The Day After Russia Attacks
What War in Ukraine Would Look Like—and How America Should Respond
The United Nations Conference on Trade and Development-UNCTAD-was not only the biggest trade conference in history, it was the biggest international conference in history on any subject, numbering upwards of 2,000 delegates. It is worth repeating what Isaiah Frank noted in his article in the January 1964 issue of this journal, that the developing countries viewed the conference as the single most important event for them since the founding of the U.N. The formal findings and recommendations of the conference, which lasted for 12 weeks ending in mid-June, are embodied in its Final Act. That governments consider this an important document is clear from the long hours and occasional bitter debate that went into its formulation. But it is also clear that the official record of the conference at best can give only official conclusions and that these alone are not the stuff of which future policy is made.
The official conclusions are important. The preamble of the Final Act contains the "message" the developing countries want the world to have about the conference and why it was called. The Final Act states flatly: "The United Nations Conference on Trade and Development was convened in order to provide, by means of international coöperation, appropriate solutions to the problems of world trade in the interests of all peoples and particularly to the urgent trade and development problems of the developing countries."
The "findings" listed in the Final Act contain an excellent catalogue of what the developing countries see as their trade problems. These include the disproportionately small share of developing countries in the more than doubling of world trade since 1950 and the resultant insufficiency of their foreign exchange earnings-hence, as they see it, the adverse effect this has had on their development. Developing countries contend that their terms of trade have deteriorated seriously in the last decade; that is, that there has been a marked decline in prices for many commodities which developing countries sell, and some increase in prices for the manufactured goods they must buy for their development process. This combination of price movements is cited as an important factor aggravating the difficulties of the developing countries. The Final Act enshrines the concept of a "gap" between import requirements and export earnings of developing countries, and even embodies an estimate made by the U.N. secretariat that the "gap" could be around $20 billion a year in 1970, given the 5 percent-a-year rate of growth which is the target of the U.N. Development Decade, and assuming that the future will be a replica of the recent past.
The use of the $20 billion figure illustrates that "facts" are not necessarily factual but may merely be a reflection of the views of the majority. The findings in the Final Act cite various policies of developed countries as contributing to the sluggishness of the export growth of developing countries, including tariffs, price support programs, the accumulation of surpluses and their depressive effect on world commodity prices, and the like.
The Final Act contains all the recommendations approved by the conference. UNCTAD was conducted in five main committees of the whole-the whole being 119 countries-dealing with primary commodity trade, trade in manufactures, finance and invisibles, institutional issues, and then a catchall committee for all other issues but which focused largely on attempting to formulate a set of principles which could guide the world in its future trade relationships. The Final Act contains recommendations in all these fields- in some cases the same recommendations that emerged from the committees; in other important instances, compromise recommendations which were reached in plenary only after the committees completed their work.
The Final Act is thus a vital document. It reflects the aspirations of the developing countries going into the conference, the issues deemed central coming out of it, the recommendations the conference was able to agree on by at least a two-thirds majority vote, and the observations of countries either concurring in these recommendations or indicating why full concurrence was not possible.
What the Final Act is not is perhaps more important to keep in mind. It is not necessarily a guide to what was in the minds of men-and of countries, since the men were official representatives-as the conference proceeded to its final, cliff-hanging agreements. The cliché sounded by almost all speakers as the conference closed was that this was just the beginning-this was only UNCTAD-1. The cliché, in this case, was true.
What governments must now focus on is where they, and the world, go from here in meeting the aspirations of the developing countries as set forth in the Final Act.
This is the first lesson, and a crucial one: that UNCTAD, or some variant of it, is now with us for the foreseeable future. The "continuing machinery," as the phrase went at the conference, could be important, or it could be futile. (The Swiss national exposition held every 25 years was going on at Lausanne concurrently with the conference. One of the exhibits at the exposition was a piece of machinery that moved its parts a lot, made a lot of noise, but served no other purpose. Some conference delegates referred to it as the "continuing machinery.") There is no easy a priori answer as to what the machinery will turn out to be-this depends on its secretariat and on governments, both of developed and of developing countries.
The approved recommendation on the continuing machinery calls: for future conferences at least every three years, and the next early in 1966, only two years hence; for a Trade and Development Board of 55 countries, almost half the participants, to meet normally twice a year between conferences, for which it is also to prepare; for the Trade and Development Board to have at least three committees, to deal with primary commodity trade, trade in manufactures, and with invisible issues (debt servicing, tourism, etc.), including shipping, and finance related to trade; and for all of this machinery to have its own secretariat in the U.N. structure, headed by a secretary general of the conference to be appointed by the Secretary- General of the United Nations and confirmed by the General Assembly.
What is significant is that the U.N. now will have machinery to review systematically, over time and in depth, all issues related to the trade and development of the developing countries. This, above all, was what the developing countries wanted. It is this that governments must now prepare for. And it is this that makes it important to understand the conduct at the first conference, and to seek to understand, also, the motivations for that conduct.
