hibit investment activities. Where a Third World country offers incentives designed to attract genuine foreign investment (as distinct from tax evasion or tax avoidance) the Australian Government should maintain those tax provisions which permit Aus­ tralian investors to benefit from such incentives.

5. While Australian residents are almost invariably relieved of double taxation through the provisions of the Australian tax laws, Australia should give greater pri­ ority than in the past to the negotiation of double taxation agreements with develop­ ing countries, especially those in the Asia-Pacific region which seek such agreements. We should attempt to ensure that the Australian taxation authorities possess adequate staffing and other resources to permit this.

6. So as particularly to encourage Australian investment in less developed countries in our region, consideration should be given to such possible steps as the negotiation of bilateral investment guarantee agreements with these countries.

7. Consideration should be given to allowing limited access to the Australian capital market for governments of neighbouring Third World countries to raise loans for de­ velopment purposes. 1

INTERNATIONAL DEBT ISSUES

1. Australia should not involve itself actively in matters of contention between Third World debtor countries and foreign creditor countries, except in those cases where significant Australian financial interests are involved.

2. Australia should join other advanced countries in opposing proposals which m ay be made for generalised debt relief, since such action would be likely to inhibit th e access of credit worthy Third World countries to international loan capital. But we should continue to indicate our readiness to support case-by-case consideration of in­ dividual countries' debt service problems.

1 The Committee assumes that the Committee of Inquiry into the Australi an Financial Sys tem will ex a m­ ine the significant aspects of exchange rate and domestic monetary policy, and policies regard ing the Australian banking system bearing on this matter.

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DEVELOPMENT AID

1. The basic purpose of Australian aid should be to support the independent efforts of recipient countries to achieve economic and social development.

2. . In Australia's aid program there will be many opportunities for providing for the basic needs of the very poor while simultaneously promoting long-term economic on a national basis. ijowever, our aid programming should not make the

meetmg of basic needs an overriding test.

3. As far as possible, Australia's aid should be project-type aid. Such aid should em­ phasise assistance for improving labour productivity and skills, the provision of edu­ cation and training in Australia, and improved facilities for education and health in developing countries. The provision of education and training in Australia to citizens of Third World countries, and the establishment of facilities in developing countries to provide these things, are two very effective ways in which Australia can assist econ­ omic development in the Third World.

4. Bearing in mind the possibility of Australia's taking over general purpose budget support in South Pacific countries until recently dependent on such support from metropolitan powers, in general, Australia should give progressively less emphasis in its overall program to aid for general budget support and more to project-type aid.

5. Bearing in mind its commitment to achieving official development assistance of 0.7 per cent of GNP, the Government should prevent any further diminution in the proportion of our GNP going to development aid. The Australian Government should consider setting a realistic target date for the progressive achievement of the

above ratio, subject to such a date being consistent with maintaining the quality of our aid.

6. Australia's aid should continue to be concentrated in the South Eas t Asian and South West Pacific regions, though a small proportion should be set aside for dis­ bursement in other developing regions.

7. Australia should continue to support the multilateral institutions, notably the World Bank and the Asian Development Bank (ADB). Consideration should also be given to joining other regional development banks apart from the ADB.

8. The proportion of the annual aid budget directed at Papua New Guinea should continue to be reduced as quickly as practicable. The budget support grant co m­ ponent should be complemented by project aid and technical assistance, so as to pl ace Papua New Guinea on a less dissimilar footing to that of other re cipients.

9. Because of sharp increases in recent years and problems of absorptive capacity, the proportion of the aid budget directed at the South Pacifi c need not be increased at the present time. However, because of their often diffi cult economic circumstances and their general significance to Australian strategic interes ts, it will be necessary to regard these countries and territories as having special cl aims on our ai d. Aus trali a should be prepared to extend all-purpose budget support to those co untries depen­ dent until recently on subventions or grants-in-aid fr om fo rm er metro politan powers.

10. Australia should continue to support international action to increase the pro ­ portion of international aid that is untied and should co ntinue the tre nd in its own policies to increase the proportion of untied aid . Howeve r, efforts should be made to maximise the Australian identity of our aid projects and technical a sis tance and to

190 Chapter VIII

promote the close involvement by the Australian business sector, and other non­ government interests, in the conduct of the aid program.

11 . Consideration should be given to making greater use of Australia's agricultural expertise to help Third World countries increase food production. In particular, ad­ ditional agricultural research could be conducted in Australia specifically directed at overcoming agricultural problems in developing countries. This might be funded by a separate appropriation in the aid budget.

12. Australia should continue to provide the bulk of its aid in grant form but should not rule out the provision ofloans for projects with high rates of economic return.

13. Modest support should continue to be provided by the Government for non­ governmental organisations, which should, however, be expected to raise the bulk of their funds by private subscription.

TRAINING

I. Australia has considerable experience in training its own and indigenous Papua New Guinea personnel for service in that country. Thought should be given to ways of making full use of that experience: (a) to give assistance to other new states in the region, particularly those in the

South West Pacific, by offering training courses for their public servants; and (b) to give specialised training to Australians-both public servants and those employed in the private sector-who are going to work in Third World countries.

2. If it is anticipated that Australia's economic relations with the Third World are going to grow, there is particular need and scope for developing training in respect of commercial transactions with societies whose practices and values differ from our own. While this should be seen as primarily a matter for the private companies and institutions to organise, it should receive Government encouragement and practical support.

3. Australia should continue to provide access to military training courses for middle and junior ranking commissioned officers from Third World countries, recognising the valuable goodwill and contacts which have flowed from the arrangement in the past.

191

DISSENTING VIEW FROM MR J. T. SMITH

I dissent from the proposition, which is the foundation of the Committee's first Recommendation, that Australia is a Western country. This view is vigorously re­ peated in Recommendation No. 13 (i); it is the opening thought in Chapter VI on Australian interests involved in relations with the Third World; and indeed it is are-curring theme in the Report. .

The matter has been debated at length and voted on in the Committee. In a con­ sensual report, such as this, where members may disagree on particular points, the recording of dissent is necessary only on matters of fundamental importance. It is because this proposition, that we are a Western country, is so fundamental to our approach to the Third World collectively and individually that I record this dissent.

I regard the proposition as a false basis upon which to formulate Australia's re­ lations with the Third World. To say this is, of course, not to deny the influence of Western Europe on our formation as a nation, on our religious and cultural development and on many other

facets of our national life. What the proposition denies, in a sense, is that we are essentially Australians. In effect, the Committee recommends that the Government approach our relations with the Third World not on the basis that first we are Australians but first that we are

Western: and an odd kind of Western at that-'Western with a difference'. In my view a sounder and more accurate approach would be to assert that we are distinctively Australia, a country developing a multi-cultural society in the Southern Hemisphere on the very fringe of the Third World, handling our relationships with the so-called Western countries not on the footing that we are one of them but with due regard to the interests we have with them as we also have interests with countries of the Third World.

Having shaken off the 'British' tag which so long qualified Australian foreign pol­ icy, why should we now label ourselves 'Western'? In dealing with Japan or the United States or China or the EEC we do not say we are Western: we say we are Aus­ tralians. Why then in dealing with the Third World, above all, should we start from

the proposition that we are Western? The Aboriginals, Asians and other Australians of non-European origin, who now comprise a significant element of the Australian community, would surely be per­ plexed to discover that they are part of a Western country when so much money and effort is being devoted to making them feel they are Australians.

How much more perplexing it would be to the Third World, and especially to Asia, to discover that we regard ourselves as Western and are basing our policy towards them on that, just when (after 30 years effort on our part) they were begin­ ning to believe that we really are Australians and not Europeans or British.

The main thrust of this Report is to seek a stronger and realistic rel ationship with the Third World countries of our region and with the groupings (like ASEAN) build­ ing up there. How can we approach them successfully as anything el se than Aus­ tralians, genuinely independent and ready to be part of an Asia-Pacifi c world , unclut­ tered by labels like 'Western' or other appeals to the past?

As this Report brings out very clearly, the Third World tends to see ' the West' as its adversary- in terms of its colonial past, its economic exploitation, its resistance to their demands and sometimes for its grudging concessions. By so deliberately Iden­ tifying ourselves as Western we would invite the Third World to see us in the same

light- yet that is not our real image.

192 Chapter VIII

At the core of the 'West' is the European Communities whose trade policy has shown it to be as callous about Australian interests as it is about those of the Third World excluded from the Lome Convention. We should be careful to avoid situations and terminology whereby we can be identified too closely with them.

This is not to say that on matters of mutual interest we should not caucus at inter­ national gatherings and have other arrangements with the countries of Western Europe, the United States, Japan, Canada and New Zealand-all included in the Committee's definition of the 'West'. We have done so with advantage to our interests and should, as appropriate, continue to do so. But these linkages, however described, should be seen as the consequences or means of pursuing our interests in­ ternationally not the starting point in approaching our relationships with the countries of the Third World.

193

APPENDIX A

Prime Minister

FOR PRESS 6 April 1978

COMMITTEE ON AUSTRALIA'S RELATIONS WITH THE THIRD WORLD

The Government has established a high-level Committee to examine the wide ranges of issues involved in Australia's relations with the developing countries of the Third World and to identify policy options for Australia's approach to this group of states in the future.

The Prime Minister said the decision reflected the Government's awareness that the concerted approach of Third World developing countries to global issues-such as food, energy and the conditions for international economic growth-represented an increasingly important factor in international relations.

The issues raised critical political, economic and moral questions. A growing inter­ dependence between states, an increasing urgency attaching to the global problems and the need for co-operative. solutions compelled attention to the character of Australia's relationship with the Third World.

Australia had always paid close attention to its bilateral relations with Third World countries and to the particular issues involving them. But the Government be­ lieved that recent developments required a more co-ordinated and comprehensive approach-one which recognised the existence of the Third World as a collective en­ tity and took full account of the political significance and complexity of many of the issues which concerned it.

The membership of the Committee, which would be headed by Professor Owen Harries, of the University of New South Wales, had been selected to reflect the breadth of the Australian interests, both within government and in the community generally, which were involved in our relations with the Third World.

The group of eminent people who had agreed to serve on the Committee were: Associate Professor Owen Harries, of the School of Political Science, University of New South Wales (Chairman) Mr E. K. Fisk, Professorial Fellow, Department of Economics, Research School ofPacific Studies, Australian National University, Canberra

Mr Peter Nolan, Secretary of the Australian Council of Trade Unions, Melbourne Dr Brian Scott, Group Managing Director, W. D. Scott & Co. Pty. Ltd., Man­ agement Consultants, Sydney

Mr J. A. Uhrig, Managing Director, Simpson Pope Ltd. , Adelaide Mr J. T. Smith, of Canberra, formerly Minister (Commercial ), Australian Em­ bassy, Washington Mr J. D. Moore, First Assistant Secretary, Overseas Economic Relations Div­ ision, Department of the Treasury, Canberra

Mr Neil Mcinnes, Deputy Director-General (Economic and Financial ), Offi ce of National Assessments, Canberra

194 Appendix A

Mr A. R. Parsons, First Assistant Secretary, Department of Foreign Affairs, Canberra The Prime Minister subsequently requested the addition to the Committee of Mr A. T. Griffith, Special Adviser, Department of the Prime Minister and Cabinet. The Committee would consult widely among the public, government departments and agencies, academic bodies and other interested organisations. The Government hoped that the Committee would report to it by the end of 1978.

195

APPENDIXB

THE MEANING OF 'THE THIRD WORLD'

Like many other political terms ('democracy', 'the West', 'socialism' and 'nation' come readily to mind), the expression 'the Third World' suffers from a certain impre­ cision and vagueness around the edges.

A.

B.

Here are two recent attempts at definition:

'THIRD WORLD. ( 1) Collective term of French origin (le Tiers-monde* ), taken up by American writers, for those states not regarded or regarding themselves as members of either the developed capitalist or the developed communist ' worlds': they are thus classified by their state of economic development as 'under-developed', 'less developed', or 'develop­ ing' states. The Third World includes most of the countries of Latin America and there­

cently independent states of Asia and Africa. Many of these share a colonial past and strong resentment agairist imperialism; they are poor and, thanks largely to the population ex­ plosion, are growing poorer by comparison with the industrialised nations; in foreign pol-icy, following the Indian example many of them have favoured neutralism . . ... .

(2) More recently, some writers have begun to distinguish between the Third World, which they confine to those developing countries with rich natural resources such as the oil­ producing states of the Middle East, and the Fourth World, in which are counted all the other under-developed countries which have no such resources and little if any prospect of development.''

'As opposed to the power" blocs" of the Western and Communist Worlds-a generic term for the countries of Latin America and the more recently independent states of Africa and Asia. Three traits are shared by most of the countries of the "Third World".

( 1) A colonial past and resentment of the former colonial power and of imperialism. (In South America these resentments are now directed against the US. In Afro­ Asian countries long dominated by Europe a growing nationalism was stimulated by a sense of racial grievance.) (2) "Underdeveloped" economies- compared to the advanced industrial economies

of Europe, the USA or Japan. In Asia and Latin America the population explosion continually threatens living standards and the gap between the " rich " co untries and the Third World has widened. ( 3) As a consequence of ( l) and ( 2) mass illiteracy is common and political life tends

to be dominated by a small (often Western) educated elite.

Many Third World countries have favoured a neutralist foreign policy . This has not prevented different interpretations of such a policy, internal dissensions or political re­ alignments. Since the emergence of the Afro-Asian Bloc a nd later co nferences unity has been more often proclaimed than achieved.''

• Secretariat note: The expression has a n obvious associa tio n wit h the pre-French Revolution 'tiers etat' (the third estate). There is doubt about when and by whom the te rm was fir st used , but it is often attributed to Alfred Sauvy, the French de mographer, econo mist , stati stician and so ci ologist, who wrote in L 'Observateur of 14 August 19 52:

'For this Third Wo rld , ignored, exploited and despised, exactly as the Third Estate was before the Revolution, would also like to beco me so methin g.' The Fontana Dictionary of Modern Thought, ed . Bullock and Sta ll ybrass , Fontana/Colli ns, 19 77 , p. 635. 2 A Dictionary of Politics, ed. Walter Laq ue ur, The Free Press, New York , 1974, p. 476.

196

c.

Appendix B

According to Professor Weeramantry of Monash University: 'The Third World itself, though generally understood to refer to a particular group of countries, is a term which defies definition. Common factors that are thought to make the so-called Third World a group, are variously seen by various observers. Recent emergence from colonial domination, less de­ veloped economies, lack of compelling military power or advanced technology, depen­ dence on agriculture and primary products-any of these factors can offer principles of classification, any one of them as acceptable as any other. Without aiming at greater pre­ cision, we shall take this expression to mean the countries outside what are commonly de­ scribed as the Capitalist and Communist blocs. Though China is often included among Third World countries it is not included in this study as it is a category in itself, too distinc­ tive to be treated with the others. ••

As Professor Weeramantry explicitly recognises, and as the two earlier definitions suggest, there is an irreducible untidiness about the term and there is scope for argu­ ment about whether some marginal countries, which have some but not all of the ascribed characteristics, should be included (e.g. Yugoslavia, Turkey, and, most im­ portant, China).

C. J. W eer a m a ntry, Equality and Freedom: Some Third World Perspectives, Ha nsa Publishe rs, Colo m bo, 1976, p. 4.

197

APPENDIX C

List of Third World Countries

GDP Population

Per Capita in millions Member Member

($ US in 1975) (a ) (1975) (b) G. 77 Non-A ligned

Afghanistan 133 19.28

Al geria 779 16 .78

Angola 665

Argentina 1,935 25 .38

Bahamas 2,600 .20

Bahrain 2,440 .26

Bangladesh 111 76. 82

Barbados 1,260 .25

Benin 137 3. 11

Bolivia 383 5.3 6

Botswana 444 .6 9

Brazil 1,019 10 6.23

Burma 96 30.34

Burundi 107 3.76

Cameroon 35 5 6.40

Cape Verde 268 .29

Central African Republic 268

Chad 124 .3 1

Chile 690 10.25

Colombia 577 23 .54

Comoros 260 .3 1

Congo 572 1.35

Costa Rica 978 1.97

Cuba 800 9.33

Cyprus 1,0 76 .64

Democratic Kampuchea 70 8.11

Djibouti 1,920 . 11

Dominica .07

Dominican Republic 768 4.56

Ecuador 643 6.73

Egypt 3 16 37.23

El Salvador 4 55 4.0 1

Equatorial Guine a 352 .3 1

Ethiopia 103 2 7. 94

Fiji 1, 143 .57

Gabon 3,072 .53

Gambia 189 .52

Ghana 542 9.87

Grenada 390 . 10

Guatemala 6 11 6.08

Guinea 166 4.42

Guinea Bissa u 120 .53

Guya na 637 .79

Haiti 19 1 4.58

Honduras 333 3.04

India 139 598. 10

Indone sia 2 16 13 6.0 4

Iran I ,635 33.02

Iraq 1,222 11.1 2

Ivory Coast 789 4.8 9

Jamaica I ,438 2.0 4

Jordan 41 4 2.70

198 Appendix C

GDP Population

Per Capita in millions Member Member

($US in 1975) (a) (1975) (b) G. 77 Non-Aligned

Kenya 234 13.40

Kuwait 12,060 1.00

Laos 70 3.30

Lebanon 1,219 2.87

Lesotho 107 1.04

Liberia 500 l. 71

Libya 5,635 2.44

Madagascar 233 8.02

Malawi 133 5.04

Malaysia 780 11.90

Maldives 100 .12

Mali 106 5.7

Malta 1,446 .30

Mauritania 357 1.32

Mauritius 659 .88

Mexico 1,314 60.15

Morocco 426 17.31

Mozambique 408 9.24

Nauru 6,250 .0 ]I

Nepal 105 12.57

Nicaragua 720 2.16

Niger 142 4.60

Nigeria 407 62.93

North Korea 430 16.03

North Yemen 170 6.67

Oman 2,546 .77

Pakistan 162 70.26

Panama 1,356 1.67

Papua New Guinea 481 2.76

Paraguay 570 2.65

Peru 546 15 .61

Philippines 368 42.51

Qatar 9,090 .09

Rwanda 79 4.20

St Lucia . 11

Sao Tome and Principe 460 .08

Saudi Arabia 4,281 8.97

Senegal 416 4.14

Seychelles 520 .06

Sierra Leone 236

Singapore 2,536 2.25

Solomon Is. 364 .19

Somalia 108 3.71

South Korea 551 35 .28

South Yemen 201 1.69

Sri Lanka 244 13.99

Sudan 179 15.7 3

Surinam I, 183 .42

Swaziland 516 .49

Syria 743 7.35

Tanzania 170 15 .31

Thailand 289 41.87

Togo 284 2.22

Tonga 371 . 10

I mid - 1976 so urce: Th e Statesman 's Year Book / 9 77- 78.

Trinidad Tunisia Tuvalu Uganda

United Arab Emirates Upper Volta Uruguay Venezuela Vietnam

Western Samoa Zaire Zambia

2 mid-1973, ibid.

GDP

Per Capita

($US in 1975) (a)

1,900 753

296

13 ,680 108 1, 153 2,415

160 320 !53 496

Population in millions (19 75) (b)

1.0 8 5.61 .06 2 11.55

.22 6.0 3 3.06 11.99 45.21

. 15

24.90 4.98

M ember G. 77

199

Member

Non-A ligned

Sources: (a) GOP: UNCTAD Handbook of International Trade and Development Statistics, Supplement 1977. ( b) Population: UN Demographic Yearbook, 19 76.

Notes: I. The UN considers most of the populatio n estima tes listed a bove to be of q uestio na bl e re lia bil ity as th e basic da ta used for their calculation was judged to be of dubio us accuracy. 2. It should be noted that this list of Third World countries, despite very great o verl a p, is different fro m th e various lists of developing countries used by some of the multilateral institutio ns wh ose statistics have bee n used in this Report. T he

World Bank , for example, includes a few low-income Europea n countries in its list of developi ng cou nt ries.

200 Appendix D

APPENDIX D-Chapter I, paragraph 26 refers

TABLE A

Population Density x GNP Per Capita in Developing Countries (including capital surplus oil exporters)

Population density Number of Level of GNP Per Capita 1976 Median

(in persons per countries level

square kilometre) (lowest) (highest)

1 2 3 4 5 6 7 8

Between 0 and 5 9 2 2 I 2 4

Between 5 and I 0 lO I 4 I 2 I I 4.5

Between I 0 and 20 13 2 2 I 2 3 2 I 5

Between 20 and 30 16 3 3 I 2 4 2 I 4

Between 30 and 50 15 2 2 4 2 4 I 3

Between 50 and I 00 13 2 2 2 I 2 2 2 5

Between I 00 and 200 lO 2 2 I I I 2 I 3.5

Over 200 8 I I 2 3 7

All developing countries 94 II 12 12 12 12 12 12 II 4.5

Source: Data drawn from IBRD, World Development Report, 1978, Annexe Table I pp. 76-7.

TABLE B

Growth in Population x Growth in GNP Per Capita in Developing Countries (excluding capital surplus oil exporters)

Population growth rates Number of GNP per capita growth rates

(average annual percentage rate countries (annual percentage rate 1960-75 average) 1960-75)

Less than I 2 I

1-2 8 I I 4 2

2-2.5 27 3 10 8 3 3

2.5 - 3 28 5 6 9 6 2

3- 3.3 12 I 2 6 3

More than 3.3 9 3 6 3

All developing countries 86 10 22 33 14 6

Source: Data drawn from World Bank Atlas, 1977, pp. 6-9.

201

APPENDIX E-Chapter I, paragraph 29 refers

Deficit/Surplus on Current Account as Percentage of GDP (-Indicates Deficit)

1960 1965 1970 19 73

Developing Countries -2.7 -1.9 -3.0 -1.3

Industrialised Countries 0.7 0.7 0.7 0.0

Developing Countries by Income Group: Higher Income -3.3 -0.8 -3.1 - 2.5

Middle Income -3.4 -2.3 -5.0 - 1.8

Lower Income -3.3 -3.9 -2.9 - 5.2

Oil Producing 1.3 -0.8 -0.8 4.0

Developing Countries by Region: Southern Europe -3.5 0.3 - 3.2 - 1.1

Middle East -3.4 -3.1 -5.6 3.0

Africa -4.2 -3.7 -2.5 - 2.0

South Asia -3.0 -3.5 -1.8 - 3.2

East Asia -4.8 -3.7 - 6.3 - 2.9

Western Hemisphere -1.6 -0.6 -2.2 - 1.5

Source: IBRD, World Tables 1976, Series III, Table II pp. 472-3.

202 Appendix F

APPENDIX F-Chapter II, paragraph 43 refers

Table 1: Developing Country Shares of World Merchandise Exports (Percentages)

1955 1960 1967 1974

Agricultural Products 43 38 33 29

Ores and Minerals 35 31 32 32

Manufactures 4 4 5 7

Total Non-Fuel 22 18 15 14

Fuel 57 61 64 78

Total 26 22 19 27

Source: IBRD Development Policy Staff, Prospects for Developing Countries 1978-85, November 1977, Table 11.3, p. 10.

Table 2: Composition of Developing Countries' Non-Oil Merchandise Exports 1955-85(a)

1955 1960 1967 1974 1977(b)

Agricultural Products 76 72 61 47 45

Non-Fuel Minerals 13 15 17 16 14

Manufactures 10 13 21 36 41

Total( c) 100 100 100 100 100

Source: (Calculated from UN and IMF trade data) IBRD Development Policy Staff, Prospects for Developing Co un -tries 1978-85, November 1977, p. 44. (a) Excluding capital surplus oil exporting countries. (b) Estimated.

(c) May not add to 100 because of rounding and unclassified transactions.

Table 3: Major Commodity Exports of Developed and Developing Countries Average 1973-1975

(FOB $US million)

Developed Countries (') Developing Countries ( 2 )

I. Petroleum 18 ,528 I. Petroleum

2. Wheat 9,449 2. Sugar

3. Timber 7,245 3. Coffee

4. Maize 4,994 4. Copper

5. Sugar 4,258 5. Timber

6. Copper 3,522 6. Cotton

7. Beef 3,200 7. Rubber

8. Iron Ore 2,584 8. Iron Ore

9. Wool 2,342 9. Cocoa

10. Cotton 2,308 10. Phosphate Rock

II. Rice 2,039 II. Tin

Total Commodity Exports 68 ,405 Total Commodity Exports

Excluding Petroleum 49,877 Excluding Petroleum

(I) Includes USSR and Eastern Europe. ( 2 ) Excludes centrally planned Asia. Source: IBRD, Commodity Trade and Price Trends, 1977, Report No. EC-1 66177, p. 18.

93 ,863 4,279 3,998 3,965 2,527 2, 173

1,859 1,70 I 1,364 1,200 1,0 10 127 , 137

33 ,274

203

APPENDIX G-Chapter II, paragraph 45 refers

1950 1951 1952 1953

1954 1955 1956 1957 1958

1959 1960 1961 1962

1963 1964 1965 1966 1967 1968 1969

1970 1971 1972 1973 1974

1975 1976 1977

Terms of Trade 1957-76 (1970 = 100)

Developing Countries

Excluding oil

Total exporters

Ill n.a.

117 n.a.

106 n.a.

105 n.a.

Ill n.a.

109 n.a.

107 n.a.

103 97

103 95

105 98

103 98

100 94

98 92

99 94

101 97

99 95

100 98

99 96

100 97

101 100

100 100

104 95

102 93

112 101

156 94

140 84

146 87

144 n.a.

Ratio of terms of trade of

developing (excluding oil exporters) to developed countries

n.a. n.a. n.a. n.a. n.a. n.a.

n.a. 109 103 104

102 96 94 97 100

97 100 97 98 101 100

96 93 102 108

93 n.a. 89

Note: Terms of Trade= Unit Value Index of Exports and is termed the' Net Barter Terms of Trade'. Unit Value Index oflmports

Source: IBRD, Commodity Trade and Price Trends, 1977 , Report No. EC-166 / 77 , p. 8.

204

APPENDIX H-Chapter II, paragraph 58 refers

Net Capital Flows to Developing Countries, 1969-76(a)

1969 1974 1976

($US current billion)

Foreign flows: Grants 2.1 6.5 4.5

Loans from official sources 3. 1 7.0 11.9

Loans from private sources 2.1 7.5 16.0

Direct investment 2.1 2.9 6.3

Total 9.5 23.7 39.0

Domestic savings 41.2 147.4 170.8

Total capital available 50.7 171.1 209.8

(Percent)

Foreign capital as share of total capital available 19 14 19

(a) Includes oil deficit countries. Source: IBRD Development Policy Staff, Prospects for Developing Countries 1978-85, Table VII. l,p. 51.

Appendix H

APPENDIX 1-Chapter II, paragraph 62 refers

External Public Debt of 85 Developing Countries ($US billion)

1970 1976 %Change

Disbursed Debt: Official Creditors Private Creditors

Total

Price Index ( 1970 = I 00)

Debt Service: Amortisation Interest

Total

Total Debt Service as Proportion of Export of Goods and Services (%)

36.3 17.4

53.7

100

4.2 1.9

6.1

10.4

85.4 71.6

157.0

235

10.9 7.0

17.9

8.6

+ 135 +311

+ 192

+ 135

+ 160 + 268

+ 193

- 17

Source: Data drawn from IBRD, World Economic and Social indicators, April 1978, pp. 27-29. Note: Figures are disbursed debt, i.e. commitments are excluded. Price index is for all developing countries.

205

ChapterV, paragraph 3 refers

Population Growth since 1850 (millions)

1850 1900 1950 1960 1970 1980

World Total 1,262 1,650 2,486 2,986 3,632 4,457

Develoted countries of which 347 573 858 976 1,090 1,210

ustra 1a and New Zealand* 1.3 4 10 13 15 19

Developing countries of which 915 1,077 1,628 2,010 2,542 3,247

South East Asiat 78 146 200 219 287 380

1990 2000

5,438 6,494

1,336 1,454

23 26

4,102 5,040

492 608

)>

"'tJ "'tJ

m 2

c

>< c...

Annual Percentage Growth Rates

1850-1900 1900-1950 1950-2000

0.5 0.8 1.9

1.0 0.8 1.1

2.4 1.9 1.7

0.3 0.8 2.3

0.7 1.2 2.5

Note: Developed regions as defined by the United Nations (UN) sources used for the purpose of compiling their population statistics comprise Europe, the USSR, the United States, Canada, Japan, Temperate South America, Australia and New Zealand. • Figures for Australia and New Zealand for the years 1850, 1900 and 1950 are taken from the Yearbook of Australia 1977-78, p. 99, and the New Zealand Official Yearbook 1978, pp. 23 and 59. The annual percentage increase for the period 1850-1900 applies to Australia only.

All other figures are derived from the following UN sources: The World Population Situation in 1970, UN Department of Economic and Social Affairs, Population Studies No. 49, 1971; and The Determinants and Consequences of Population Trends, ST /SOA/ SER.A/50, 1973; and post 1960 figures are based on medium variants. (As it is impossible for a demographer to predict precisely what future developments will affect the net balance of births, deaths and migrants, and therefore the future population of any given country, projections are usually pre­ pared in several different variants. The UN presents ' high',' medium' and 'low' variants. The' medium' variant estimates represent what is considered the most plausible future population

trend; the ' high ' and ' low ' variants represent the limits of a zone of greatest plausibility.) t Complete figure s for South East Asia for 1850, 1900 and 1950 are unavailable. The figure s arrived at are approximate only and have been extrapolated from UN total Asian regional figures for those dates.

N 0

0'\

'"1:5

c....

Population and Population Growth R,ates 1969-1976

1969 1970 1971 1972 1973 1974 1975 1976

Developed Market Economies (millions) 695.63 702 .57 708.78 715.52 721.92 728.02 733.99 738.88

(per cent) 0.9 1.0 0.9 1.0 0.9 0.8 0.8 0.7

Developing Countries-( a) Total 1,772.6 1,820.44 1,865.96 1,911.34 1,956.95 2,005.6 2,054.82 2,107.71

2.5 2.7 2.5 2.4 2.4 2.5 2.5 2.6

( b) Oil Producing* 255.25 262.27 269.78 277.19 284.74 292.56 300.14 308.81

2.7 2.8 2.9 2.7 2.7 2.7 2.6 2.9

(c) Non-Oil Producing 1,517.35 1,558.17 1,596.18 1,634.15 1,672.21 1,713.04 1,754.68 1,798.90

2.5 2.6 2.4 2.4 2.3 2.4 2.4 2.5

Centrall y Pl a nned Eco nomies (Eastern Europe a nd Chin a) 1, 124.77 1, 140.90 I, 156.26 1,172.69 I, 189. 19 1,206.09 1,223.20 1,239.79

1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4

Source: D a ta drawn fro m UN Dem ographic Yearbook , 1976. No te: T he p rocess o f rounding pe rcentage growth ra te fi gures to o ne decim a l point has resulted in so me fi g ures for ' Developing Countries- ( a) Total' appearing to be incompatible with th e fi gures for the su b-secti o ns (b) a nd (c). • Al ge ria. A ngo la. Ba hra in , Brunei, Ecuado r, Ga bo n. Indo nesia, Ira n, Iraq , Kuwait, Libya, Nigeri a , Oma n, Qatar, Saudi Arabia, Trinidad and T o bago, United Ara b Emirates and Ve nezuela.

l> "'C "'C m z

c

>< c....

N 0

-...1

208 Appendix K

APPENDIX K-ChapterV, paragraph 7 refers

PROJECTIONS FOR ECONOMIC GROWTH

Projections of growth prospects over a period of, say, 5 years ahead are naturally likely to be closer to the actual outcome than those for 20-25 years ahead. The World Bank's projections1 to 1985 are of some interest in this context.

2. The Bank's projections suggest the possibility of faster growth in low-income co_untrie.s, especially in _Asia; a slight slowing-down of the fast rates of growth in the m1ddle-mcome countnes; and broadly similar average growth performance for developing countries as a group to that achieved in the 1960-75 period.

Low-income Asia Low-income Africa

Middle income

All developing countries

Industrialised countries

Centrally planned economies

Growth of Gross Domestic Product, 1960-85 (Average annual growth rates, at 197 5 prices)

1960-70

2.4 4.3

6.3

5.5

4.9

6.8

Source: IBRD, World Development Report, 1978, p. 45 .

1970-75 1975- 85

3.9 5.1

2.8 4.1

6.4 5.9

5.9 5.7

2.8 4.2

6.4 5. 1

The Bank indicated that the projected acceleration in the economic growth of low­ income countries hinges on the assumption that their agricultural performance can be improved substantially; while the slightly lower rate of growth projected for middle­ income countries reflects what the Bank describes as the uncertain outlook for trade and capital flows. These projections would imply an increase in average per capita in­ comes of 1.5- 2.5 per cent per annum for low-income countries and 3.5- 4.0 per cent per annum for middle-income countries.

3. Using these same rates of growth, and assuming that inequality of incomes in­ creases in the early stages of development but decreases in the later stages, the Ba nk has projected that the proportion of the population of developing countries living in 'absolute poverty' would fall from 3 7 per cent to 17 per cent by the year 2000,

although because of the growth of population there would still be some 600 millio n people living in that state (out of a total Third World population of 3.5 billion). These would be very largely located in the low-income developing countries.

4. The Overseas Development Council in the United States, taking the World Ba nk projections of economic and population growth as a basis, has extrapolated them to show what the pattern of per capita incomes would be in the year 2000.

I IBRD Development Policy Staff, Prospects for Developing Countries I 978-85, 1977.

209

Per Capita Income (constant 1975 $US)

1965 19 75 1985 2000

Poorest countries (under $200 per capita) . . . . . . 130 150 180 300

Middle-income developing countries (over $200 per capita) 630 950 1,350 2,260

Developed countries . . . . . . . . . . . . . 4,200 5,500 8,100 13 ,570

Note: The use of international comparisons of average incomes per capita in a common currency as a measure of li v­ ing standards suffers from many defects. Such comparisons fail to take full y into co nsideration non-market activities and the difference in prices and in the purchasing power of national currencies, as well as income distribution. Rece nt studies suggest that 'real' average income levels in developing countries, in terms of purchasing power, may be co nsiderabl y

higher than suggested by these figures.

5. The OECD Interfutures project, without itself attempting any exercise in system­ atic projections, has proceeded to a further stage of disaggregation by examining six groups of countries divided according to the principal assumptions of its Scenario A. 1 Through simple extrapolation of past growth rates (which the authors of the study

call a 'pessimistic' assumption) and through mechanical computations on the basis of growth rates contained in UN regional commissions' growth targets (called 'optimis­ tic') the study produced a range of results for each of the groups of countries and for individual countries within them. Examples of these results are as follow s:

Group 1. By the year 2000 some of the ' newly industrialising countries' (NICS ) may reach GDP per capita levels comparable to those of some of th e advance d countries in l9JO.

Extrapolating 1950-75 growth rate s would give Singapore $6,000 2 while growth rates projected by the UN Economic Commission for Asia and the Pacific (ESCAP) would give it more th an $7,000. The extrapo­ lated figure for Hong Kong would be $4,000.

The range for South Korea would be between $2,600 and $3,600. By extrapolation, Taiwan would approach $2,000 and Malaysia also a bout $2,000.

For Iran, ESCAP growth rate projections would yield $ 1,300 - $ 1,800 while in Algeria sustained growth rate s of 7 to 8 per ce nt per annum would le ad to per capita inco mes of $900-$ 1,300, accordin g to evo l-ution of natality.

A 7.5 per cent ra te of growth would give $2,0 75 for Mexico and $ 1,740 for Brazil while for Argentina extrapolation yield s $2 ,700.

Group 2. India, the chief member of a heteroge neous group of countries ca pa bl e of industrialising without large -scale integration with the wo rld eco nomy, would not reach much more than $300 in the yea r 2000 eve n wi th the optimistic growth rate of 6.1 per cent projected by ESCAP. In dia's G DP

The chief assumptio ns a re: (a) full integratio n of th e ' newly industri a li ing co un trie into th e wo rld eco no my, ( b ) converge nce of th e producti vi ty growth ra tes o f the OECD countrie , (c) lib era li ed ca pital fl ows, ( d ) sig nifi cant increases in ODA.

2 Constant 1970 US doll a rs.

210 Appendix K

per capita was under $120 in 1975 despite the. fact that the country is one of the major Third World producers of manufactures.

Group 3. This group includes countries at the beginning of an outward-looking in­ dustrialisation process but at a much lower level than in the case of the NICs. Indonesia, growing at an ESCAP-projected rate of between 6.0 per cent and 6.9 per cent would not reach $300 by 2000. Extrapolating

1950-75 rates, the result would be $156. The same extrapolation yields $317 for Egypt and below $150 for Zaire.

Group 4. This group, which includes the major raw materials exporters, displays a divergent range of results because of different starting points. Examples of agricultural exporters are the Philippines, which could reach $650-$800 according to whether the 'pessimistic' or'optimistic' assumptions are used; and Ivory Coast for which extrapolation produces about $700.

Groups 5 and 6. These comprise countries which, because of their resource endow­ ment and/or their present levels of development, cannot be expected to move far in the direction of integration with the world market and must rely on external aid or 'collective self-reliance' with neighbouring countries. Projections for the South Asian region as a whole result in GDP per capita

between $150 and $400 in 2000. For sub-Saharan Africa similar results are obtained. The Interfutures authors comment that, for the poor countries, 'extrapolation of past performances would mean a dramatic and proba bly not tolerable increase of the number of people in a situation of absolute poverty. ' 1

6. In Interfutures' Scenario A, which requires full progressive integration of the developing countries into the world economy, world GDP is projected to multiply 3.4 times in 1970-2000 with GDP per capita multiplying 2.3 times. The Third World 's share increases from 18 per cent to 30 per cent while that of the United States de­ creases from 31 per cent to 19 per cent, the European Communities (EC) from 20 per cent to 15 per cent, and Japan 's increases from 6 per cent to I 0 per cent. In per capita terms, North America's and Japan's incomes would be around $10,000, the EC 's around $7000, the Latin American and the West Asia/North African regions ' around $2000. On the other hand, sub-Saharan Africa's would be about $350 and ' Asia's' (defined as substantially the whole ESCAP region) $270. While in 1976 the devel­ oped market economies had 67 per cent of world GDP and 20 per cent of the world 's population, they would have 52 per cent of world GDP and 15 per cent of world population in 2000.

7. Interfutures' Scenario A projection for the Third World 's share in world indus­ trial output, reflecting an assumption of especially strong growth in intra-developing country commerce in industrial goods, is for an increase from 6 per cent in 1970 to 17 per cent in 2000.

I These figures come from Interfutures working documents.

211

8. A major econometric study on the future of the world economy undertaken for the United Nations by Professor Leontief analysed the implications of a range of different assumed economic growth rate scenarios for the relativities between various groups of Third World countries, and between the Third World group and developed countries, to the year 2000. Assuming a 3.5 per cent average rate per capita for the developing and developed countries to the end of the century, the study projected that the share of developing market regions in world gross product would increase by 5 per cent by the end of the century while their share in world output of manufacturing industries would increase from 6 per cent to 11-12 per cent.

9. The extrapolation based on World Bank projections, the projections presented in Interfutures and in the Leontief study all assume a wide spread in the performance of various sub-groups of countries. No region would be actually worse off in 2000 than in 1970; significant growth would occur in all regions but on a per capita basis

differences would be considerable: the arid Africa group, including the Sahel coun­ tries, would achieve per capita growth of only $7 between 1970 and 2000 (from $205 to $212) while the middle-income Latin American group would achieve $985 com­ pared with $594 in 1970.

10. The growth assumptions on which these prospects are based are not substan­ tially more favourable than those that would represent a simple extension of broad post-1950 trends for developed and Third World countries to the year 2000. Because of this, the ratio of 12: 1 which existed between the average per capita incomes of the

developed and developing countries in 1970 would remain unchanged to the end of the century. The projected ratio would, however, be significantly less for the high­ growth countries and regions and the capital surplus oil exporters, and significantly more for the very low-growth countries.

212 Appendix L

APPENDIX L-Chapter V, paragraph 9 refers

GNP of S.E. Asian Countries, South Korea and Taiwan-Per Capita GNP (US$) in year 2000 at 1976 prices

GNP growth Low Historical High

Country Population growth Low Historical Low Historical Low Historical

Australia 12,540 11,680 15 ,780 14,700 19,810 18, 450

Singapore 12,730 11 ,860 15 ,860 14,780 19,720 18 ,380

Indonesia 490 460 620 580 780 730

Malaysia 1,790 1,660 2,240 2,090 2,800 2,610

Thailand 950 880 1, 190 1, 110 1,480 1,380

Philippines 630 590 790 740 990 930

Taiwan 3,850 3,590 4,800 4,480 5,970 5,570

South Korea 3,320 3,090 4, 130 3,850 5, 140 4,790

Notes: I. GNP is projected fo rw ard a t the 1960- 76 average annual rate (' historical growth ' ) and at I per cent per 111num below and above this rate. 2. Population is projected forward at the 1960- 76 rate ('historical ' ) and at 0.3 per cent per annum below th at rate ('low'). The low ra te is the same as an 'optimistic' estim ate in a recent World Bank staff working paper on growth and pov­ erty in the year 2000.

213

APPENDIX M-Chapter V, paragraph 13 refers

Projections of World GNP at 1976 Prices in 2000-Extrapolation of Estimates of Growth in GNP to 1985*

Group

lnd ustrialised Low-income developing Middle-income developing Centrally planned

Totalt

1976

$bill. %

4,269 63.7

191 { 2. 8

920 16 ·5 13 .7 1,324 19.7

6,704 100.0

Base

$bill. %

11,460 57. 1

616 { 3. 1

3,640 2 1.2 18.1 4,370 21.8

2000 Low

$ bill. %

10 ,2 10 56.3

588 { 3.2

3,180 20 ·7 17 .5 4, 170 23.0

High

$bill. %

12 ,85 4 58 .3

630 { 2.9

3,990 2 1.0 18 . 1 4,570 20.7

20,086 100 .0 18 , 148 I 00.0 22 ,0 44 100.0

* As contained in the IBRD 's World Development Report, 1978, p. 32 and Annex Table I pp. 76-77 - the details a re contained in the table below. t Excludes capital surplus oil exporting countries, which represented only 1.05 per cent of world GNP in 1976.

Industrialised 'Low Middle Capital surplus oil exporters

Centrally planned

Assumed Growth Rates

Base L ow

4.2 3.7

5.0 4. 8

5.9 5.3

n.a. n.a.