At the conference, the developing countries-the so-called Group of 75, since slightly expanded to 77-operated as a cohesive bloc. In a joint declaration of the developing countries read at the final plenary session and incorporated in full in the Final Act, this unity of the 75 was called by them "the outstanding feature of the entire conference and an event of historic significance." The developing countries clearly consider this unity as a portent of great significance.
How one looks at this unity depends on whether it will serve to generate reasonable or extreme positions. As the 75 rolled up inevitable majorities on resolution after resolution in the main committees, and even in the drafting committee where the factual record of the conference was assembled, there was some doubt as to its desirability. But it is a fact, and an important one, that the developing countries concluded that in unity there is strength.
At times this unity led to extremes and to majority votes on issues on which the developed countries were being asked to take actions but which tended to ignore their views. At other times, the unity of the 75 made compromise resolutions possible.
Fostered by this cohesiveness of the 75, the conference took on the air of a North-South confrontation, of the rich against the poor. There has been much talk in recent years that the division of the world, if one can talk of such a thing, should be along North-South economic lines rather than along the East-West lines of the cold war. UNCTAD was the first major conference where this was in fact the case. East-West issues arose, but secondarily. The Soviet Union generally was deemed to be a developed country and tended to be lumped together by the 75 with other developed countries. It would be utopian to hope that East-West divisions will be totally absent from the continuing machinery, but it can realistically be expected that these will be secondary to the North-South alignment.
But to call this a North-South "division" also would involve over- simplification. What the conference called for, as the developing countries themselves stated, was "international cooperation," not an international adversary proceeding. If there is to be a successful Development Decade, there will have to be a "joining" of interests between the North and the South. This, certainly, is an important lesson.
The developed countries, whether of the market or centrally planned type, as the U.N. parlance goes, were not monolithic. On many substantive issues of fundamental importance the industrialized countries of the West, plus Japan, New Zealand and Australia, were often widely divided. The Soviet bloc sometimes split on important votes when Poland or Rumania went in a direction different from that of the U.S.S.R. Divide and conquer took peculiar turns-turns which may well become the norm in the continuing machinery.
By trying to understand the motivations which led to the various decisions at this first conference, we may find it possible to understand also how governments are likely to act at future meetings.
In international bodies, governments don't like to talk too much about what they themselves should do; they prefer instead to place the emphasis on what others should do. This made for a sort of continuing refrain at UNCTAD and is likely to be the same in the continuing machinery. The theme of the conference-and this is reflected in the Final Act-was on what the developed countries must do to foster the economic development of the developing countries. The assumption under which the developing countries operated was that they already were doing what was possible in their own behalf and what the conference was all about was to examine what others, the developed countries, must do to help them. The following sentence from the final declaration of the 75 is illustrative of this mode of thinking: "The efforts of developing countries to raise the living standards of their peoples, which are now being made under adverse external conditions, should be supplemented and strengthened by constructive international action."
The developed countries argued that the crucial factor in economic development is self-help, and that if the conference was all about development, it should focus on the responsibilities of the developing countries. The latter were willing to accept this, in the abstract. This idea is even reflected in the Final Act. For example: "The developing countries recognize that they have the primary responsibility to raise the living standards of their peoples; but their national exertions to this end will be greatly impaired if not supplemented and strengthened by constructive international action based on respect for national sovereignty." The italics are supplied; there was always a "but" in the thinking of the developing countries. It was the phrase after the "but" that the conference focused on.
The tendency to want to talk about the shortcomings of others is a normal one. No country wants to spend its time at an international conference with a mea culpa. And yet, it will be appropriate for the continuing machinery to focus on both aspects of the development problem, the internal action and the external coöperation. They must go together if the aspirations of the developing countries are to be met. The job of governments, and of the secretariat of the continuing machinery, is to bring this mutuality of interest into focus without alienating either side.
There are issues on both sides in which sensitivities run deep. Some of these were highlighted at the conference and are likely to come to the fore again in the continuing machinery. By taking account of the depth of feeling, it may prove possible to minimize the acrimony.
Perhaps the most sensitive of all issues, especially to the most recently independent of the developing countries, is the concept of one country, one vote. This is wrapped up closely with the feeling for national sovereignty. On the other side, that of the developed countries, the feeling runs deep that the countries which will be principally responsible for taking actions in the trade and development field in the interest of the developing countries cannot subject themselves to the tyranny of the majority-in short, that one country, one vote is meaningless when automatic majorities are rolled up by countries which do not have to take any action in response to the votes. The conduct of the 75 in rolling up just such majorities on certain issues heightened this feeling of the developed countries.