5. 1 4. 9

High

4.7 5.1 6.3 n.a.

5.3

Source: World Development Report, 1978 as above, except for centrally pl anned low and high figures , which are estimated on the basis that growth in industrialised countries will have a rela tively sma ll effect on their growth rates.

214 Appendix N

APPENDIX N-ChapterVII, paragraph 51 refers

Comparison Between the Aid Performance of Australia and DAC Donors-Selected Indices

Population GDP ODA I GNP Ratio

(millions)

Average

annual changes

1976 1970-76 1976-77 1970 1974 1977

Australia 13.9 3.8 0.5 0.59 0.55 0.45

Austria 7.5 4.1 3.5 0.07 0.18 0.24

Belgium 9.8 3.3 2.5 0.46 0.51 0.46

Canada 23.0 5.0 2.25 0.42 0.48 0.51

Denmark 5.0 2.5 - 0 .5 0.38 0.55 0.60

Finland 4.7 3.5 -0.75 0.07 0. 17 0. 17

France 52.9 4.3 3.0 0.66 0.59 0.60

Germany 61.5 2.5 2.75 0.32 0.37 0.27

Italy 56.2 2.9 2.0 0. 16 0. 14 0. 10

Japan 112.8 3.5 6.0 0.23 0.25 0.21

Netherlands 13.8 3.6 2.5 0.61 0.63 0.85

New Zealand 3.1 3.3 - 0.5 0.23 0.31 0.39

Norway 4.0 4.8 4.25 0.32 0.57 0.82

Sweden 8.2 2.2 -2.5 0.38 0.72 0.99

Switzerland 6.3 0.3 2.75 0.15 0. 14 0. 19

United Kingdom 56.0 2.0 0.25 0.37 0.37 0.37

United States 215.1 2.9 4.75 0.31 0.24 0.22

Source: OECD Observer No. 91, March 1978 and OECD, DAC Chairman's Report 1978, Ta ble A3, p. 191

215

The following papers were either commissioned by the Committee or prepared by the Chairman and the Secretariat. While they are not endorsed by the Committee, they are considered to be valuable background material for an understanding of the Third World.

216 Appendix 0

APPENDIX 0

THE THIRD WORLD IN THE UNITED NATIONS

(Prepared in the Secretariat)

NUMBERS

Among the 51 states which attended the first United Nations General Assembly in January 1946, only two were African (excluding South Africa), two Asian (excluding China), and six Middle Eastern (with a seventh, Afghanistan, participating in the sec­ ond part of the first session). There were also 20 Latin American states, but until the early 1960s these tended to follow the United States' lead at the United Nations (UN) and were not representative of developing country attitudes. The real influx of developing countries began around 1955-56 when nine more joined. The majority of new Third World members were African countries, 24 of which joined in the years

1960-62, and 17 since then, bringing the total of African countries in the UN to 48 (including the Arab nations of North Africa).

2. At the 1977 General Assembly there were Ill Third World countries out of a total UN membership of 149, with the newly independent Solomon Islands being admitted at the beginning of the 1978 General Assembly. Even though the percent­ age of what are now considered developing nations in the UN has increased only 15 per cent, from 60 per cent in 1946 to 75 per cent in 1977, their influence has grown more than this percentage increase would suggest, and is particularly manifested in the issues treated and, due to the substantive change in the stance of the Latin Americans, the votes carried in the UN General Assemblies.

3. As one would expect, the nations labelled Third World do not perform as a single unified bloc in the UN. However, they have displayed sufficient voting solidarity especially on issues such as anti-colonialism, racialism, self-determination, economic development and associated socio-economic issues, to create a North-South axis of polarisation perpendicular to the traditional East-West division.

4. Regardless of whether a vote in the General Assembly requires a simple majority or a two-thirds majority (in the case of an issue designated 'an important question '), the Third World has the numbers to win the adoption of resolutions important to it, should it have the will to do so. This advantage applies not only to Plenary and the Assembly's main committees, in which all members are represented , but also extends to the numerous special committees in which the most important debate on a given issue can often occur. Similarly, since the change in the membership of the Security Council in 1965 , it is now technically possible for the seven Third World delega te s in the Security Council to use the support of the three rem aining non-perm anent members to carry a resolution unacceptable to the permanent five , provided the veto is not used .

CAUCUSING GROUPS

5. Although caucusing groups are usually regio nally based , they are not identica l with the official electoral groups- Western European and other Sta te s, Ea tern

217

Europe, Latin America, Asia and Africa-used in the election of regional representa­ ' tives for numerous organs. It is really only in the case of the African members that the two groups are synonymous.

1 6. Despite the absence of rigid bloc voting, Latin American, African and Arab

caucusing groups can be easily defined and have shown considerable group cohesion and voting solidarity. The Asian countries, however, have never comprised the same sort of firm, geographically based caucusing group; they used to participate in the larger Afro-Asian caucus of the 1950s and 1960s, but now operate in the Non­ Aligned Movement (NAM) on political issues and the Group of 77 ( G77) on econ­ omic questions. This means that some members of the Asian electoral group, a very amorphous and disparate collection of about 36 states in the extensive area from the Middle East to the Pacific, including Japan and China, do not join in these caucuses as they are not members of one or other of the groups.

7. The Latin American states already had considerable experience in intra-group cooperation when the UN was formed, and formally established their UN caucusing group at the Conference of Chapultapec in 1945. The group has been well organised since then, with regular meetings covering group tactics and strategy on a wide range of Assembly topics. However, decisions taken are not binding, as has been evidenced

by the frequency with which some members vote contrary to the majority. The nu­ merical strength of the group in the early years of the UN meant that its voting sup­ port was usually necessary to ensure the adoption of General Assembly resolutions, though this advantage was less important than it seemed because of the willingness of most Latin American countries on most occasions to follow the lead of the United States. The expansion of the UN in the early 1960s meant that Latin American sup­ port ceased to be so crucial. As more Caribbean countries have gained independence,

a Caribbean caucusing sub-group has developed and has had the effect of reducing the overall cohesion of the Latin American group in this decade, paricul arly a Guyana and Jamaica are very influential in the NAM. Furthermore, the iss ue s of Belize and the Falkland (Malvinas) Islands have been divisive within the group; Cen­ tral and South American countries tend to split along ideological lines, whereas the Caribbean states are influenced by a more complex network of factors, including language, race, culture and ideological positions. While remaining a member of the

Latin American regional group for electoral purposes, Cuba now caucuses with the Soviet bloc on political issues.

8. The African caucusing groue emerged as a result of the Accra Conference of Independent African States held m April 1958, when the eight African members of the UN were directed to instruct their permanent mis sions to consult each other on matters of common concern. A temporary split into the Brazzaville and Casa bl a nca factions between 1960 and 1963 was largely overcome following the form ation of th e Organisation of African Unity (OAU) in May 1963 with the aim of devel oping better cohesion among African states in the pursuit of common go als, particul arly in relation

to decolonisation and the avoidance of negative foreign influences in Africa n pro b­ lems. The positions agreed upon in OA U gatherings such as ministerial or Head of State meetings are binding on members as regard s their UN votes and th e o ffi ce of th e OAU in New York tends to operate as a secretariat for the Africa n ca ucu in g group. The issues which African states identified as important to themsel ve - racial equ a lity, self-determination, economic development and disa rm ament ( now in term of nu­

clear development in South Africa )- have been adopted as general Third World cru­ sading banners. On black African issues, such as aparth eirl , Namibia and Zimba bw e,

...

218 Appendix 0

the group has shown exceptional cohesion. Once a policy position has been reached within the group, wider Third World support is sought through the NAM at the UN rather than through other geographically oriented caucusing groups.

9. The Arab caucusing groul? appears traditionally to have been the most dis­ ciplined and formal m Its activities. The original members of the group were those that signed the Pact of the League of Arab States in March 1945, and as new League members joined the UN they were automatically incorporated into the caucusing group. The group is most cohesive on Middle East issues, but even there deviations sometimes occur: in particular, Egypt will sometimes not support radical Arab pro­ posals and its influential position in the NAM will usually carry other non-aligned states with it. Like the African group, the Arabs seek wider support for their aims through the NAM caucusing group at the UN. While the Arab states clearly form a .::aucusing group in their own right, the north African Arab countries are also included in the African group, while the majority of the Arab nations sit uncomfortably along­ side their Asian and Pacific colleagues in the Asian electoral group.

10. The Non-Aligned Movement operates as another important caucusing group at the UN, although the very wide range of interests of non-aligned states limits the scope for formulation of NAM positions. In the absence of a permanent secretariat, the Coordinating Bureau and five specific working groups are the main vehicles for NAM policy discussion and the drafting of resolutions. The permanent mission to the UN of the host of the last NAM Summit has overall coordination and secretariat responsibilities. A NAM position is usually the result of agreement among influential delegations such as India, Yugoslavia, Algeria, Egypt, Iraq and Peru, and small non­ aligned states will often use such agreed positions as a voting guide if they lack specific instructions from their capitals. 1

II. Two other minor caucusing groups worth mentioning are the Commonwealth group, once a formal electoral group but inactive as a caucusing group until the last Commonwealth Prime Ministers' Conference in London in June 1977, from which time it has been operational on the question of Belize. The second small caucusing group is the ASEAN and Pacific, or ASEAN-Plus, group, comprising the ASEAN countries, Australia, New Zealand, Japan, Fiji, Western Samoa and Papua New Guinea. This group is significant because through it the Western members are often able to break down NAM influence, e.g. on issues such as Guam, the Solomon Islands, Tuvalu, the Gilbert Islands and the New Hebrides.

COHESION

12. To assess caucusing group cohesion, most researchers have used roll-call voting results as indicators. Different research methods and different sample votes obviously lead to varying conclusions, but the general trend during the 1950s and 1960s in re­ lation to colonialism and economic development appears to have been th at the Latin American group became progressively more cohesive, as did the African members (as their numbers increased) except during the temporary split into the Brazzaville and Casablanca factions from 1960 to 1963; the Arab group's high level of co hesion did not vary greatly; while the Asian members showed less voting cohesion. Deviati ons from group positions on issues which do not relate closely to prim ary group goa ls are determined by numerous factors , su ch as religion, form al alliances , political and economic systems.

I See Appendix Ron The Non-Aligned Movement.

219

13. In terms of the overall importance of the Third World in the UN, the growth in voting cohesion between Latin American and Afro-Asian states and the willingness of members of one group to co-sponsor resolutions drafted by the other are most sig­ nificant. Although in the early 1950s there was a considerable degree of mutual sup­ port in the UN by both groups, the development of the NAM in the late 1950s led the Latins to identify more closely with the Western camp, especially the United States, with which it has formal links. However, faced with the same problems of under­ development and economic dependence, the Afro-Asian and Latin American coun­

tries began to realise in the early 1960s that they had a common interest in achieving more favourable terms for their trade and development. This led to the formatio n of the G 77 in 1964, in which they would coordinate their policies for their participation in the Second Committee of the General Assembly and the United Nations Confer­ ence on Trade and Development (UNCTAD) meetings, as well as other UN and

non-UN arenas.

14. As the issues on which the Third World seeks to exert pressure have devel oped mainly from African or Asian problems, leadership in policy and sponsorship has emanated from the Afro-Asian states rather than the Latins. During the 1950s, when Asia was the centre of the emerging NAM, it was also the policy leader in the Afro­ Asian group, but it relinquished this position to the African states in the 1960s, reflect­ ing the growing importance of Africa both in terms of UN membership numbers and issues originating in that continent. Even on the issue initially most vital for the Third

World, decolonisation, the Latin Americans chose to moderate their support for the Afro-Asian proposals when these were aimed at a country for which the Latin · Americans felt some affinity of interest, as in the case of PortugaL

15 . As might be expected, in contrast with the high levels of voting cohesion on col­ onial and economic development resolutions, the Third World split over East-West issues. An extemely large proportion of Third World states tried to avoid supporting either the East or the West in the 1960s by abstaining or being absent for a vote. Thi

tactic was very much in evidence in votes on the unseating of Taiwan and the seating of the representatives of the People's Republic of China.

ISSUES

16. The effect of its domination of the General Assembly has been th at th e Third World has essentially controlled the agenda of that body over the la st decade and a half. It has used that control with great effect to ensure that the iss ue s which are im­ portant to it have not only dominated the proceedings of the Assembly but ha ve assumed a new prominence in international relations generally. Am ong th e key issues of concern to the Third World are:

(a) Colonialism 17. As indicated above, the principal issue on which the Third Wo rld was a bl e to achieve high levels of solidarity in the UN during the 1960s was decol onisa ti on. Re­ lated to its efforts in this field are a very selective interpretation of hum an ri ghts and a drive against racial discrimination.

18. The systematic decolonisation campaign dated from succe ss ful efforts in 19 60 to secure the General Assembly's adoption of the Afro-Asian draft Decl aration on th e Granting of Independence to Colonial Countries and Peoples ( Re so lution 15 14 XV ). The Resolution was carried by 89 votes to 0, with 9 abstentions- Au strali a, Belgium,

Britain, the Dominican Republic, France, Portugal, South Africa , Spain and th e

220 Appendix 0

United States. The Declaration (often called the Declaration on Colonialism) pro­ claims the following principles:

(i) The subjection of peoples to alien subjugation, domination, and exploi­ tation constitutes a denial of fundamental human rights, is contrary to the UN Charter, and is an impediment to the promotion of world peace and cooperation.

(ii) All peoples have the right to self-determination: by virtue of that right they freely determine their political status and freely pursue their econ­ omic, social and cultural development.

(iii) Inadequacy of political, economic, social, or educational preparedness should never serve as a pretext for delaying independence.

(iv) All armed action or repressive measures directed against independent peoples shall cease in order to enable them to exercise peacefully and freely their right to complete independence, and the integrity of their national territory shall be respected.

( v) Immediate steps shall be taken, in trust and non-self-governing terri­ tories or all other territories which have not yet attained independence, to transfer all powers to the peoples of those territories, without any con­ ditions or reservations, in accordance with their freely expressed will and desire, and without any distinction as to race, creed or colour, in order to enable them to enjoy complete independence and freedom. (vi) Any attempt aimed at the partial or total disruption of the national unity

and territorial integrity of a country is incompatible with the purposes and principles of the Charter.

(vii) All States shall observe faithfully and strictly the provisions of the Charter, the Universal Declaration of Human Rights, and this Declar­ ation, on the basis of equality, non-interference in the internal affairs of States, and respect for the sovereign rights of all peoples and their terri­ torial integrity.

19. It is worth noting the imprecision of the use of the word 'peoples' and the impli­ cation in the sixth paragraph that no ethnic or minority group included within adjac­ ent land areas of any state can aspire to independence and to UN support towards that end. The Resolution aimed at limiting the right of 'self-determination' to ex­ colonies of Western European nations and denying it to minority groups within such states after independence had been achieved.

20. At the following session of the General Assembly, the Third World secured the adoption of Resolution 1654 (XVI) providing for the establishment of a Special Committee to make recommendations on the implementation of the Declaration on Colonialism. Initially comprised of 17 nations (Australia, Cambodia, Ethiopia, India, Italy, Madagascar, Mali, Poland, Syria, Tanganyika, Tunisia, the USSR, the United Kingdom, the United States, Uruguay, Venezuela and Yugoslavia), the Committee was later enlarged to 24 members (to include Bulgaria, Chile, Denmark, Iran, Iraq, Ivory Coast and Sierra Leone) and became known as the Committee of 24. The composition ensured that the administering powers were heavily out-numbered by anti-colonial states. This Committee became the main instrument for attempts to put into effect the principles contained in the Declaration on Colonialism. A number of

administering powers eventually decided to dissociate themselves from the Com­ mittee: Italy withdrew in December 1970, the United Kingdom and the United States

221

in 1 ?71, and Australia withdrew temporarily in 1969, rejoining during the Whltlam penod of government. (Current membership: Afghanistan, Australia, Bul­ garia, Chile, China, Congo, Cuba, Czechoslovakia, Ethiopia, Fiji, India, Indonesia, Iran7 !raq, IvoiJ:' Coast, Mali, Sierra Leone, Sweden, Syria, Trinidad and Tobago, Tums1a, Tanzama, the USSR and Yugoslavia.)

21. The developing nations won an important procedural battle within the Com­ mittee. The administering powers wanted the Committee to discuss regions and measures appropriate for particular types of situations, whereas the new nations pressed for procedures which would allow for discussion on a country-by-country

basis and the adoption of resolutions by formal voting, leaving open the possibility of directly pressuring recalcitrant regimes by sending visiting missions to and receiving petitions from individual colonies. The procedures finally accepted by the General Assembly recognised that it was preferable to reach consensus but that if required the Committee would put issues to the vote, and that it was necessary to gain the co­ operation of administering powers before sending missions to their colonies.

22. The Third World has used the Committee of24 and its sub-committees as orig­ inating points for initiatives and as organs of constant surveillance of colonial areas. Even though the few Western representatives on the Committee have often been able to exert a slightly moderating influence in the formulation of recommendations and

draft resolutions for the General Assembly, they have not been able to counterbal­ ance the anti-colonial majority.

23. The ability of the Third World to use the Committee of24, the General Assem­ bly and the Security Council to further its aims in relation to colonial iss ue s is best illustrated by specific examples.

Southern Rhodesia! Zimbabwe 24. At the 1961 General Assembly, despite Western and Latin America n oppo­ sition, the Committee was requested to 'consider whether the territory of Southern Rhodesia had attained a full measure of self-government'. The Committee's effo rts to convince the British Government to intervene in Southern Rhodesia to bring abo ut an end to racial discrimination and the establishment of a fully representative govern­

ment prior to the granting of independence were unsuccessful , as Britain argued that the colony had been self-governing since 1923 , thereby falling o utsid e the com­ petence of the UN and Britain with regard to internal matt ers. Despite severa l Gen­ eral Assembly resolutions- each stronger than the la st- calling on Britain to take

action, and the convening of a Security Council meeting in Septe mber 1963 , at th e re­ quest of 32 African states, to examine the threat to African peace and security pose d by Southern Rhodesia, the Afro-Asians were not a ble to force the degree of UN in­ volvement in the Southern Rhodesian question they had wanted.

25. It was Southern Rhodesia's threats to declare independence unil atera ll y, a nd it declaration to that effect on 5 November 196 5, th at led to the implementatio n of some of the UN measures that the Africans had so ught. On 6 May 1965 , the Security Council adopted its first resolution on Southern Rhodesia, req ue tin g th e nited

Kingdom to take all necessary action to preve nt a unil ateral decl aration of indepen­ dence (UDI) and to grant independence only in accord ance with th e a piration of the majority of the population. Following th e UDI, th e General A embly a nd the Security Council both passed resolutions condemning th e So uth ern Rhode ia n action calling on member states not to recognise or as i t the regime a nd , in th eca e o f the

General Assembly resolutions, urging Britain to take teps to re ume ad mini tratio n

222 Appendix 0

of the territory. In supporting the Security Council resolution, Britain explained that once UDI had been declared the only legal government in Southern Rhodesia was the British Government, and it was clearly a matter for British action and inter­ national concern that an attempt was being made to establish an illegal regime based on minority rule.

26. As the result of its failure to obtain agreement from the Southern Rhodesian regime on settlement proposals, the British Government recommended that the Security Council impose mandatory sanctions on Southern Rhodesia. Resolution 232 of December 1966 defined the situation in Southern Rhodesia as a threat to inter­ national peace and security and imposed mandatory economic sanctions in relation to the purchase of nine Southern Rhodesian exports and the supply of military equip­ ment, oil or oil products. Eighteen months later, in view of the failure of selective mandatory sanctions to bring about the collapse of the illegal government, the African states called for another Security Council meeting on Southern Rhodesia. On 29 May 1968, the Council adopted Resolution 253 whereby it decided to apply mandatory sanctions with regard to all trade, investment and travel. It soon became clear that even these measures would not have the desired effects, due to extensive violations and evasions. Despite calls by both the OAU and the General Assembly to the Security Council to take more severe measures against Southern Rhodesia, stronger resolutions could not obtain Western approval. This marked the dead end of the consideration of the Southern Rhodesian question by the Security Council.

27. Although the African states did not succeed in convincing the United Kingdom to use force against the white Southern Rhodesian regime or in having the Security Council extend the sanctions imposed on Southern Rhodesia to its supporters, South Africa and Portugal, by forcing the international community to focus repeatedly on

the situation in Southern Rhodesia/Zimbabwe, they saw fulfilled their aims of havin g the Security Council categorise the situation in that country as a threat to international peace and security, apply comprehensive mandatory sanctions, and confirm the legit­ imacy of the support given by African and other states to Zimbabwean opponents of

the white regime.

South West Africa! Namibia 28. An even more long drawn out decolonisation exercise which has attracted enor­ mous Third World attention is that of South West Africa/Namibia. This has been a problem for the UN since 1946, when South Africa, the administering power under the League of Nations Mandate since 1920, refused to enter into a Trustee ship Agree­ ment with the UN. The General Assembly submitted the issue to the International Court of Justice (ICJ) several times in the 1950s for advisory opinions, and de spite th e ICJ's endorsement of the UN 's view that the mandate status persisted , South Africa continued to ignore these opinions, contending that they were political rather th an legal.

29. In 1960, at the request of the Second Conference of Independent Africa n States, Ethiopia and Liberia initiated a litigation against South Africa in the ICJ on th e grounds that South Africa had violated the Mandate by extending apartheid to South West Africa, unilaterally changing the legal status of the Territory and failing to sub ­ mit reports to the General Assembly. During the time in which the South Wes t Africa question was sub judice, the West did not want it dealt with in the UN , but Africa n pressure kept the issue on the agenda and led to numerous General Assembly reso l­

utions condemning South Africa.

223

30. When the ICJ handed down its decision in July 1966, dismissing the claims put by Ethiopia and Liberia without ruling on the merits of the case, the Court frustrated the African states' expectation of a restatement of earlier ICJ advisory opinions in binding form and provoked considerable bitterness towards both the Court and the Western nations which had supported 6 years of legal proceedings. In response, the OAU began a campaign through the African group at the UN to find a political sol­ ution to the problem. In October 1966, at the 21st Session of the General Assembly, as the result of intensive effort by African and Asian states, Resolution 2145 was adopted, terminating South Africa's mandate and theoretically placing the Territory under the direct responsibility of the UN. The Fifth Special Session of the General Assembly adopted Resolution 2248 in May 1967, providing for the establishment of a Council for South West Africa to arrange the transfer of the Territory. However,

although virtually all of the African, Asian and Latin American states voted in favour of the Resolution, most of the states that were capable of exerting some influence on South Africa were among those abstaining, thus casting some doubt upon the effec­ tiveness of the envisaged Council.

31. African demands for effective UN action became more intensive after South Africa sentenced to death 33 of 37 prisoners on charges of terrorism in February 1968, and shortly after frustrated an attempt of the Council for South West Africa to enter the Territory. This led to General Assembly Resolution 2372, renaming the Ter­ ritory 'Namibia' and calling on the Security Council to. take measures to ensure there­

moval of the South African presence. In March and August of 1969, the Security Council adopted resolutions calling on South Africa to withdraw from the Territory.

32. Persistent non-compliance by South Africa eventually led the Security Council to refer the issue once again to the ICJ, whose opinion, handed down in June 1971 , was entirely supportive of the anti-South African position. Despite Western members' advocacy of the continuation of a dialogue between South Africa and UN representa­

tives, including the Secretary-General, the Security Council voted in December 197 3 to end consultations with South Africa and the Territory (Resolution 342 ). Having succeeded in the Security Council, the Africans then worked in the General Assembly to have Resolution 3111 adopted in December, recognising the South West Africa

People's Organisation (SWAPO) as the 'authentic representatives of the Namibian people' and demanding immediate withdrawal ofSouth African military forces .

33. A gradual change in the attitude of the South African Government led to its official recognition on 27 May 1975 of the international status of Namibia. Within the framework of Security Council Resolution 385 of January 1976, the five Western members of the Council, through a' contact group' of senior officials, have continued

negotiations with South Africa, SWAPO and the' front line' states. Although the UN continues to be involved, both through decisions such as the Security Council's Reso l­ ution 435 of January 1978, which, inter alia, established the United Nations Tran­ sitional Assistance Group (UNTAG) to aid in the transfer of power to democraticall y elected Namibian representatives, and through the Secretary-General 's Special

Representative to Namibia, the onus of negotiating a peaceful transition to indepen­ dence, and therefore the weight of African pressure, is really on the five We tern powers.

Portuguese Colonies 34. The third outstanding example of Afro-Asian press ure co ntributing to th e decolonisation process in Africa is, of course, in relation to the former Portu gue e co l­ onies there. Both as a colonial power which refused to bow out gracefully, prefernng

224 Appendix 0

to react to liberation movements with violence, and as a supporter of the white regime in Southern Rhodesia, Portugal was the object of numerous condemnatory UN resol­ utions. Efforts by the African states to have the Security Council apply mandatory economic and diplomatic sanctions failed because of Western unwillingness to take

any measures against Portugal, other than supporting a voluntary partial arms embargo.

35. Although the rhetoric and action of anti-colonial states in the UN was certainly not the only, or even the main, factor which induced Portugal to take rapid steps towards decolonisation after the coup d'etat brought the overthrow of the dictator­ ship, it was certainly very influential. Mario Soares said in his speech to the General Assembly in September 1974:

'unfortunately, the oppression and obscurantism which prevailed in Portugal for almost fifty years have up to now impeded any fruitful cooperation and resulted in the systematic disregard of the recommendations of the UN ... . . Portugal has sol­ emnly reaffirmed what its constitutional laws already guarantee: that it fully recog­ nises the right of people to self-determination and independence. Portugal is, there­ fore, ready to apply the UN decisions to that effect .... '

36. The outstanding achievement of the Afro-Asian nations in the UN in the 1960s was that they were able to forge an international moral consensus against the continu­ ation of Western colonialism by forcing UN and world attention to keep focusing on colonial situations and by maintining a constant flow of anti-colonial demands and rhetoric. At the behest of these nations the Assembly moved from general pronounce­ ments of moral and legal rights, such as the 1960 Declaration on Colonialism, to con­ demnations of specific nations and requests for diplomatic, economic and military sanctions. 1 Through the Special Committee on Colonialism they maintain a close watch on the remaining non-self-governing terrritories, including the Cocos (Keeling) Islands administered by Australia, and other cases in Australia's region such as Brunei, the New Hebrides, the Gilbert Islands, Pitcairn, American Samoa and Guam, and have managed to have included on the Committee's agenda issues such as foreign military bases and foreign economic interests in non-self-governing territories. Although the Latin Americans did not often oppose resolutions which, directly or by association, condemned Portugal, because of the influence of Brazil , which is histori­ cally linked to Portugal, they preferred abstention, gradually moving towards support for decolonisation resolutions as the Western states' attitude softened.

37. The often claimed right to self-determination has sometimes been extended to situations not strictly involving decolonisation but which lend themselves to being depicted in terms of a Third World country suffering the aggression of a non-Third World state, as in the case of Cyprus in the mid 1960s. By appealing to the principle of self-determination, Cyprus won considerable support from the non-Arab African nations in its dispute with Turkey and succeeded in having its draft re solution passed in the General Assembly.

38. For the Third World, the importance given in the UN to human rights has bee n but another vehicle for advancing their attack on colonialism and racial dis­ crimination by the West. As observed by one author: 'Traditionally, the promotion of human rights has been viewed from the perspecti ve

of protecting the citizen in the fullest possible exercise, compatible with orga nise d

The chart in Annex A shows how the percentage of' no ' votes cas t by France, th e United Kin gdo m a nd the United States gradually decreased between 1950 and 1966 on 14 5 deco1onisa ti o n re solutions.

society, of those rights that flow from the dignity and worth of the individual. For this perspective, centred on the individual, the new nations have substituted a perspective centred on the evils of Western colonialism with its domination of black by white. ' 1

(b) Racialism2

225

39. Another issue used increasingly by the Third World in the decolonisation cam­ paign is that of racialism, particularly in relation to' semi-colonial' situations such as apartheid in South Africa and Palestinian refugees. This greater emphasis on racial questions led to the declaration of the Decade to Combat Racism and Racial Discrimination, 1973-83, and the adoption of a Program of Action for the Decade, from which the United States withdrew in opposition to General Assembly Resol­ ution 3379 of November 1975 denouncing zionism as a form of racism. As part of the Program of Action for the Decade, a World Conference to Combat Racism and

Racial Discrimination was held in Geneva in August 1978, out of which most Wes­ tern delegates walked in protest at the adoption of two paragraphs in the Conference Declaration.

Apartheid 40. The most prominent target of UN activity against racial discrimination is South Africa. Although the problem of apartheid has been considered by the Assembly since 1946, it was only after the Sharpville incident in 1960 that the Security Council,

meeting at the request of the African and Asian states, adopted a resolution recognis­ ing apartheid as a threat to international peace and security. This also marked the be­ ginning of Afro-Asian pressure to have mandatory economic and military sanctions applied against South Africa.

41. During the 1960s, the Africans ensured that resolutions were regularly passed condemning South Africa and its major trading partners and requesting members to apply economic sanctions. In 1963 the Security Council recommended an arms em­ bargo, and in 1970 condemned violations of that embargo but not until November

1977 was the embargo made mandatory. Even though Western Security Council members have allowed Council recognition of the 'legitimacy of the struggle of the oppressed peoples of South Africa in pursuance of their human and political rights', they still resist the application of mandatory economic sanctions, largely because of

the considerable Western economic interests in South Africa.

42. Although there has been pressure from the African states since the early 1960s for South Africa to be expelled from the UN, it was not until 1974 that the Credentials Committee rejected South Africa's credentials, also asking the Security Council to' re­ view the relationship between the UN and South Africa '. Vetoes by Fra nce , th e

United Kingdom and the United States saved South Africa from expulsion fr om the UN, but the General Assembly subsequently voted to suspend South Africa fro m further participation in its proceedings.

Zionism 43. The Arab states and the Palestine Liberation Orga ni sa tion (PLO ) have attempted to widen Third World support for their campaign again t Israe l by linkin g

I David A. Kay, Th e New Nations in th e UN 1960- 6 7, Columbia U nj ve rsity Pre s, ew Yo rk, 1970 , p. 6.

2 The terms ' racism' a nd 'racia lism' te nd no w to be used inte rcha ngea bl y with rme r bei ng th e te r m most often used in the UN co ntext. Ho wever,' racia li s m ', mea nin g racia l prej udice o r discrimin a ti o n , h a been preferred usage in this Repo rt a nd ' racis m ' is use d o nl y whe n re ferrin g to a titl e o r quotin g th e tex t o fa UN resolution.

226 Appendix 0

that campaign to issues on which there is substantial Third World solidarity. Even though they have been able to secure the adoption of numerous resolutions which the West generally has considered unacceptable, their tactics have not achieved unqualified Third World support. In particular, the Latins tend to abstain on resol­ utions on Palestine and the Middle East dispute.

44. With General Assembly Resolution 3151 G of December 1973, which con­ demned the 'unholy alliance between Portuguese colonialism, South African racism, zionism and Israeli imperialism', the Arabs initiated a process of trying to identify zionism with racism, in the hope that Israel's expulsion and other sanctions could ultimately be achieved. The climax of this campaign was the adoption of Resolution 3379 of November 1975, but as well as most Western states, some African and Latin American members opposed this Resolution, and it has been suggested that some ten­ sion arose between the African and Arab groups as a result of the latter's attempt to encroach upon African leadership on the racialism issue.

(c) Economic Issues 1 45. Having evolved parallel to the various political problems between the Third World and the West, the confrontation on economic issues has become the dominant theme of their debate in the 1970s.

46. Since the declaration of the first UN Development Decade in 1961, Third World proposals on aid and development have become increasingly numerous, demanding and specific. The Third World's first major achievement in this field was the establishment of UNCTAD in 1964 as a permanent forum for negotiation on economic issues and whose secretariat and procedures they largely control. Against a

background of drastic oil price rises, a worsening international economic recession, and growing Third World frustration over the West's unwillingness to consider seriously the developing countries' demands, the UN Special Session on Raw Materials and Development (Sixth Special Session) was held in April-May 1974. The scope of this session represented a Third World victory in that the West wanted to dis­ cuss only oil but the Third World managed to have the agenda expanded to cover a wide range of development issues. Although the attitude of the West at this Session remained unaccommodating, the developing country majority secured the adoption of the Declaration on the Establishment of a New International Economic Order and the Programme of Action designed to implement the Declaration. These resolutions were later approved by the General Assembly in 1974 and put together in a Charter of Economic Rights and Duties of States.

47. The Seventh Special Session in September 1975, convened to consider develop­ ment problems, witnessed the emergence of a new approach by Western govern­ ments, particularly the United States. The confrontation of the Sixth Special Session was replaced by the initiation of genuine negotiation resulting in a final compromise resolution which recognised the legitimacy of some Third World demands. This more conciliatory Western attitude in general - even though borne out in relatively limited practical changes-and the West's willingness to negotiate on the Common Fund in particular-the G77's primary goal at UNCTAD IV - have been the Third World 's most significant recent achievements within its overall success in forcing the devel­ oped world to focus so much attention on Third World economic and developm ent

I Dealt with very briefly in this paper; see Appendix Q on the G77 and the North-South Dialogue .

227

problems. In part because of the satisfaction resulting from the political and economic concessions it has won from the West, and in part because of a better understanding of the complexities of the issues involved, Third World demands in the economic sphere have now lost some of their earlier stridency and are less extreme.

(d) Other Issues 48. The basic conflict of control over and access to resources of all types reappears in various guises in many of the UN specialised agencies, conferences and subsidiary bodies. Debates on environmental issues, telecommunications, transnational corpor­ ations and the mass media, for example, have been characterised by the divergence of views held by the developed and developing nations. At the Law of the Sea Confer­ ence, the developed and developing states are divided over the system by which the extensive minerals of the sea-bed beyond national jurisdiction are to be explored and exploited, and, consequently, over the powers to be entrusted to the International Sea-Bed Authority. In some UN forums, there has been a growing problem of poli­

ticisation, e.g. by drawing on references to southern Africa or Israel, with the result that the technical functions are overshadowed by unrelated political disputes.

49. Although the Third World, through the NAM, has repeatedly sought to play a major role in the disarmament debate, it has been largely unsuccessful. Conscious of its inability to influence significantly the decisions of the principal world powers with regard to conventional and nuclear weapons limitations, the Third World is very

much in favour of a strengthened role for the UN in disarmament. The less developed countries ( LDCs) argue that the developed states should reduce their expenditure on armaments and use the resulting savings for increased development assistance. Although the West is genuinely sympathetic to this argument, many practica l prob­ lems would need to be solved before such a plan were implemented as there is nodi­

rect link between disarmament and development. The Soviet bloc believes savings as a result of arms control should be directed to domestic needs. The developing coun­ tries agree on the need for their assured access to nuclear technology and equipment for peaceful purposes, but whereas some are strong supporters of the No n­ Proliferation Treaty others, such as India and Brazil, are equally strongly opposed to it, on the grounds that it circumscribes their options.

50. Allegiances based on political, military, economic, religious, cultural, lin guistic and other ties can also lead to a breakdown of Third World voting co hesion, with th e votes on East Timor being the best recent example of that. On iss ue s which are poten­ tially divisive for the Third World, the Non-Aligned group at the UN o ft en prese nts a draft resolution which is so anodyne, confirming general principles such as self­ determination, freedom from foreign intervention, and peaceful so lutions, th a t a pub­ lic split is avoided.

THE THIRD WORLD IN OTHER MAJOR UN ORGANS

51 . Although from the early 1960s onward s the Third World 's ' auto matic majority ' in the General Assembly has meant that its reso lutions co uld be adopted despite o p­ position from the developed states, the achievement of the sa me goal in th e Securi ty Council has proved to be much harder.

52 . Until 1960, the non-permanent members o f the Security Coun cil po n ored very few resolutions in comparison with the 5 permanent member and until 1965 th e Southern bloc had only 46.7 per cent success in securin g adoption of th e 30 dra ft re -olutions it introduced in comparison with an average success rate of 80 per ce nt for

228 Appendix 0

the permanent Western members. During that period the Western and Southern blocs co-sponsored 15 resolutions with 86.6 per cent success, while the Soviet and Southern blocs did not co-sponsor any resolutions. From 1960 to 1965 the Southern bloc countries showed a divergence from United States voting positions on North­ South issues, indicating that the East-West cleavage was receding in prominence. The

alignment of the Soviet Union with the South on many North-South votes was indica­ tive of the growing competition for Southern support by the Western and Soviet bloc leaders.

53. Since 1965, the developing countries have enjoyed an increasingly important role in the Security Council. It was in 1965 that the decision to expand the Council to include I 0 non-permanent members instead of 6, with the number of votes required for adoption of resolutions increasing from 7 to 9, took effect. The distribution of elec­ tive seats is now:

5 for Africa and Asia (usually 3 African and 2 Asian) 1 for Eastern Europe 2 for Latin America 2 for Western European and other States (WEOG) Two specific manifestations of Third World influence in the Security Council are the fact that Security Council meetings were held in Addis Ababa in 1972 to consider African questions and in Panama City in 1973 to deal with the Panama Canal Treaty; and the changed attitude of the Council to requests for non-members and representa­ tives of political parties and liberation movements to appear before it. Since 1971 , African nationalists have been frequent participants in Security Council debates and the PLO is regularly invited to take part on the same basis as UN members.

54. In view of the Afro-Asian preoccupation with colonial and racial issues-in which they can usually count on the support of the Latin American countries an,d the Eastern bloc to have resolutions adopted-the African and Asian representatives have tended to use the Security Counci: as a propaganda platform rather than as an organ for furthering international cooperation and maintaining peace. Their proclivity towards extreme declarations and impractical proposals, leading to resolutions which would not be implemented, has somewhat undermined the Council's authority, and the fact that the Afro-Asian nations have also used the Council as a forum for discuss­ ing minor matters has made the permanent members reluctant to bring major inter­

national issues before the Council.

55 . In contrast with the concentration on Cold War issues and membership appli­ cations in the Council's first two decades when the veto was used almost exclusively by the USSR (I 04 times in a total of I 08 vetoes in the Security Council to 1965 ), the prominence of southern African and Middle Eastern issues in the Council's proceed­ ings has resulted in the veto now being used mainly by the West in defence of their policies in these regions (33 vetoes by permanent Western members in a total of 41

from 1966 to 1977).

56. The Third World has pressed for and achieved greater representation not only in the General Assembly and Security Council but throughout the UN generally. The same resolution of 1963 which approved the expansion of the Security Council increased the Economic and Social Council from 18 to 2 7, most of the new seats being for Afro-Asian states, and this number was doubled by Resolution 2847 of December

1971 , so that the Council now comprises 14 African seats, II Asian, 10 Latin American, 13 WEOG, and 6 Eastern European seats.

229

57. Similarly, in the early 1960s, the new nations began demanding greater representation in the UN Secretariat to ensure responsiveness of the UN administration to their social and developmental goals. The net effect of Third World pressure to this end is that whereas the Secretariat was overwhelmingly staffed by Western officials in the initial years of the UN, in mid-1975 40 Third World countries, and no developed countries, were grossly over represented in comparison with their 'desirable range'. However, some developing countries are still under represented.

58. The basic guidelines for UN Secretariat recruitment give priority to competence but the principle of geographical distribution is expressed in desirable ranges for professional posts calculated on the basis of 2 to 7 posts for each state by virtue o f its membership (minimum of 2 per state; whether there are more depends upon the quality of the applicants); 200 posts distributed among regions according to their

population; and remaining posts allocated according to assessed budget contributions. Under represented LDCs dispute the importance of individual merit, seeing it as a means of favouring developed nations. LDCs also se ek preferential treatment for their nationals in promotion to senior posts, and in the staffing of specialised bodies, such as the United Nations Industrial Development Organisa tion

(UNIDO), which were established to assist Third World development.

59. Despite its greater representation, it does not appear th at the Third World has been able to use the Secretariat to its own advantage, as has certainly been the case with the UNCTAD Secretariat. Nevertheless, the fact that the Secretariat has to represent the majority view in UN assemblies has meant that Third World posi tions have been favoured to some degree in the drafting of documents. The in stitutional checks inherent in a system which produces papers by me a ns of collective disc ussion

prevents the emergence of flagrant partisanship.

60. Beyond the principal organs of the UNO, the Third World has a lso been influential in various UN subsidiary bodies and specialised agencies. This influence has been exercised predominantly in the economic area, reflecting the priority given by the Third World to development related issues. Their constant press ure led to th e

adoption of resolutions in 1962 for the establishment of UNCTAD and in 19 65 for the establishment of UNIDO, subsidiary bodies which operate alm ost exclusively for the benefit of the developing nations and which have enj oyed a high degree of

autonomy. Despite this exceptional degree of administrative freedom within th e UN system, UNIDO is in the process of being converted into a specialise d age ncy , again as the result of pressure from Third World countries which believe th at this wou ld make UNIDO more effective in meeting their needs. The developing coun tri es a lso successfully campaigned over a long period for th e formation of a UN Capital

Development Fund in 1966, but to little avail , as th e wealthy states have refu sed to contribute to the Fund on a significant scale. In many of th e specialised agencies, th e developing countries are currently attempting to bring abo ut changes in the ba lance of control in order to ensure that the agencies' activities are directed more to the needs of the LDCs and that a greater proportion of th e budget is spent o n deve lopment

programs.

BUDGET CONTRIBUTIONS

61. A General Assembly Committee on Contributio n re co mm end a ca le of assessments according to a state's capacity to pay , using estim ate of national inco me as a guide. The terms of referen ce of the Co mm ittee recogni e that de el opin g countries, especially those with the lowest per capita income , require pecial

230 Appendix 0

consideration. In 1977, the minimum rate of assessment was lowered from 0.02 per cent to 0.0 I per cent of the UN budget, and this contribution was allocated to 67 countries for 1978 and 1979 (see Annex B). In 1977, the assessment for 117 developing countries amounted to 11.73 per cent of the budget, leaving the remaining 2 7 members 88.2 7 per cent to pay. Assessed contributions are intended to meet the costs of the UN regular budget and part of the expenses of the specialised agencies; remaining expenses for the specialised agencies and other UN funds and programs are met through voluntary contributions, which are made predominantly by developed states.

REACTIONS OF THE FIRST AND SECOND WORLDS

62. The reaction of the Soviet bloc to the phenomenon of the Third World 'taking over' in the UN on issues important to the developing nations has been essentially exploitative: it takes advantage of the Third World pressure on Western nations by supporting decolonisation and anti-racialism resolutions, but is noticeably reticent about contributing in a material way to any measures which will further Third World aims, unless there is a tangible benefit for the Soviet bloc. Similarly, in the area of economic assistance and development, the USSR makes all the right noises for Third

World listeners, but offers no financial support for the principles it espouses publicly, claiming no responsibility for the consequences of colonialism and neo-colonialism in the Third World. Whether because it accepts this argument, or whether because it realises that pressure on the Soviet bloc is unlikely to lead to greater Soviet aid disbursement or trade benefits, the Third World has, so far at least, directed little criticism towards the Soviet Union for its lack of economic assistance.

63. It is in keeping with the Soviet Union's parsimoniousness towards the developing countries that it has a record of resisting any expansion of UN bodies, agencies or budgets, partly because it wishes to prevent an increase in supranational power accruing to the UN and partly for straight financial reasons.

64. The reactions of the Western powers to Third World pressures on prominent political questions has been indicated as the issues were reviewed. In the economic sphere, the Western nations have resisted giving in to many Third World demands, but made concessions where they felt able, always within the framework of the existing economic system. The West has not been able to present a fully coordinated response to Third World economic demands as the reactions of individual Western states vary from the reluctance of West Germany to make any concessions, to the much more forthcom ing approach of the Scandinavians.

65 . Obviously, Western states will not be bound by UN resolutions to carry out measures with which they disagree and even when voting in favour of a re solution they sometimes enter reservations on specific sections which they oppose. Their primary objective in the UN seems to be to avoid confrontation with the Third World and also, when possible, to avoid much negotiation, preferring to carry this out in

forums in which they are not so disadvantaged bynum bers.

CONCLUSION

66. The overall effect on the growth of Third World representation and press ure in the UN has been that it has become very much more a Third World forum. In view of the limited human and economic resources of many Third World countries, th e UN , especially the General Assembly, is in most cases the principal vehicle for th e

231

enunciation and implementation of their foreign policies, and the most important single avenue for exerting pressure on the developed world to make the concessions the Third World claims are necessary for its political, economic and social advancement. It has been able to press almost the entire UN system into the service of these goals, and by far the greatest proportion of UN funds is now devoted to development linked activities.

67. Despite the fact that the UN General Assembly is not a legislative body, the Third World majority attempts to make the semi-parliamentary proceedings lead to resolutions which are binding through their moral force. The following assessment of the implications of this trend indicates why the Western world continues to take the

UN seriously: 'An increasingly prevalent opinion is that repeated General Assembly resolutions supported by a broad majority cannot simply be regarded as irrelevant in terms of international law. However, the political importance is more important than possible ramifications with respect to international law. Texts which are adopted by a large

majority of the states and confirmed by continual repetition become political re ality and established data, guidelines and criteria which cannot be ignored in international discussions or negotiations. Thus the Western industrialised countries find themselves being subjected to

increasing pressure. Their international position will be compromised if resolutions which do not take their interests into consideration are adopted and used against them.''

68. Only Security Council resolutions can be made binding on members in other than a moral way. As long as the veto mechanism exists in the Security Council, the major developed nations have the power to prevent the UN from becoming a quasi­ supranational government dominated by smaller states-which is precisel y wh y it was

made a condition for the setting up of UNO and why it will never be a bolished .

69. At the same time, however, it would be a mista ke to dismiss out of hand the Third World's control of the General Assembly because its decisions are not binding. There is such a thing as moral or symbolic power which ca n on occasion profoundly influence events. Like the Roman Catholic Church, the United N atio ns has no

military divisions; but like that and other Churches, it has a kind of authority derived from the fact that, despite many aspects of its performa nce , it still embodies the aspirations and hopes of millions of people- including in the West- for a mo re peaceful and just world order. It is not necessary to sha re these aspira tio ns in ord er to recognise them as a political fact.

31 Ma rch 1979

I Walter G orenflos, ' The UN and Intern a tio na l Po litics ', A ussenpolitik , N o. 2 , 1976, pp. 179 - 19 1.

232 Appendix 0

ANNEX A

(From David A. Kay, The New Nations in the UN 1960-67, Colombia University Press, 1970.)

Percent

50

25

Asscm bly Sessions __ ... ....,, Fl'LJ!lCC

Member state

Afghanistan Albania Algeria Angola Argentina Australia Austria

Bahamas Bahrain Bangladesh Barbados Belgium Benin Bhutan Bolivia Botswana Brazil Bulgaria Burma Burundi

------- United Kingdom

•••••••••• United States

CHART IV. I Percentage of 'no' votes cast by France, the United Kingdom, and the United States on selected decolonisation issues, Fifth to Twenty-First Sessions of the General Assembly.

ANNEX B

(From the Report of the Committee on Contributions, UNGA, Official Records, Thirty-Second Session, Supplement No. II , A/32/ II)

Scale of Assessments

(1) (2)

1974-1976 /977

scale scale

0.02 0.02

0.02 0.02

0.08 0. 10

0.83 0.83

1.44 1.52

0.56 0.63

0.02 0.02

0.02 0.02

0.08 0.04

0.02 0.02

1.05 1.07

0.02 0.02

0.02 0.02

0.02 0.02

0.02 0.02

0.77 1.04

0. 14 0. 13

0.03 0.02

0.02 0.02

(3)

Scale

recommended for 1978 -79

0.01 0.01 0.10 0.0 2 0.8 4

1.54 0.64 0.0 1 0.0 1 0.0 4 0.0 1

1. 08

0.0 I 0.0 1 0.0 I 0.0 1

1.04

0. 14 0.0 1 0.0 1

233

(/) (2) (3)

Scale

19 74-1 976 1977 recommended

Member state scale scale for 1978-79

Byelorussian Soviet Socialist Republic 0.46 0.40 0.4 1

Canada 3.18 2.96 3.04

Cape Verde 0.02 0.0 I

Central African Empire 0.02 0.02 0.0 1

Chad 0.02 0.02 0.01

Chile 0. 14 0.09 0.09

China 5.50 5.50 5.50

Colombia 0. 16 0.11 0. 11

Comoros 0.02 0.01

Congo 0.02 0.02 0.0 1

Costa Rica 0.02 0.02 0.02

Cuba 0. 11 0.13 0. 11

Cyprus 0.02 0.02 0.0 1

Czechoslovakia 0.89 0.87 0.84

Democratic Kampuchea 0.02 0.02 0.0 1

Democratic Yemen 0.02 0.02 0.0 1

Denmark 0.63 0.63 0.64

Djibouti 0.02 0.0 1

Dominican Republic 0.02 0.02 0.02

Ecuador 0.02 0.02 0.02

Egypt 0. 12 0.08 0.08

El SaJvador 0.02 0.02 0.0 1

Equatorial Guinea 0.02 0.02 0.0 1

Ethiopia 0.02 0.02 0.0 1

Fiji 0.02 0.02 0.0 1

Finland 0.42 0.4 1 0.44

France 5.86 5.66 5.8 2

Gabon 0.02 0.02 0.0 1

G ambia 0.02 0.02 0.01

German Democratic Republic 1. 22 1.35 1.33

Germany, Federal Republic of 7.10 7. 74 7.70

Ghana 0.04 0.0 2 0.02

Greece 0.32 0.39 0. 35

Grenada 0.02 0.02 0.0 1

Guatemala 0.03 0. 02 0.02

Guinea 0.02 0.0 2 0.0 I

Guinea Bissau 0.02 0.02 0.0 I

Guyana 0.02 0.0 2 0.0 I

Haiti 0.02 0. 02 0.0 1

Honduras 0.02 0.02

0.0 1

Hungary 0.33 0. 34

0.33

Ice la nd 0.02 0.0 2

0.02

India 1.20 0.70 0.68

Indonesia 0. 19 0. 14

0. 14

Iran 0. 20 0.43

0.40

Iraq 0.05 0. 10

0.08

Ireland 0. 15 0. 15

0. 15

Israel 0. 2 1 0.24

0.23

Italy 3.6 0 3.30

3.38

Ivo ry Coast 0.02 0.02

0.02

Jamaica 0.02 0.0 2

0.02

Japan 7. 15 8.66

.6 4

Jordan 0.02 0.02

0.01

Kenya 0.02

0.02 0.0 I

Kuwait 0.0 9 0. 16

0. 15

Laos 0.02

0.02 0.0 I

234 Appendix 0

( 1) (2) (3)

Scale

1974-1976 1977 recommended

Member state scale scale for 1978-79

Lebanon 0.03 0.03 0.03

Lesotho 0 .02 0.02 0.01

Liberia 0.02 0.02 0.01

Libya 0.11 0.17 0.16

Luxembourg 0.04 0.04 0.04

Madagascar 0.02 0.02 0.01

Malawi 0.02 0.02 0.01

Malaysia 0.07 0.09 0.0 9

Maldives 0.02 0.02 0.0 1

Mali 0.02 0.02 0.01

Malta 0.02 0.02 0.01

Mauritania 0.02 0.02 0.01

Mauritius 0.02 0.02 0.01

Mexico 0.86 0.78 0.79

Mongolia 0.02 0.02 0.0 1

Morocco 0.06 0.05 0.05

Mozambique 0.02 0.02

Nepal 0.02 0.02 0.01

Netherlands 1.24 1.38 1.42

New Zea land 0.28 0.28 0.26

Nicaragua 0.02 0.02 0.0 1

Niger 0.02 0.02 0.01

Nigeria 0.10 0.13 0.13

Norway 0.43 0.43 0.45

Oman 0.02 0.0 2 0.01

Pakistan 0.14 0.06 0.07

Panama 0.02 0.02 0.02

Papua New Guinea 0.02 0.01

Paraguay 0.02 0.02 0.0 1

Peru 0.07 0.06 0.06

Philippines 0. 18 0.10 0.10

Poland 1.26 1.40 1.39

Portugal 0. 15 0.20 0. 19

Q a tar 0.02 0.0 2 0.02

Romania 0.30 0.26 0.24

Rwanda 0.02 0.02 0.01

Samoa 0.01

Sao Tome and Principe 0.02 0.0 1

Suadi Arabia 0.0 6 0.24 0.23

Senegal 0.02 0.02 0.0 1

Seychelles 0.01

Sierra Leone 0.02 0.02 0.01

Singapore 0.04 0.08 0.08

Somalia 0.02 0.02 0.0 I

South Africa 0.50 0.40 0.42

Spain 0.99 1.53 1.53

Sri Lanka 0.03 0.02 0.02

Sudan 0.02 0.02 0.0 1

Surinam 0.02 0.0 1

Swaziland 0.02 0.02 0.0 I

Sweden 1.30 1.20 1. 24

Syria 0.02 0.02 0.02

Thailand 0.11 0. 10 0. 10

Togo 0.02 0.02 0.0 1

Trinidad and Tobago 0.02 0.02 0.03

Tunisia 0.02 0.02 0.02

235

(/) (2) ( 3)

Scale

1974-1976 19 77 re co mmended

Member state scale scale for 1978-79

Turkey 0.29 0.30 0.30

Uganda 0.02 0.02 0.0 1

Ukrainian Soviet Socialist Republic 1.71 1.50 1. 53

Union of Soviet Socialist Republics 12 .97 11.33 11. 60

United Arab Emirates 0.02 0.08 0.07

United Kingdom 5.31 4.44 4.52

United Republic of Cameroon 0.02 0.02 0.0 1

United Republic of Tanzania 0.02 0.02 0.0 1

United States of America 25.00 25 .00 25 .00

Upper Volta 0.02 0.02 0.0 1

Uruguay 0.06 0.04 0.04

Venezuela 0.32 0.40 0.39

Vietnam 0.03 0.03

Yemen (AR) 0.02 0.02 0.0 1

Yugoslavia 0.34 0.38 0.39

Zaire 0.02 0.02 0.02

Zambia 0.02 0.02 0.02

Assessment of Non-Member States The UN has assessed that the following states, which are not members of the United Nations but which participate in certain of its activities, should co ntribute towards the expenses of such activities at the following rates:

Democratic People's Republic of Korea Holy See Liechtenstein Monaco Nauru Republic of Korea San Marino Switzerland Tonga

Percentage rates

Percentage recommended for rates 1977 1978- 79

0.05 0.02 - 0.02 0.02

0.02 0. 13 0.02 0.96 0.02

0.05 0.0 1 0.0 1 O.Ql 0.0 1 0. 13 O.ot 0.96 0.0 1

236 Appendix P

APPENDIX P

THE IMPACT OF THE THIRD WORLD IN UNITED NATIONS SPECIALISED AGENCIES (Prepared in the Secretariat)

The impact of the Third World on the United Nations (UN) system has not been limited to the main organs of the UNO; it has also extended to some of the subsidiary bodies and many of the specialised agencies, which deal predominantly with econ­ omic, social and technical affairs. Although the primary function of the United Nations is stated as the maintenance of international peace and security, in fact three­ quarters of its budget and the majority of its staff are involved in economic and social programs. This evolution in the focus of UN activities reflects to a large degree the success of developing countries in exhorting international bodies to be more respon­ sive to their needs and preoccupations.

2. Whereas the developing countries are able to exert some influence over subsidi­ ary bodies and programs through the main UN organs to which such bodies report, attempts to exert influence in the specialised agencies must be made quite indepen­ dently. The specialised agencies (ILO- International Labour Organisation; FAO­ Food and Agricultural Organisation; UNESCO-UN Educational, Scientific and Cul­ tural Organisation; WHO- World Health Organisation; IMP-International Monetary Fund; IDA-International Development Association; IBRD­ International Bank for Reconstruction and Development; International Finance Cor­ poration; !GAO-International Civil Aviation Organisation; UPU- Universal Postal Union; ITU-International Telecommunication Union; WMO-World Meterological Organisation; IMCO- Intergovernmental Maritime Consultative Organisation; WIPO-World Intellectual Property Organisation; UNIDO-UN Industrial Develop­ ment Organisation- in the process of becoming a specialised agency) and the Inter­ national Atomic Energy Agency are autonomous organisations with their own admin­ istrative structures, staff, permanent secretariats, plenary and executive bodies, and

budgets. They are linked formally to the UN only by specific agreements.

3. The developing countries are basically seeking to make many of the specialised agencies more responsive to Third World development needs. To achieve this they have been pushing for' democratisation' -changes in the composition of the agencies' organs, particularly the executive councils and secretariats, to ensure 'equitable geo­ graphic distribution ' so that developed countries do not retain such high levels of con­ trol. The attempts to derive greater benefit from the agencies have also led the developing countries to undermine' the Consensus' Resolution 2688 of the 25th Gen­ eral Assembly in 1970 , which recognised the United Nations Development Program ( UNDP) as re sponsi ble for the coordination of UN funding of technical assistance. Instead of relying on UNDP funds, which come from voluntary contributions, the developing countries want a proportion of some agencies' regular budgets- from assessed contributions- to be spent on technical assistance. Examples of succes s in this area are the FAO decisio n in 1976 to spend a proportion of regular budget funds on technical assistance, and the WHO '601 40 ' Resolution of 1976 , calling on the Director-General to ensure that by 1980, 60 per cent of the regular budget would be spent on operational activities (i.e. field projects conducted mainly in developing countries). Similar demands have been made in the ILO, where the Director-General

237

often finds himself in a position of being obliged to make concessions in program budgets in order to take account of Third World declarations even though these have not been discussed by the developed countries' delegates.

4. In some agencies, usually the smaller, more technical ones such as WMO, IMCO, or UPU, both the developed and the developing countries can share an interest with the Secretariat in seeing the overall budget increased to enable a particular program to advance. In the larger agencies, however, the secretariats and the developing coun­ tries often coincide in their desire to obtain budget increases which the major donors­ the industrialised Western countries-resist.

5. The second general way in which the Third World had an impact on the specialised agencies is through what could be called their illegitimate politicisation. It could be argued that much of the advantage the developing countries have won through achieving greater control of and responsiveness from the agencies has been qualified by the frequent importation of contentious issues from the UN 's political

arenas into supposedly technical organisations. Although the agencies are not bound by General Assembly resolutions and are simply requested to take them into account where appropriate in formulating programs, Third World delegates have increasingly sought the translation of the majority opinion expressed in the Assembly into action

by some agencies. As well as the repetition of debates on major international disputes such as the Arab-Israeli conflict, this politicisation has often taken the form of argu­ ment over recognition of credentials, more recently of delegates from South Africa or Chile, even when the particular agency's constitution does not provide for suspension or expulsion of members. Recent examples have been the expulsion of South Africa

from the last World Congress of the WMO in 1975, attempts to do the same in WIPO in 1977, and South Africa's expulsion from the Intergovernmental Oceanographic Commission of UNESCO in 1978. There is some hope that the United States' with­ drawal from the ILO will have a moderating effect on the Third World tend ency to

politicise the specialised agencies.

6. The general statements made above can be illustrated by looking at what is oc­ curring in several of the agencies.

7. UNIDO is a particularly interesting case because it is in the process of beco ming a specialised agency. The Organisation had operated since 1966 as a se mi-autonomo us body within the UNO, with its administrative and research activities finan ced from the UN 's regular budget and operational activities financed by voluntary contri­

butions and other sources, including the UNDP. However, in 1975 at UNIDO 's Sec­ ond General Conference held in Lima, the developing countries pushed through the Declaration and Plan of Action on Industrial Development and Cooperation (which was basically a Group of 77 ( G 77) draft adopted by the Second Ministerial Meeting of the G77 in Algiers a month earlier) which, inter alia, called for the developing countries' share oftotal world industrial production to be increased to 25 per ce nt by

the year 2000 (it is currently 7 per cent), the redeployment of certain industrial capacities and resources from developed to developing countries and , to facilitate the industrialisation process in the Third World , the co nversion of UNIDO into a specialised agency. Since then, negotiations have been going on to th e

tution of the new agency, the sixth and most recent round of which was held w February-March 1978 in New York. However, at this co nference Group B witne ed considerable slippage from positions to which the developing co untries had agree d at previous meetings in Vienna, and disagreement persists on uch as

whether a proportion of the regular budget fund ed by as e se d co ntnbut10 n hould

238 Appendix P

be spent on technical assistance, as the developing countries want. The developed countries-the major contributors-are keen to maintain control over budgets by insti­ tutional means in order to prevent excessive budgetary increases forced through by Third World majorities in the plenary conferences. The 33rd UN General Assembly adopted a resolution to hold another round of negotiations in 1979, but this time in Vienna again, a venue considered more conducive to agreement, despite the develop­ ing countries' strengthened negotiating position.

8. UNESCO has recently experienced considerable division along North-South lines on communication, media and information issues. Although the Declaration on the Mass Media finally adopted by the UNESCO 20th General Conference in October-November 1978 met with the approval of Western delegations, consensus was reached only after long and intensive negotiations on the draft which had been presented to the previous General Conference in 1976. The initial Third World pos­ ition that the media should be geared to a country's development needs, and hence subject to a much greater degree of government control, was rejected by the West, but the Third World's appeal for a 'new world information order' has been received sym­ pathetically by the developed nations, some of which have expressed willingness to give practical assistance in increasing the developing countries' involvement in and control of information and communication systems.

9. Although political feuding was kept to a minimum at this General Conference, when the issues under discussion afforded the opportunity there was acrimonious de­ bate between Israeli and Arab delegates, and the representatives of Turkey and Cyprus, Ethiopia and Somalia, and Chad and Lybia.

10. Although the tripartite system of representation in the ILO has often led to div­ ision along government-employer-employee group lines rather than North-South lines, over the past five or six years, the divergent concerns of the developed and developing countries regarding labour issues and long-standing disagreement over the problem of restructuring the agency have resulted in a more pronounced split along developed/developing country lines. Although in fact the greater part of there­ sources of the ILO is now deployed on projects to assist developing countries, Third

World delegates to ILO conferences witness only the legislative activities of the agency. Such conferences usually deal with the setting of labour standards which are attainable only by developed nations, and, unaware of the evolution in the ILO 's work away from regulating standards, and more towards practical programs of benefit to developing countries, Third World delegates often criticise the ILO as anachronistic in its preoccupations and of little benefit to the Third World. These criti­ cisms are also made of the agency's structure, as ten states ' of chief industrial import­ ance' retain permanent seats on the Organisation's Governing Body, and have veto power over constitutional changes. Consequently, the Governing Body, which makes many of the important decisions on programs, approves the budgets, elects th e Director-General and establishes committees to examine specific issues, tends to be conservative. Whereas the main focus of the ILO has evolved from human rights to development, as a result both of changes in members ' needs and of political press ures from the expanded membership, its structure has changed far less.

11. Following the United States ' notice of withdrawal in protest at the growin g poli­ ticisation of the ILO, Western members began to consult more closely and in 1976 formed the IMEC (Industrialised Market Economy Countries) group which beca me very involved in the political and restructuring debates in an attempt to redu ce this trend. Although the initial G 77 reaction was one of greater group-oriented ac tivity, it

239

appears that subsequently there have been some departures from a firm G 77 line and IMEC has been successful in bringing about a diminution in the degree of politicisa­ tion within the agency.

12. WIPO is another agency in which the developing countries are successfully pres­ suring for changes which will lead to greater benefits for themselves. In relation to copyright, they won the revision in 1971 of the Berne Convention of 1886 (and the Universal Copyright administered by UNESCO) thereby facilitating access to literature and educational material. Since 1975, the industrialised nations­

both of the Eastern and Western blocs-have been under pressure to again revise the Paris Convention of 1883 for the Protection of Industrial Property. Much of this pressure comes from UNCTAD as a consequence of the work being done there on the formulation of a Code of Conduct on Transfer of Technology. In general terms, the developing countries want the Paris Convention to discriminate in their favour, so that patents can be transferred to them on more favourable terms-at less cost and with greater control for the recipient over the conditions of use. The major technology generating countries, such as the Federal Republic of Germany, the United States, the United Kingdom, France and Sweden, are strongly opposed to such a revision; countries such as Australia, Canada and New Zealand are in a difficult position as

they cannot really afford to make the concessions sought by the Third World.

13. Thus, the main aim of the Third World in many of the specialised agencies is to bring about changes in the balance of control in order to ensure that each agency's activities are directed more to the needs of the developing countries and that a greater proportion of the budget is spent on development programs. In this they are enjoying a gradual but definite success. A secondary aim, which may in fact be contrary to their real interests, is to use the agencies as another avenue for pursuing political goals unrelated to the specialised concerns of the agencies. Although the West is strongly opposed to this trend, it has not been very effective in checking it.

31 March 1979

240 Appendix Q

APPENDIX Q

THE GROUP OF 77 AND THE NORTH-SOUTH DIALOGUE (Prepared in the Secretariat)

EVOLUTION OF THE GROUP OF 77

Economic development on a global scale was scarcely recognise d as a task for the international community three decades ago. Developing countries coming to independence after the Second World War found that the multilateral economic insti­ tutions which had evolved were directed more towards post-war reconstruction, and were concerned mainly with the interests of the developed countries. Bilateral aid was the principal instrument for alleviating the underdevelopment of developing coun­ tries; increasingly, however, those countries were looking towards more 'equal' inter­ national trade and financial arrangements to promote their development.

2. An attempt had been made in 1946 to establish an International Trade Organis­ ation (ITO) as part of the 'trinity' of multilateral institutions aimed at the normalis­ ation of the post-war international economy, the other two being the International Monetary Fund and the International Bank for Reconstruction and Development. Although adopted in 1948 at the United Nations Conference on Trade and Em­ ployment held in Havana, the ITO Charter was approved by only two states, Australia and Liberia. Contemporaneous with efforts to set up the ITO was the estab­ lishment in 1946 of the General Agreement on Tariffs and Trade (GATT). The GATT, intended only as an interim arrangement pending the formation of the ITO,

became by default the main international instrumentality in the 1950s and 1960s for developing multilateral trade. The non-ratification of the ITO Charter led to a proliferation of other international organisations and sub-organisations dealing with commodity and other trade problems. By 1963, there were 43 such organisations. Apart from the unsatisfactory situation of duplication none of these bodies met what the developing countries considered were their needs. In particular, the developing countries concluded that the system of international trade as it had become institutionalised in the GATT, with its emphasis on stimulating trade in manufactures with little equivalent impact on agricultural products, was biased in favour of the de­ veloped countries, and that it seriously hampered their efforts to achieve growth through trade.

3. Developing countries were already a prese nce at the first General Asse mbly of the United Nations (UN) in 1946, comprising 30 of the 51 states th at attended , and at the Food and Agricultural Organisation Conference in Washington in 1949, newl y independent India had played a quite prominent role. As the deco lonisation process gathered momentum more and more newly independent countries joined what in th e international context had become in effect an informal 'cl ub ' of developing states, embracing Africa, Asia and Latin America. A group emerged in the UN led by the Latin Americans which began to press from the ea rly 1950s onwards for better terms of trade. Pressure from developing countries led to the establishment in 195 6 of the Commission on International Commodity Trade as a commission of the UN 's Econ­ omic and Social Council. However, the activities of the Commjssion were boycotted

by the major industrial powers until 1959. Their attendance in that year refl ected a new awareness of the mounting pressure being exerted by the developing co untries ,

241

as well as changes to the Commission's terms of reference which made it more accept­ able. At the 1960 meeting of the Commission developed member states were met with a relatively concerted approach from the developing countries, similar to that which has come to be associated with the United Nations Conference on Trade and Devel­ opment (UNCTAD). Prominent in discussion were India and Brazil. The issues dis­ cussed, commodities, terms of trade and compensatory financing, were those which

have come to be the bread and butterofthe UNCTAD.

4. The efforts of the developing countries were helped by the transformation of UN membership (in 1960 alone 17 newly independent states were admitted) which made it possible for them to form new and dominant majorities on economic and social questions. The Non-Aligned Summit held at Belgrade in 1961 and the Cairo Confer­ ence on the Problems of Developing Countries in 1962 were further important steps

by the developing countries towards establishing common ground on trade and de­ velopment issues, even though a number of the Latin American countries continued to remain on the sidelines, acting cautiously on matters that might offend the United States. Paralleling these activities was mounting pressure from developing countries

for the holding of an international conference on their trade problems. UN Resol­ ution 1707 (XVI) adopted by the General Assembly at its 16th Session in 1961 called on the Secretary-General to consult governments on the possibility of holding a world conference on international trade problems. The results of the Secretary-General's survey showed that the majority, comprising African, Asian, most Latin American

and Eastern bloc states were in favour of such a conference, while the Western indus­ trialised countries were opposed or uncommitted.

5. The degree to which a common basis of principles had by then been established among developing states was evidenced when 75 of them came together in 1962 as an ad hoc group of co-sponsors of UN Resolution 1897 (XVIII) at the 18th Session of the General Assembly setting out their position on preparatory arrangements for a

United Nations Conference on Trade and Development. The UNCTAD was fo r­ mally established by Resolution 1995 (XIX) at the General Assembly's 19th Session.

6. The setting up of UNCTAD was assisted by the growing thaw in the Cold War which helped make the situation within and outside the UN more fluid a nd conducive to innovation. There was also an increasing, if perhaps grudging, willingness by the West to link the commercial problems of developing countries with their develop­

ment problems. But it was the developing countries which were the main engin ee rs. Their success was a notable one, not only did it demonstrate how effective coo perative action by developing countries could be, it also marked the form al in stitutionalisa tion of what came to be known as the Group of77 (G77).

7. Over the three months UNCTAD I at Geneva in 1964 the inform al group of 75 became the Group of 77 . The number change re sulted from the addition of Kenya , South Korea and South Vietnam to the Group 's Declaration , iss ued at the end of th e meeting, and the withdrawal of New Zealand. The latter had found its pos ition of for­

mal relationship to the developing countries more and more unten a ble as UNCTAD I progressed. (Between the second and third preparatory co mmittee. mee tin gs for UNCTAD I Australia had declined a developmg co untry wvltauon to s1gn th eir Jomt Declaration, although it had commended the document. )

8. The G 77 is declaredly a pressure group. The Joint Declaration of th e Seventy­ Seven Developing Countries issued at end of UNCTAD I stated that:

242 Appendix Q

'The unity[ofthe developing countries in UNCTAD] has sprung out of the fact that facing the basic problems of development they have a common interest in a new pol­ icy for international trade and development. . . . The developing countries have a strong conviction there is a vital need to maintain, and further strengthen, this unity in the years ahead. It is an indispensable instrument for securing the adoption of new attitudes and new approaches in the international economic field.'

ORGANISATIONAL FEATURES OF THE G77

9. Responding to, and in large part confirming, the existence of the self-identified, natural coalition of the developing countries UNCTAD divided member states into groups A, B, C and D, for electoral purposes. These groupings correspond directly to the interests of UNCTAD members: Groups A and C comprise the developing coun­ tries; Group B consists of Western industrialised states, including Australia; and Group D is made up of socialist states. By adopting this formulation, UNCTAD institutionalised group differences and interests and made caucusing on a group basis a part of the Conference's negotiating processes.

10. · The principal executive organ of the G 77 is the Group's Ministerial Meeting held primarily to prepare for UNCTAD Conferences. The G77 Ministerial Meeting generally meets prior to the UNCTAD Conference itself. G77 Ministerial Meetings have been held in 1967 at Algiers, in 1971 at Lima, in 1976 at Manila and in 1979 at Arusha (Tanzania) preceding respectively UNCTAD II at New Delhi in 1968, UNC­ TAD III at Santiago in 1972, UNCTAD IV at Nairobi in 1977 and UNCTAD V, which will be held at Manila in May 1979. At the Algiers Ministerial Meeting four inter-conference committees were established to consider and report on various agenda items. (This appears to remain the G 77 practice.) In response to the pressures generated on the issue, the Algiers Meeting also established a working group of 15 on special measures to be taken in favour of the least developed among developing countries.

11. Another general trait of the G77 is the contribution made to the Group's activi­ ties by regional sub-groups. The three regional groups, Latin American, African and Asian, are an important focus ofG77 policy formulation and proposals. Each regional group meets prior to each G 77 Ministerial Meeting to work out its position. Thus negotiations at the Meeting itself are generally based on compromises already worked out among the regional groups.

12. Of the three groups, the Latin Americans are perhaps the best organised in a functional sense. The Economic Commission for Latin America (ECLA) deals with the technical and economic matters on UNCTAD 's agenda and provides the expert base for the intergovernmental coordination which takes place in the Special Com­ mission on Latin American Coordination (CECLA). CECLA was set up in 1964 to enable the Latin American countries to coordinate their economic policies in inter­ national forums without the presence of the United States or Cuba. The Special Com­ mission meets at ministerial level. Its work is supplemented by on-the-spot coor­ dination by Latin American delegations at Geneva.

13. Formally, it is the UN Economic Commission for Africa (ECA) and the joint meetings of the ECA Working Party on Intra-African Trade and the Ad Hoc Com­ mittee of 14 of the Organisation of African Unity ( OA U) that elaborate concrete pro­ posals on all UNCTAD issues of interest to the African group. For financial reasons, and partly because some African states were not very enthusiastic about the benefits they were likely to receive from UNCTAD, the meetings of this group were not very

243

regular initially. The varying interests, traditional mistrust and lack of communication between the English speaking and French speaking Africans were also factors inhibit­ ing coordination. At UNCTAD II, however, the African group was very well pre­ pared and coordinated. Since then, it has met regularly prior to each session of the

UN CTAD Trade and Development Board.

14. The Asian group is the least homogeneous ideologically, politically and cul­ turally, and its institutional arrangements are perhaps the least formalised. The UN Economic and Social Commission for Asia and the Pacific (ESCAP) has not become the main focus of the group's positions on UNCTAD issues, partly because not all Asian group members belong to it; for instance, the Arab states of West Asia fall within the ambit of the UN Economic Commission for Western Asia, and partly be­ cause of the presence in ESCAP of a number of developed states. (ESCAP has, how­ ever, organised ministerial meetings to consider various UNCTAD matters.) The Asian group comes together mainly during the various sessions ofUNCTAD and de­ spite lack of formal arrangements seems able to achieve effective coordination. Infor­

mally, four broad groupings in the Asian group are taken into account for the purpose of election to UNCTAD posts: West Asia; Far East; South East Asia; and the Indian sub-continent and Yugoslavia.

15 . The G77 is not only an UNCTAD caucus, it has become the mechanism through which the developing countries conduct their negotiations in a wide spectrum of forums, particularly those concerned with economic issues. They include the UN General Assembly, the UN Industrial Development Organisation (UNIDO), the Law of the Sea Conference, the Food and Agriculture Organisation and, to a lesser extent, the other UN specialised agencies. Self-contained G77 caucus groups operate in all the capitals at which these organisations are located , namely New York,

Vienna, Geneva and Rome.

16. The most important 'branches' of the G77 remain those associated with UNCTAD and the UN General Assembly (UNGA) itself. From the inception of the Group there has been a certain amount of jurisdictional conflict between the N ew York and Geneva branches of the 77 over who has primacy, which persists tod ay . In this context, it is important to recall that UNCTAD 's parent body is the General Assembly itself, to which the main organ ofUNCTAD, the Trade and Development

Board, reports regularly. The tension that exists between the New York and Geneva branches of the G77 is not over doctrinal differences but rather arises from perso n­ ality conflicts and the different approaches required in UNCTAD, which is a more technical body, and in the General Assembly which is above all a political forum . It is the nature of the UN, and the developing countries ' desire to enha nce the rol e of

UNGA, and thereby their own influence, that decrees th at New York is the pre­ eminent branch of the Group of77.

17. Both the New York and Geneva branches of the G77 have their own intern al or­ ganisation. At New York the G77 has established a Steering Committee of 27 , co m­ prising 9 representatives each from Latin America, Asia and Africa . The chairm an­ ship of the G77 rotates annually among the three regions at th e beginning of each session of the UN General Assembly. The Chairman of the G77 is also the Chairm an of the Steering Committee. The Steering Committee's task is to devel op draft resol­

utions on issues of importance to the G 77 and to submit these to th e Group for en­ dorsement. The guidance of the draft re solution through the UN co mmittee tage is given to an individual country, usually one with a particular interes t in th e matter. T he G 77 is active particularly in the UN 's consideration of eco nomic is s ues whi ch take

244 Appendix Q

place primarily in the General Assembly's Second Committee, and in the plenary sessions.

18 . Many of the Geneva branch's organisational features have evolved from a need to conduct itself effectively in UNCTAD. The G77 Ministerial Meeting at Algiers in 1967 designated a Group of 31 in Geneva, consisting of the developing country members of the then 55 member UNCTAD Trade and Development Board (TDB). Of the 31 members ten each come from Latin America, Africa and Asia, plus a Chair­

man. In 1976, by resolution of the 31st Session of the UNGA, membership of the TDB was made available to all UNCTAD member states. Currently 79 of the 117 Board members are from the G77. 1 It would seem that an increase in G77 members on the Board has not been reflected in the Group of 31, which remains the main steer­ ing committee for the Geneva branch. Broadening the TDB membership has re­

moved a source of friction among G77 members. Formerly, the convention applied among all groups that only the largest developing states would be represented on the Board. Differences had sometimes occurred in the G 77 among middle-sized African and Latin American states whose claims to TDB membership were about equal. The G 77 is represented on all the sub-committees of the Board.

19. Although the G 77 has increased its numbers over the last 14 years the actual number of Group members with missions in Geneva is much less than the mem­ bership of about 117. 2 An average good attendance of the Group of 77 at a major UNCTAD meeting would be about 70. As many of the G77 's missions in Geneva are very small the burden of their participation in Geneva conference work tends to be shared by a relatively limited number of the major developing countries, particularly within the Asian Group.

20. The G77 has set up a number of ad hoc UNCTAD-related groups to cover areas of particular importance to them. These are the Group of 33 on the Integrated Program for Commodities and the Common Fund, the Group of 15 on Debt Prob­ lems, and Group of 15 on the Rationalisation of UNCTAD Permanent Machinery, the Group of 30 on Economic Cooperation Among Developing Countries and the Coordinating Committee on the Multilateral Trade Negotiations. 3 All these bodies are open-ended.

21. The G77 has no permanent secretariat. Operationally, the UNCTAD Sec­ retariat at Geneva and the UN Secretariat at New York service the Group of77. Both Secretariats make available meeting rooms and translation/interpretation services. UNCTAD staff produce on demand background papers for the G77, which may or may not put its stamp on them. The G77 pays for none of these services over and above members ' normal budgetary contributions. Some developed countries have ex­ pressed concern at the amount of assistance the G77 has received from UNCTAD. However, the procedural and organisational tasks the Secretariat performs are avail­ able to all UNCTAD member groups and countries for the asking, provided the cost is within the budgetary appropriation approved by the UNGA. There is little doubt though that on substantive issues the Secretariat leans more in the G 77's direction , acting as a ' think tank' for the Group.

I See Annex A 2 See Annex B. 3 See Annex C.

245

22. Some members would prefer to see the G77 establish its own secretariat and permanent consultative machinery in order to bolster the Group 's negotiating a bility and technical preparedness, and to help filter out internal differences. Proposals fo r secretariat arrangements, including the formation of an inter-governmental structure along lines similar to the Organisation for Economic Cooperation and Deve lopment, have been put forward, so far unsuccessfully. Those averse to the greater institu­ tionalisation of the G77, which seem to include most of the Latin American state s, appear to be concerned to preserve their flexibility. The practical constraints of cost and appropriately qualified personnel are also inhibiting fa ctors. Although this sort of thinking seems to be holding the line against those members arguing fo r increased and more formal organisation of the G77, pressure to create a secretariat co uld in­ crease in the context of facilitating economic cooperation between developing coun­

tries, which is an issue receiving growing attention in UNCTAD. The idea of a 'Third World Secretariat' concerned not only with G 77 issues, but also designed to provide overall technical and organisational support for developing countries and th eir nego·· tiations, is one that is gaining some currency.

23. Decision-making in the G77 is subject to the same sorts of we aknesses and fa ults which beset the group negotiating system overall. The G 77 re aches decisio ns by consensus, first within the three regional groups and then within the whole Gro up. Although regional differences have tended recently to be superseded, to an ex tent, by

divergence between the least developed and more developed G77 members, it has not greatly affected the political processes within the Group. Mos t of the least devel­ oped G77 states are in Africa, which tends to reinforce the regional basis fo r decisio ns. In the past, issues of particular concern to one country or a group of co un tries, whic h were not controversial within the Group, used to get unanimous G 77 support. This was gradually modified to a type of barter: those not affe cted by a proposal wo uld agree to support it in return for a concession on some other iss ue. This ' trade-off' ar­ rangement reflects the fact that most G77 members have ve ry littl e to offer each other

and therefore little scope to develop a substantive co mpromise within or betwee n issues. The least developed G77 members in particul ar have tend ed to use the 'trade-off' tactic to ensure concern for their problems. It is one way of ge tting aro un d the diversity in the level of G77 member states' deve lopment and of tryin g to ensure

that each one will derive some benefits, somewhere along the line. It also leads to a tendency to pile demand on demand in situations where in tra-G 77 gro up conflicts cannot be resolved, giving rise to problems of reaching agreement on a package which is not impossibly idiosyncratic or contradictory. T he end res ult of this process is often a decision or a formulation based on an aggregate of the G77 members' pos­ itions. This seems to apply particularly in the case of G77 proposals reached at minis­

terial level. On issues in the UNCTAD context where it is probable th ere might be numerous losers among G77 members, the UNCTAD Secretariat seem to play a central role in devising a program that promises as ma ny benefits a possible to a many countries as possible.

24. With time, and the experience o f working togeth er, the rather rigid and le ngthy decision-making processes and rules o f behaviour within th e G77 eem to have been somewhat relaxed. Where Group un animity has bee n impo ible to obtain there ha been a growing tendency for the three regional group , Africa, A ia and Latin America, to speak independently on iss ues . Equ all y, individ ual G 77 member are increasingly allowed their say o n those iss ues of particul ar relevance to them and

which do not involve the strate gic interes ts of the whole Group.

246 Appendix Q

GROUP OF 77 ACTIVITIES OUTSIDE UNCTAD AND THE GENERAL ASSEMBLY

25 . The G77 functions in a number of other UN bodies and specialised agencies, but, with some exceptions, in a less institutionalised way than in the General Assem­ bly and UNCTAD. This may partly reflect the less strict organisation of the member­ ship within these bodies into 'collective bargaining' groups.

26. The UN Economic and Social Council (ECOSOC), established as one of the 'principal organs' of the UN, functions as a link between the specialised agencies and General Assembly. The Council has also set up in its own right a variety of com­

missiOns related to economic and social affairs, including the important regional econ­ omic commissions for Africa, Latin America, Europe, Asia and the Pacific, and for Western Asia respectively. The G 77's main preoccupation in regard to ECOSOC, and one which also applies in relation to the executive bodies of the various specialised agencies, has been to increase developing countries' representation and thus their influence. Partly as a result of developing country pressure, and partly because of the

major funds contributing countries' desire to make of ECOSOC an effective overseer the Second UN Development Decade, the Council's membership was expanded

m 1971 from 27 to 54. In ECOSOC the G77 comports itself much as it does in the UNGA Second Committee. Because of the provision for ECOSOC to hold its spring meeting in Geneva, the differences between the New York and Geneva branches of the G 77 are perhaps more pronounced in the Council than elsewhere. The ECOSOC spring session has tended to remain largely an affair for the New York G77 'poli­ ticians' with the Geneva G77 'technocrats' playing a lower key role.

2 7. Most commentators consider that ECOSOC has failed to fulfil its mandate. The Council's diffuse and unwieldy responsibilities have contributed to the gradual taking-over by the General Assembly of many ofECOSOC's overview functions. The formation of the controversial UN Committee of the Whole (Overview Committee) in 1977 to keep under review the implementation of the proposals contained in the

New International Economic Order (NIEO), seems to have robbed ECOSOC of yet more of its patrimony. However, the 65th Session ofECOSOC (August 1978) did de­ bate and take decisions on a number of issues controversial in themselves and within the G77.

28. Because of their major responsibilities for the execution of economic and social programs, including the implementation of proposals relating to the NIEO, the specialised agencies within the UN system are important targets for G 77 activities. Overall, the developing countries' main concern is to try to improve the organisa­

tional links between the General Assembly and the specialised agencies to enable th e former to exert greater direction over the work of the latter. As the G 77's impact is greatest in the General Assembly, closer links between that body and the specialised agencies would assist the Group to have greater influence than they already do o n agency programs. The practical orientation of specialised agencies' activities me a ns that much of the G77 's collective effort is directed towards financial issues , in particu­ lar with the intention of having the agencies spend more of their regular budgets on operations. To a great extent, G77 political activity in the specialised agencies has a n 'ad hoc' air about it. When an opportunity for exercising leverage arises, G 77

members organise around that focal point rather than maintaining a group identity on a continuous basis.

247

29. The degree to which the G77 is active to depend partly on the scope for politicisation offered within a particular For example, the Unlted

Nations Educational, Social and Cultural Orgamsatwn (UNESCO) by the nature of its mandate, is apt to be more political than the other specialised agencies. The G77 :s well coordinated dominance in UNESCO virtually determmes the Orgamsauon s direction, although there are countervailing forces such as the

practical benefits and the' role often played by A

major preoccupation of the G77 m UNESCO has been the dtverstficauon of Th.trd World media sources and resources. To that end, the G77 has sought the concluswn of a Mass Media Declaration. Intensive negotiations between the developmg a nd developed countries, and between African and members ":ithin the G77 ttself,

on the controversial draft texts finally resulted m a compromtse document bemg adopted at the UNESCO General Conference in November 1978.

30 . Divisions between different branches of the G77 and between Group members over the structure and role of various specialised agencies and the arising within them are quite common. Althoug.h the G77 had a success m 1975 w pressmg for the transformation of the Umted Nauons Industnal Development Orgamsatwn

(UNIDO) into a specialised agency, subsequent negotiations on the co nstttuuonal issues involved gave rise to serious differences between the. New York and Ytenna branches of the G77. In the International Labour Orgamsauon (ILO) and .th e Inter­ national Labour Conference (ILC) the fact that regional groups are the basts for elec­

toral arrangements has reinforced the between the Afncan, Astan a nd

Latin American G77 members m those bodtes.

31. Although always present as for consult ative purposes, the

developing and developed countnes dtd not form wto the G77 and IMEC (Indus­ trialised Market Economy Countries) caucuses wlthm the ILO unul .'974. The move seemed to be prompted by the adoption of a G77-msptred resolutwn ( ILC59 , IX , 1974) at the ILC concerning 'the policy of d1scnmmauon , ractsm and vwlauon ? f

trade union freedoms and rights practised by th e Israeli authonues w P alesune and m other occupied Arab territories ', and requesting the Director-General of t,he ILO 'implement the resolution takmg mto account the provlSlons o f the Geneva Conven tion Relative to the Protection of Civilians in Times of War ' of 1949. The Resoluuo n

was highly controversial and was instrumental in the United State s' wHhdrawa l from the ILO in 1977. The significance of tha t move ca nnot be underes umate d as a portent of the way in which the United States might again ac t w a stmtl ar situ ation.

32. Major targets ofG 77 activity within th e UN sys tem have bee n th e large ly au omous financial institutions: the Internatio nal Bank for Reco nstrucuo n and Develop ment (IBRD); the International Development Agency ( IDA ); th e Intern auo nal Finance Corporation (IF C) and the Internauo nal Monetary Fund ( IM F ). A

teristic of all four organisations is that, unlik e m th e spec1a l1se d age nc1es , th e one state one vote ' principle does not a pply; th e vo tin g power of each member, a nd thu its influence, is rel ated directly to the stze of ItS fin a ncial paruc1pauo n. Fo r exam pi e, 1n 1970 seven countries in the IMF (Canada, the Umted States, the nned Km gdo m,

the Federal Republic of Germ a ny, Fra nce , It aly and Ja pa n) o ut of a me mb er h1 p of more than 100 held 52 per cent of the votin g power .. Th e democrausauon of this 'weighted ' system is a priority fo r the devel opm g co untnes.

33 There is little doubt th at the impact of deve lopin g co untrie ' co nce rn has · h h ·n the IMF both at th e decisio n-maki ng a nd th e prac ti ca l leve ls, wroug t c anges 1 ,

248 Appendix Q

albeit rather more slowly than they themselves would deem desirable. The establish­ ment in 1963 of a Compensatory Financing Facility, the creation of Special Drawing Rights (SDRs) in 1969 and subsequent increases in available quotas, and the setting up of a Buffer-Stocking Facility in 1969 and an Oil Facility in 1974 were all moves responding in significant measure to developing country pressure. 1 Developing country members have, with some success, organised themselves within the IMF to advance their commonly agreed positions on international monetary questions. In

1966, the nine IMF Executive Directors elected by the developing countries began to meet as an informal group. In 1971, the developing countries established a body par­ allel to the developed countries "Group of 10' called the ' Group of24 '.It comprised 8 representatives each from the African, Asian and Latin American members of the Group of77. Subsequently, the Group of24 has continued to meet on a regular basis. The growing part played by developing members in the IMF's policy-making processes after 1971 is best exemplified by the policy mechanisms established to de­ termine new monetary arrangements. In contrast with the Group of I 0 the Committee of 20, set up in 1972 to work out the reform of the monetary system was deliberately

made an organ of the Fund and composed of representatives of all member states, incl uding nine from developing countries. When the Committee of20 was disbanded in 1974 the Interim Committee, set up with even broader functions, was composed in the same way. The developing countries, particularly those which are not oil pro­ ducers, continue to face representational problems on the Fund 's Executive Board, however, which remains the primary locus of policy formulation.

34. The General Agreement on Tariffs and Trade (GATT) retains a vestigial formal link with the UN through the Interim Committee for the International Trade Organis­ ation (ICITOY Not all G77 members are also parties to the GATT. However, there is an informal but well established developing country caucus in the GATT tracing its origins back to the late 19 50s, and since 1964 those GATT parties which are also G 77 members have formed this group. The principal objective of the GATT is to reduce the barriers to international trade and the keys to that process are non-discrimination and reciprocity in trade arrangements. In growing acknowledgement both of the difficulties developing countries ( LDCs) encounter in applying these principles, and in obtaining benefits from them , and of the increasing collective pressure of the LDCs themselves GATT has progressively evolved procedures to assist those states. At the

behest of the developing countries a new Part IV of the GATT, on Trade and Devel­ opment, was negotiated in 1964-65 and came into force in 1966. It constitutes an undertaking by the developed countries (there are no corresponding commitments for the developing countries) to give priority to eliminating barriers to developing country exports and to accept the principle of non-reciprocity for tariff concessions

The Co mpensatory Financing Facility was introduced to assist countries sufferin g from a shortfa ll in their export earnings. The Buffer-Stocking Facility sought to a melio rate the problem of the stabilisa ti on o f th e prices of pri­ ma ry products by helping developing members fin ance their contributio ns to internationa l buffer stocks o f primary products. The Oil F acility was made available to a number of developing member co untries of th e IM F to assist them in meeting the impact on their bal a nce of payments of increases in the costs of imports of petro leum and petroleum products due to the 1973 rise in oil prices. (The facility a lso assisted a number o f deve l­ oped countries hard hit by the oil price rise.)

2 The GATT was set up in 1947 as a n interim meas ure pending the creatio n of a n Intern atio nal Trade Or­ ganisa tion ( ITO). Pending the outcome of negoti atio ns o n the ITO, the GATT acquired th e secretariat services of the Interim Committee o n the ITO (ICITO ). In the eve nt, th e ITO fail ed to be esta blished ; however, the ICITO remains in existence de jure as a UN body and is still th e form al employer of th e GATT Secretariat.

249

granted to them. Part IV is not mandatory, although the developing countries would it be so .. It consists of principles and objectives in which the donor-recipient

relat10nsh1p prevalls over the contractural-commercial one.

35. Certainly the developing countries consider that Part IV of the GATT has achieved little for them. Its impact so far has been limited and little progress has been made in dismantling the higher tariffs which are customarily applied by importing countries to developing countries' raw materials in their processed forms. The chief hope of the developing countries for concrete trade and tariff benefits lies in the cur­

rent round of Multilateral Tariff Negotiations (MTN), the 'Tokyo Round'. The Tokyo Declaration lays considerable emphasis on the special interests of developing countries. An acknowledged, if informal entity in the GATT, the developing country caucus is clearly identifiable in the MTN deliberations. The views of the developing

countries are being coordinated G77 fashion, with individual Group members acting as the Group's spokesman on various issues.

36. A notable recent development in G77 activities has been an apparent moder­ ation in Group positions. Some commentators suggest this has been brought about by the fact negotiations on many NIEO proposals are now entering a specific phase and the G 77 is constrained by the demands of achieving practical progress.

INTERNAL POLITICS OF THE GROUP OF 77

37 . From 77 in 1964 the G77 now numbers 117 states. Membership in the Group is a much less controversial issue than in the Non-Aligned Movemen t for instance, where it is determined by the entire body. G77 membership decisions are made by the regional groups.

38. Because of its large numbers, its relatively unstructured operation, the differences existing among members and the great emphasis on their sovereign equality, no explicit overall leaders of the G77 have emerged. Certain factors do con­ fer an implicit leadership on various states, however, which is exercised in a number of ways and at different levels. Economic strength and size, clear political objectives

and weight in the Non-Aligned Movement, technical preparedness and organisation and influence within the three regional groups all bestow le adership at the general level of G77 activities. The main source for authority in Group affairs lies in the re­ gional groupings with Brazil, Argentina and Jamaica playing prominent roles in the

Latin American group; Nigeria, Ghana, Algeria and Egypt in the African group and India, Pakistan, the Philippines and Yugoslavia in the Asian group. In addition, there are the leaders of the cross-sectoral sub-group of least developed countries (LLDCs), Ethiopia, Tanzania, Bolivia, Ecuador, El Salvador and Guatemala. Member states of the Organisation of Petroleum Exporting Countries (OPEC) too play a leading role ;

this was particularly noticeable at the UN Seventh Special Session in 1975 . On specific issues, countries with direct interests involved often take the lead. Members holding G77 committee positions also exercise authority by virt ue their role, at least for its duration. Influence is not an immutable constant-even m the case of

major G77 members- but can wax and wane depending on the per analities and abilities of individual member states' represe ntati ves.

39. Divisions and differences among the G77 occur along a number of lin e : politi­ cal and ideological; between more and le ss advanced member states and ; those arising from the links between certain developing and developed co un tnes and

250 Appendix Q

those dissimilar and similar needs and interests which often give rise to alliances. Of potentially greatest significance for the unity and con­

tmued existence of the G77 are the divergencies between the more and the less ad­ vanced developing countries, particularly the lack of common identity or complemen­ tarity in their short-range interests. Although the more developed members of the G 77 were initially grudging about agreeing to the concept of 'special measures' for less members, the latter subsequently have been reasonably successful in receivmg Group support at a general level for their demands, which seems to have

qeen given as a form of 'compensation' for the limited benefits which have so far accrued to them from the various measures on the international economic agenda. of negotiations to actually implement particular proposals

could highlight the differences between the two groups. The possibility for a falling out between the more and the less developed developing countries, at least in the UNCTAD context, is complicated by the fact that 'least-developedness' is deter­ mined in relation to each issue, creating scope for a variety of coalitions.

40. The problem posed by the least developed countries is further accentuated by the fact that broadly it is superimposed on a regional cleavage. Most African countries are in the category of least developed countries, adding to the rift which already sep­ arates them from the Latin American group in particular. Where differences have arisen between the African and Latin American groups, the Asian group has often played a mediating or' bridging' role.

41. The recent emphasis by developed aid donor countries on directing assistance to basic human needs is viewed with misgiving by a number of developing countries; first, because they regard it as an interference in their sovereign right to determine their own development priorities; and, secondly, because of the potential such an ap­ proach has for dividing the G77 by appealing to its poorest members. Other differences among G77 members, which operate in the context of the Law of the Sea negotiations, are those between the land-locked and shelf-locked members and their coastal state counterparts and also between land-locked and transit states.

42. The oil crisis of 1973-74 (plus the nearly simultaneous rise in food grain prices) created a new sub-group of disadvantaged states within the G77. They constituted 40 or so developing country importers of oil which were designated at the UN Sixth Special Session in 1973 as those 'most seriously affected' by the economic crisis. OPEC provided direct financial assistance to these states to help keep them in the G77 'fold', and at the multilateral level the Sixth Special Session set up a special program of emergency assistance. Despite some serious wavering and trenchant criticism of OPEC by a number ofG77 members, with the backing of substantial OPEC bilateral aid, defections from the Group over the oil crisis were in the end avoided. This was a signal achievement for G 77 solidarity.

43. Radical/moderate differences between G77 members show up in the general issue of the sort of bargaining approach and style the Group should use vis-a-Yis the developed countries, particularly of the West. At present, a more moderate attitude of compromise generally prevails in the negotiations.

44. A current and respectable school of thought suggests that although the G 77 gives the appearance of quite impressive unity at the level of principle that unity will crumble as specific issues directly affecting member countnes ' natwnal interests arise for negotiation. However, even on issues of substantive national interest

251

to individual members, the G77 has been able to negotiate compromises. So far, the unity of the G77 has only bent, not broken.

45. Negotiations within UNCTAD on the establishment of a Generalised System of Preferences ( GSP) is a case in point. The African and Latin American groups were in­ itially in opposing camps on the issue, with the Latin Americans seeking the abolition of selective tariff arrangements between the European Economic Community and the Association of African States and Madagascar (AASM). In return for such a move, the Africans sought equal advantages elsewhere and product coverage under a gen­ eral system of preferences widened to include not only manufactures, but also pri­ mary and agricultural products. Largely due to the mediation efforts of Asian moder­ ates (India, the Philippines and Yugoslavia) at UNCTAD II the intra-group agreement on selective preferences achieved at Algiers in 1967 was formalised by 'splitting the difference' between the extreme positions of the Latin American and AASM groups. The Latin American group dropped its demand for immediate abol­ ition of selective preferences, while the AASM countries opted for' effective beneficial

participation' in the GSP as opposed to their prior insistence on' equality of benefits', because of an assurance from the G77 about wider product coverage and special measures for LLDCs. The G77 adopted the same pragmatic approach in inter­ UNCTAD group negotiations on the GSP and were therefore prepared to accept different national schemes from the developed countries, rather than wait indefinitely

for a single 'perfect' scheme. Skilful intervention in the negotiating process by the UNCTAD Secretary-General, Raul Prebisch, and a change of United States policy in favour of a GSP helped bring the negotiations to a conclusion which was generally regarded as a success for the G 77, at least in political terms (the G 77 consider the

practical benefits of the GSP have been less than they hoped for).

46. It is misleading to infer that the formation of coalitions and sub-groups is contra­ dictory to the solidarity and unity espoused by the G77 at the symbolic, declaratory level. At the functional level of translating a proposal into practice it is inevitable that coalitions reflecting particular interests will form; this is a phenomenon common to all

diverse groups, not just the G77. In this context, it is worth noting that the very nature of some current international negotiations, like those for a Law of the Sea regime con­ cerned as they are, inter alia, with geographical and physical factors, require the for­ mation of coalitions conforming to the particular situations of individual state s. In

that sense, coalitions are components of an organic process which goes to make the total negotiation. In the G77 symbolic, rhetorical and

are also parts of a whole; they are not in conflict or opposition but rather m equilib-rium to each other.

THE NORTH-SOUTH DIALOGUE SINCE 1973

47. The G77's approach to the formulation and implementation o f intern ational economic reform has been an evolutionary and cumulative one, reflectin g th e Group's gains and losses vis-a-vis the developed countries, the prevailing eco nomic climate, the exigencies of practical and the exploratory of th e

whole process. The Group's position as set out m an_ y one document rem am th e _ ac­ cepted orthodoxy only until the G 77 next meets. For mstance, the Arusha Decl arauon adopted by the G77 Ministerial Meeting in February 1979 , and currentl y th e ba lC reference text for Third World claims, will be overtaken by whatever pohcy statement

252 Appendix Q

the G 77 chooses to issue at its next Ministerial Meeting, which will probably be held in 1982.

48 . Throughout this evolutionary process, however, there has been no derogation by the G77 from the principle of reform of the existing international economic system, or from the major elements which that process needs to take into account. These in­ clude the concept of an 'international division oflabour', improved terms of trade for developing countries, protection of their purchasing power, monetary reform and increased automaticity of resource transfers from developed countries. Indeed, the underlying philosophy and many of the proposals which go to make up what is known as the New International Economic Order (NIEO), particularly as they relate to trade, remain in many respects those outlined in the Joint Declaration of the Developing Countries at the 18th Session of the UNGA in 1963 (Resolution 1897, XVIII) and by the first Secretary-General of UNCTAD, Raul Prebisch, in his report 'Towards a New Trade Policy for Development', submitted to UNCTAD I in 1964. Proposals have been elaborated subsequently and various ones given greater or lesser emphasis, but the essence ofG77 philosophy and claims as embodied in those early documents remains largely unchanged. In particular, the questioning of the tradi­ tional approach to economic development which has become associated with G77 de­ mands for a NIEO is not a new phenomenon. Already in the early 1960s developing countries regarded the growing disparities in wealth between the industrial states and the developing world as an indication that fundamental changes in the international economic system were necessary.

49. Prior to 1973, the most important landmark in the development of the G77 's position was the Algiers Charter, adopted at the Group's Ministerial Meeting in 1967. The tone of the Charter was more strident and demanding than developing country enunciations hitherto, introducing an element of' obligation' on the part of the devel­ oped world to 'rectify' economic trends unfavourable to the Third World. It was also the most detailed codification to date of the policy objectives of the G77. The sig­ nificance of the Algiers Charter lay not so much in its immediate economic impact, rather it articulated a platform which confirmed the G77 as an actor in international politics. The Algiers Charter was the basis of the G77's position at UNCTAD II in

1968 where its relative extremism caused consternation among the developed, Group B, countries. The intransigence of both the developing and developed countries at UNCTAD II provoked something of a stalemate and a number ofG77 countries later conceded that the Algiers Charter had been too ambitious. Post UNCTAD II the developing countries made little headway against an increasingly inward-looking de­ veloped world, concerned primarily with the problem of growing protectionism, the

breakdown of the Bretton Woods system and the threat of a trade war. Paralleling that situation was the increasing power within OPEC of the radical faction which was encouraging a more militant attitude on oil prices, then being artificially depressed .

50 . An important milestone in the formation of developing country attitudes_ on the range of development issues was the Fourth Non-Aligned Summit Conference, held at Algiers in September 1973. Algeria, seeking a pre-eminent role in Third World politics, effectively shifted the emphasis of non-alignment away from East-West to North-South issues. It characterised the existing international system as one in which the 'rich countries become richer and the poor poorer' and suggested that the process of detente was tantamount to a form of 'collusion' by the developed again st the developing countries. In a mood of disillusion and frustration at the progress achieved to date, the Non-Aligned states in their Economic Declaration laid the responsibility

253

for this situation squarely at the doors of the developed countries-particularly those ofthe West.

51. The Algiers Summit introduced a much sharper tone into the development de­ bate; a strong theme to emerge was the need for the ' developing countries to rely first and foremost on their own resources, individually and collectively, to take over the defence of their fundamental interests and to organise their development by and for themselves'. Complementing this philosophy was the emphasis given to such ideas as

producer associations for raw materials, legitimisation of actions to nationalise natu­ ral resources, proposals for transfer of technology and national controls over private investment-all of which disturbed the developed countries. The right of developing states to sovereignty over their natural resources was a principle agreed to by the Gen­

eral Assembly at least as early as its 7th Session in 1953 and the right of states to nationalise foreign-owned enterprises with appropriate compensation was agreed to at the 17th Session of the General Assembly in 1962 (Resolution 1803, XVII). The new elements in the Algiers Declaration were a greater stridency than hitherto and an

assertion that the national legislation of each state should be the determinant in issues of expropriation and compensation. The Algiers Non-Aligned Summit laid the foun­ dations for further developing country demands for reform. It called for a Special Session of the UN General Assembly to discuss development and international econ­ omic cooperation. This eventually became the Seventh Special Session held in Sep­

tember 1975. But the road to that meeting was to prove far from smooth.

· 52. Almost concurrently with the holding of the Algiers Non-Aligned Summit came the OPEC action which by mid-1974 had quadrupled crude oil prices. This move, and the disarray of the developed countries' response to it, were the catalysts which led to the holding in April 1974 of the UN Sixth Special Session on 'raw materials and de­

velopment', convened with that scope largely at the initiative of Algeria. Initially, the United States had sought to hold a conference of all oil importing co untries which could have undercut the Third World coalition on OPEC's oil decision, while the French sought a UN conference solely on energy. Algeria acted successfully to neu­

tralize both proposals by calling for a conference with a broader purpose than either. With the bargaining muscle inherent in OPEC's support, the developing countries backed Algeria's proposal for the Sixth Special Session, which marked the beginning of what has become known as the North-South dialogue.

53. With OPEC's recent success providing an example to other raw materials ' pro­ ducers, the re-examination of economic relations between th e North and South in a new context of'interdependence' became the guiding theme for the developing coun­ tries in their preparation for the Sixth Special Session. Drawing particularly on the Economic Declaration of the 1973 Algiers Non-Aligned Summit, a preparatory com­ mittee of developing countries produced a draft Declaration and Programme of Action for the Establishment of a New International Economic Order, which became

the basis for the resolutions passed at the Session.

54. The mood of the Sixth Special Session was co nfrontationist, abetted both by the circumstances in which the meeting was called , and the obduracy of the G77 and the industrialised countries. Although fin ally adopted by consensus, the Declaration and Programme of Action on the Establishment of a New International Ord er ( Re ol­

utions 3201 and 3202, S- VI) attracted a large number of specific reservation from developed countries. The question of Linkin g commodity export price to price of

254 Appendix Q

manufactured goods imported by developing countries through indexation was par­ ticularly controversial. But the major issue at stake was whether a new international economic order was what was required or merely some adjustments within the exist­ ing system which would take more account of developing countries' views and needs. Although not legally binding on member states of the United Nations, the adoption of the Programme and Declaration strengthened the resolve of developing countries in the series of negotiations following the Special Session. At the 29th regular UNGA Session in 197 4, some of the basic principles of the NIEO were incorporated into the Charter of Economic Rights and Duties of States. This document had been under

negotiation in UNCTAD since 1972, although its passage had been overtaken by the resolutions of the Sixth Special Session. It was nevertheless opposed at the UNGA by a number of major developed countries, particularly over the issue of compensation for the expropriation of foreign investments.

55 . Over the next twelve months the Group of 77-0PEC alliance stayed firm. Evi­ dence of this could be seen in the results of the Dakar Conference of Developing Countries on Raw Materials convened in February 1975 under the auspices of the Non-Aligned Movement. The Conference endorsed the Sixth Special Session resol­ utions on the N lEO, and, towards the goal of greater self-reliance among developing countries, elaborated a long-term program for primary commodities. The Second General Conference of UNIDO, held at Lima in the following month, marked a further successful attempt by the G77 to push out the parameters of the international economic debate. Based on a draft document by the G77, the Conference formulated a direct approach to diversified industrialisation as one of the UN 's central strategies for development. It also recommended that UNIDO be transformed into a specialised agency to better implement this policy. Even more controversial was the Conference proposal for redeployment of world industrial capacity to increase the share of developing countries. At one point, the developed countries proposed to give in on the issue of converting UNIDO to a specialised agency if the G77 made con­ cessions on various key substantive issues in the NIEO Programme of Action; the trade-off was not accepted by the G77. In the event, the Conference Declaration and Plan of Action for Industrial Development was brought to a vote. A number of im­ portant industrial countries either abstained or voted against certain paragraphs.

56. Contemporaneous with these multilateral developments were United States efforts to hold a producer/consumer meeting on oil. The French pre-empted the US proposal by calling for a Paris meeting of consumers, producers and developing coun­ tries, which would not be limited only to the price of oil. (This meeting became the Conference on International Economic Cooperation-CIEC.) OPEC agreed to the French suggestion in January 1975. At the Dakar Conference in February the same year developing countries had expressed their support for OPEC's actions. They de­ cided that their own position at Paris would be based on an integrated approach to the entire package of NIEO monetary, trade, financing and science and technology concerns. A preparatory committee of developing countries, including OPEC members, subsequently met to work out their common position. The Paris prepara­ tory meeting of all parties in April 1975 ended in a complete stalemate over what the scope of the full conference should be: energy only, oil plus a few other raw materials, or the entire NIEO package. There had been tacit acknowledgment by the industrial countries at the preparatory meeting of the link between oil and other raw materials

but they were not ready to discuss international arrangements for them collectively, let alone address the entire set of proposals for a NIEO. The United States had indicated that it might be willing to consider a new way of dealing with both the vol a-

255

volatility o f commodity prices and related inco me stabilisation for developing countries-but not a t Paris . 57 . The G77 's unity over the oil issue had slipped a little at the outset of the Paris preparatory meeting when the major oil importing developing countries represented publicly complained about the impact on them of increased oil prices. However, they subsequently closed ranks with the OPEC representatives in seeking to have the co n­

ference focus on the issues contained in the NIEO. The Paris meeting ended with th e coalition between OPEC and the developing countries maintained. For the develop­ ing countries, the link between the issue of oil and NIEO considerations was firmly es­ tablished. G77 success on that occasion derived partly from a fortunate coalescence of circumstances, which it is debatable would occur again. Few other raw materia ls could have the same strategic impact as oil. However, G 77 unity at the time of th e oil

crisis did demonstrate a willingness by a significant number of members to accept serious short-term dis benefits, in the interest of potential longer term advantages.

58. In May 1975 , at Paris, the then Secretary of State, Henry Kissinger, anno unced a major shift in United States policy. From the experience of the Paris preparatory meeting for CIEC he had concluded that ' the dialogue between the producers and consumers will not progress unless it is broadened to include the general issue of the

relationship between developed and developing countries' and called for' an end to the theoretical debate over whether we a re seeking a new o rder or improving th e old one .... '. The United States' change of attitude was a crucial factor in moving for ­ ward preparations for CIEC and in setting the mood of nego ti ation which charac­

terised the UN Seventh Special Session, not only of itself, but beca use it gave the moderates within the G77 a tool with which to prevail over the militants. For th ei r part, the militants seemed to have tacitly agreed to 'go along', while results were being achieved.

59. During the preparatory meetings for the Session the G77 made a number of important tactical concessions with regard to the industrialised states. The co ntro­ versial issues of full permanent sovereignty over natural resources, the ri ght to no n­ compensation for expropriation o f foreign enterprises, pro duce r associations and co n­

trol over transnational corporations did not figure in the Group 's working paper, a nd a compact was reached between the developin g and deve loped co untries to ne go ti ate on a more restricted agenda of matters of prio rity. Although fundamental difference remained between developing a nd developed countries over th e ex tent to wh ich th ere

should be structural change in the interna tional eco nomy, a nd particul arl y th e degree to which direct government intervention was acce pta bl e in th e o perations of th e inter­ national economic system , the Seventh Special Session secured a commitment from both sides to continue seriou s negoti a tion on th e iss ues in established in stitutio ns such

as the GATT, UNCTAD and the IMF. In particular, th e United States' plenary sta te­ ment reflected a more co nciliatory approach which , while defending th e exi tin g economic structure, indicated a willingness to consider new pro po a is. 60. By this time, the developin g cou ntries had se ized upo n co mm odi ty problem as

a ' cornerstone' o f th e NIEO. Producer associa tio n for a few Third World commodi ­ ties had been established fo r so me tim e. The Intergovern ment al Council of Copper Ex porting Countries (CIPEC) had been se t up in 1967, th e Association of atura l Rubber Producing Countries (AN RPC) foll owed in 1970 a nd th e Internal! nal

Ba uxite Association ( IBA) in 1974. These orga nisatio n were not primariJ directed toward s intervention in th e mark et to secure hig her pri ce , a lth ough in ce 1973 me member states have pu shed for this. The orga nisa tion also lack th e bargainin g po er e nj oyed by OPEC, principall y beca use deve loped co untries a re mu ch le depend e nt

256 Appendix Q

on imports of the commodities concerned. Accordingly, and with the world slump in commodity prices to prompt them, the developing countries increasingly focused their attention on the Integrated Program for Commodities (IPC).

61. The Seventh Special Session had given UNCTAD the task of reaching decisions the IPC which had been accepted in principle at the Sixth Special Session in Resol­

utiOn 3202 (S- VI). The UNCTAD Secretariat's proposals included buffer-stocking arrangements for a list of 18 commodities and the establishment of a Common Fund for financing them. Apart from those major elements, the other main elements of the IPC identified by both the UNCTAD Secretariat and by the G77 in the latter's Manila Declaration and Program of Action (adopted at the Group's Ministerial Meeting in January 1976) were (a) measures relating to prices, including indexation; (b) improved compensatory financing arrangements; (c) access to markets and supplies; and (d) other related measures, such as diversification of developing country exports. Leading up to UNCTAD IV, the G77 regarded that program as a

total package requiring a commitment in advance, particularly on buffer stock ar­ rangements and the creation of a Common Fund, to precede any consideration of its applicability or relevance to individual commodities. The United States and some other developed countries had long been opposed to the concept of commodity agree­

ments and the idea of international financing was unlikely to appeal to them in an in­ ternational climate of economic downturn.

62 . UNCT AD IV saw no really significant concessions from the industrialised states. The G77 pressed hard on what emerged as their twin preoccupations: the IPC and the Common Fund and generalised measures of debt relief for developing coun­ tries. They by no means obtained all they wanted on the IPC and Common Fund pro­ posals. A minimal formula was worked out with the industrialised states, and adopted

by consensus as UNCTAD Resolution 93(1V), which, inter alia, declared that ' steps will be taken, towards the negotiation of a Common Fund'. Group unity was, how­ ever, maintained. Nevertheless, the G77 did some tacit back-tracking on their de­ mand for indexation. They also retreated from their request for a generalised debt moratorium, agreeing instead that the question be placed on the CIEC agenda. 63. Developing country arguments on the need for the reform of international mon­ etary arrangments attracted increased attention in the 1970s, this being a period of global monetary as well as economic instability. A special IMF Oil Facility was set up to provide emergency financing to countries experiencing bala nce of payments prob­ lems arising from the increased cost of oil imports. An Extended Fund Facility was also established for countries whose balance of payments difficulties arose from a shortfall in export receipts. In addition, it was agreed at the Jamaica meeting of the IMF in January 1976 that a Trust Fund would be established to provide additional assistance to the poorer developing countries. 64. In the words of Jahangir Amuzegar the eighteen months ' dialogue in CIEC concluded its second, and final, ministerial session on ' a faint and joyle ss note'. ' In the commodity field it was agreed that a Common Fund should be established , with de­ tails to be negotiated through UNCTAD. Many other proposals failed to gain co n­ crete commitments, however. Both the developed and developing country representa­ tives insisted on recording their own appraisal of the Conference's report. The Group of 19, representing the G77, who had come to Paris to have implemented the Decl ar­ ation and Programme of Action on the New International Economic Order, noted ' with regret' that 'most of the proposals for structural changes in the international

I Jahangir Amuzegar, ' A Requiem for the North-South Conference', Foreign Affairs, Octo ber 1977.

257

system' and that 'certain proposals for urgent action on pressing problems'

had fa1led to get support from the developed countries. The developed countries, the G8, in turn 'regretted' the Conference had not reached agreement on guarantees on energy supply and prices and the security of investment in the Third World. A $1 billion Special Action Program was instituted to transfer increased resources quickly

to the poorer developing countries. General agreement was also reached on measures to increase the flow of private investment to developing countries, to improve their access to capital markets and to increase effectively and substantially developed coun­ tries' official development assistance flows to developing countries. Despite the mixed results of CIEC, in many ways it continued the process of accommodation between the developed and developing countries and although a breakdown of the talks was imminent at several points it was eventually avoided, averting exacerbation of North­ South tensions.

65. The question arises as to why the developed countries, after early anxieties that the link established between oil prices and the outcome ofCIEC would put them in a weak position, seemingly later felt able to hold out against some of the key elements in the G 77's demands. Certainly there had been signs in late 1976 that some of the industrialised countries might be prepared to make concessions in CIEC to stave off

what many commentators predicted would be a considerable increase in oil prices at the OPEC Ministerial Conference, scheduled for December that year. Neither possibility came to fruition. The industrialised states maintained a fairly hard line while OPEC member states failed to reach unanimous agreement on oil prices and, simultaneously, began dissociating themselves from any automatic linkage of oil price

movements to the fate ofCIEC.

66. Louis Turner suggests that behind these developments was an extensive diplomatic campaign by the United States aimed at both the G8 countries and the conservative members of OPEC, particularly Saudi Arabia, to convince them that the recovery of the world economy would be jeopardised should OPEC not show

restraint.' The United States concentrated especially on de-linking CIEC and OPEC's deliberations, being, according to Turner, of the opinion there was a real danger for the industrialised world in acting as though the two were directly related . Turner suggests that the United States found a partner for its strategy in Saudi Arabia, which was motivated less by CEIC considerations than by the Arab-Israeli conflict and a

desire to ensure an active United States role in any Middle East settlement. For their part, the Saudi Arabians responded by refusing to raise their oil prices as high as those of the more radical OPEC member states, creating a pricing split. Implicit in Turner 's analysis is the suggestion that the activities of the United States and Saudi Arabia

considerably lengthened the odds against CIEC achieving a more positive outco me , particularly for the developing countries.

67. The G77 sought to maintain mo mentum on the NIEO proposals by havi ng th e North-South dialogue transferred back to the United Nations. At the 32nd Session of the UNGA in 1977, agreement was reached on a G77 initiative to establish a new UN 'Committee of the Whole ' or ' Overview Committee' to meet between General

Asse mbly sessions and review progress on the negotiations on the lEO taking place throughout the UN system. The scope of the Overview Committee 's mandate has

I Louis Turner, ' Oil a nd the N orth -South Dialogue ', The World Today, February 1977.

258 Appendix Q

been a matter of dispute, with the G77 wanting it to have a substantive negotiating role, while the industrialised countries would prefer it to be simply a review mechanism. Mainly because of this divergence over the procedural competence of the Committee, little resulted from its first meeting in May 1978. At the 33rd Session of the UNGA in 1978 it finally proved possible to negotiate a fragile· consensus defining the responsibilities of the Committee, but a number of delegations expressed doubts that this woJ.Ild prove durable when put to the test, or that the Committee would play a very significant role as a forum for high-level exchanges on North-South issues.

68. Since 1976, the progress being made in implementing the NIEO has fallen short of what the developing countries are seeking. Their sense of dissatisfaction was highlighted at the Belgrade Non-Aligned Foreign Ministers' Conference in July 1978. Participating states expressed their 'grave concern at the lack of progress towards the establishment of the NIEO ',and, while emphasising the importance of continuing the dialogue between the developed and developing countries through negotiations 'deplored the use of these to delay the achievement of objectives agreed

upon in the various priority fields of international economic cooperation'. The Conference urged developed countries to reinforce their solidarity and 'to increasingly pursue policies of self-reliance with a view to strengthening their collective bargaining pow r with developed countries, with the objective of bringing to bear countervailing economic power in negotiations'. The atmospherics of a meeting of Third World negotiators and thinkers held at Arusha, Tanzania, in December 1978, suggest that a similar mood prevailed. A statement issued by the Commonwealth Secretary-General at the end of the meeting noted that the developing countries 'needed to adjust to the requirements and opportunities of the new situation which their collective efforts had produced [i.e. the complex of NIEO proposals], and to consciously enlarge their countervailing strength'. The G77 Ministerial Meeting held at Arusha from 6 to 16 February 1979 to formulate the Group's negotiating position for UNCTAD V, to be held at Manila in May, also emphasised the theme of collective self-reliance. A practical, if fledging, step in that direction was the establishment at Geneva in April 1978 of the Council for Associations of Developing Country Producers of Raw Materials, under the sponsorship of the Non-Aligned Movement. The Council is intended to attract the membership of existing producer associations, such as CIPEC and the IBA, and coordinate their activities to 'strengthen their bargaining power'.

69. Although there was some forward movement by both the developed and developing countries on certain key issues at the Resumed Second Session of the Negotiating Conference on the Common Fund, held at Geneva from 14 to 30 November 1978, there remained fundamental differences of principle between the G77 and Group B countries on the very concept of the Fund itself. The G77, supported by the UNCTAD Secretariat, view the Fund as an all-embracing source of commodity related financing for the developing world. On the other hand, Group B see it as a financially viable institution contributing to the financing of stabilisation of commodity prices about long-term trends through buffer-stocking, and providing finance for a circumscribed range of other measures. There was also disagreement

between the G 77 and Group B countries on the financial magnitude of the Fund and on the timing of contributions. Despite some significant concessions by Group B countries, particularly on the question of direct government contributions to th e Fund, the G 77 showed little willingness to move from the fairly ambitious parameters set for it by the UNCTAD Secretariat. The Common Fund is among the central issu es on which the Arusha G77 Ministerial Meeting is seeking progress. Some

259

commentators have suggested that because of the hardening of attitude on the Fund by some G77 members, reflected in the Arusha Program of Action, the prospects for advancing the proposal at UNCTAD V may have lessened. The key to further progress on the Fund will rest with the Resumed Negotiating Conference, scheduled for March, at which the negotiating positions for UNCTAD V will be determined.1

70. Consideration of economic issues at the 33rd Session of the UNGA was notable for the lack of confrontation between the G 77 and the developed countries. Contrary to developed country expectations, it proved possible to negotiate a resolution launching preparations for the new (Third) International Development Decade, scheduled to commence in 1980. Couched within the NIEO framework the resolution offers little that is new, however. It is UNCTAD V and the UN Special Session on

International Economic and Development Issues, scheduled for 1980, however, that will be the main platforms for the G77 to maintain their pressure for change in the structure of international economic relations. Greater moderation was evident in the three G77 regional conferences preceding the Group's Ministerial Meeting at Arusha,

and at that meeting itself. Nevertheless, a number of the initiatives proposed in the Arusha Program of Action, including particularly those on protectionism, the Common Fund and the strengthening of UNCTAD 's role in the international negotiating process on economic issues contain the potential for the sort of polemic

that has led to rigid attitudes in the past.

Comment

71. There has been a qualitative change in the North-South dialogue from confrontation to negotiation. The reasons for this are various. In part, it reflects the influence of shifts in the policy of the developed countries towards the developing countries, particularly the United States. Some commentators have suggested it also

denotes a deterioration in the position and bargaining power of the developing countries themselves.

72. A special combination of events in 1974-75 enabled the developing countries to assert themselves through a policy of 'collective self-reliance'. Aside from the establishment of a link between oil and development issues, developing cou ntries benefitted from a boom in commodity prices which gave weight to the idea they co uld

emulate OPEC in other commodities. The subsequent world recessio n eliminated th at possibility as a viable strategy. It seems likely that the continuing difficult economic climate has been instrumental in the G 77's move away from confrontation to negotiation with the developed countries.

73. In the opinion of Geoffrey Barraclough, an essential feature of the G77's current approach is the watering-down it represents of their 197 4- 7 5 program for ' co ll ective self-reliance', and a concommitant return to a traditional trade, aid and development strategy. 2 'He argues that for the present and . are

such that the developing counries' chances of 1mprovmg thetr by d1rect negotiation with the industrialised countries or groups of co untnes loo k more favourable than the sort of frontal attack they have adopted in the pa t. The

I Written before agreement in principle was reached between th e devel oped a nd develo ping o n the framework for a Common Fund at the Resumed Third Sessio n o f th e CTAD ego ua un g Conference on the Common Fund, Geneva, 12 to 22 March 1979.

2 Geoffery Barraclough in a two-part article: (i) ' Waiting fo r the New Orde r '; a nd ( ii ) ' The Strugg le fo r the Third World', in the New York Review of Books for 26 Octo ber and 9 November 197 re pectivel .

260 Appendix Q

implication of Barraclough's analysis is that the focus of developments in international economic relations is at present moving away from the global to the regional and bilateral level, and that the emphasis of the developing countries will be on achieving short-term concessions.

74. Another factor influencing the greater recourse to negotiation is the complexity of actually trying to put into effective practice the proposals contained in the NIEO. As the North-South debate has moved from the general political level to technical discussion it has been accompanied by an increasing awareness by the developing countries that solutions cannot be found overnight and, to be viable, they need the co­ operation of the developed countries. Indeed, the concept of organised effort for prac­ tical action on an agenda of priorities currently seems to be an accepted, even ortho­ dox, approach among the G77 themselves. Neither this, nor the points made by Barraclough, mean that the G77 have abandoned their objective for a NIEO, rather they have adjusted their tactics to suit what is realistically possible in existing circum­ stances. An apparent willingness to negotiate short-term concessions, often for dom­ estic political reasons, is not incompatible with an intention to achieve long-term structural adjustment. Should the policy of negotiation fail to produce substantial re­ sults, however, it is possible the developing countries will revert again to confron­ tation. The intimation of a return to more militant tactics can be read into the Declar­ ation of the Belgrade Non-Aligned Foreign Ministers' Conference in July 1978 and into the deliberations ofthe Third World negotiators and thinkers who met atArusha in December the same year, and is also apparent in the Arusha G77 Ministerial Meet­ ing's Program of Action. In addition, a number of states which exercise a moderating influence on regional group and wider G 77 deliberations, including the ASEAN members, have reportedly indicated that their continued moderation is contingent on a more forthcoming approach from the developed countries. The impact of a reversal to confrontation would depend very much on the degree of unity and solidarity the G77 can muster.

75 . Various commentators have suggested that the diversity of the G77 mitigates against their maintaining unity in the long run, particularly as negotiations become more involved with the specific implementation of proposals where the interests of countries will vary. The G77 's own oft-repeated injunctions to preserve group so li­ darity demonstrate the stresses operating. However, unity remains their mo st effective tool. Pas t experience has shown that, irrespective of very real differences, the G 77 has

been able to preserve a common front, possibly partly because the divergencie s occ ur over a broad spectrum making for the creation of a variety of shifting coalitions.

76. Donald Smyth in his study of the positions taken by G77 countries on the iss ues before the Sixth and Seventh Special Sessions isol ated a number of signifi ca nt differentials between G 77 countries on all but three iss ues: aid, energy and trade .1 Smyth suggests that the four major factors responsible for the differentiation are th e degree of East-West dependence, growth rate , wealth and region. His findin gs indi­ cate , however, that even the most profound of these factors, differences in growth rates, does not have a consistent impact over the range of issues included in the NIEO, constantly dividing one group from another. The experience of developed co untry delegations at the Resumed Seco nd Session of the UNCTAD Negotiating Confe r­ ence on the Common Fund and at the 33rd Session the UNGA suggest th at th e so li ­ darity the G77 can bring to be ar on an is sue remains formidable. UNCTAD V, and

I Donald Smyth , ' The Glo bal Eco nomv and the Third World ', World Politics, Vo l. 29, 1977 .

261