As the conference negotiated itself to a close, this voting issue stood athwart all other issues and its resolution was required before all other compromises could become effective, and before the conference could close "successfully" or end in "failure." What could be done in the continuing machinery to protect the minority which was being asked to act, and at the same time recognize the deep feeling that national sovereignty should be preserved in the form of one country, one vote? This was, and is, the issue. The issue was sidestepped in the final compromise. The Secretary- General of the U.N. was asked to appoint a special committee to report to the General Assembly, and to prepare proposals for procedures in the continuing machinery which work to establish a process of conciliation before voting, and to provide safeguards in the adoption of recommendations for action which might substantially affect "the economic or financial interests of particular countries." The resolution states that proposals of the special committee should not imply "any departure from the principle that each country has one vote."
In their final joint declaration, the 75 phrased their viewpoint on this issue as follows: "... it is their view [i.e. of the 75] that there should be ample scope for reaching workable agreement on substantial issues. But they categorically declare that no arrangements designed for this purpose should derogate from the ultimate right of the proposed Board and the Conference to adopt the recommendations on any point of substance by a simple majority vote in the case of the Board and two-thirds majority vote in the case of the Conference. The developing countries attach cardinal importance to democratic procedures which afford no position of privilege in the economic and financial, no less than in the political sphere." To the developing countries, "democracy" in U.N. parlance means that the vote of any one country is as good as that of any other country, the Security Council and several other bodies excepted.
This remains an unresolved problem. Its solution, in a way satisfactory to both groups, is probably a sine qua non to an effective continuing machinery. This is one of the cardinal lessons that delegates must have taken home with them.
Organizational questions also aroused deep feelings in other ways. The developing countries showed resentment, in varying degree, against various bodies in which their voice is not controlling. Some of these bodies are the U.N. Economic and Social Council, the General Agreement on Tariffs and Trade (GATT), and to a lesser degree the International Monetary Fund and the International Bank for Reconstruction and Development. The resentment often takes the form of lashing out at important bodies dealing with trade and development problems which have not been solved. Yet world food problems have not been solved, and the Food and Agriculture Organization is spared the resentment that devolves on the other institutions cited above. World health problems have not been solved but the World Health Organization is also spared sharp criticism.
Resentment seems to stem from a combination of important but unsolved problems (great problems are rarely "solved;" they are worked at), plus a less than controlling voice in the organization by the developing countries. As GATT grows in the number of its contracting parties, the majority of which already are developing countries, the feeling of developing countries toward it is changing. GATT operates under a one- country, one-vote rule, but voting is infrequent. If the U.N.'s Economic and Social Council is enlarged to increase the representation of developing countries, their feeling toward this may alter. But, of course, there may be a countervailing feeling. When developing countries control organizations, as they are likely to control the continuing machinery of UNCTAD, resentment may begin to build up on the side of the developed countries.
Feelings run deep, too, on many substantive issues. Here there are vast differences in emphasis among the 75, and it was on these issues that logrolling among them was most effective; some important compromises took place among them, permitting the 75 to remain a cohesive whole.
The issues of the conference ran the gamut of international and domestic economic affairs. They included removing barriers to trade in primary commodities; examining the possibility of using commodity arrangements to expand export earnings of developing countries; removing barriers to trade in manufactured goods; the coming Kennedy Round of trade negotiations; building an export potential in the industrial field in the developing countries, and then of export promotion; giving trade preferences to developing countries for their manufactured products; improving the terms and conditions of aid; improving the procedures of the International Monetary Fund for compensatory financing to mitigate short-term fluctuations in export earnings; providing some form of long-term supplementary financing when the trend of export earnings of a developing country is declining; mitigating debt-servicing burdens of developing countries; examining the world shipping problem; making greater use of the world's money markets for financing development; promoting private investment; fostering greater regional coöperation among developing countries; providing adequate rules for access to ports for the score or more of landlocked countries in the world; and a host of others. Space is too limited to discuss all of them. It may be helpful, as a guide to the future, to highlight a few of these substantive issues-particularly those which are likely to be the focus of attention in the continuing machinery.
Terms of trade, and their deterioration for primary commodity exporters over the last decade, were an issue which had been highlighted by the secretariat in advance of the conference. Raúl Prebisch, the secretary general of the conference, and formerly the executive secretary of the Economic Commission for Latin America, has been stressing terms-of-trade problems for many years. Even those developing countries whose terms of trade had not worsened, or had even improved, felt obliged to refer to deteriorating terms of trade.
All developing countries, and for that matter most developed countries, agreed that some corrective action must be taken to prevent sharp fluctuations and declines in primary commodity prices. Where it may not be feasible to hold the price line for commodities, e.g. where doing so might merely invite natural or synthetic substitutes, some form of compensatory or supplementary financing was suggested in order that development programs not suffer from declining export receipts. This is perhaps the key substantive issue with which the continuing machinery must deal. It cuts across commodity policy; and primary commodities still make up some 85 to 90 percent of the export earnings of the developing countries. And it cuts across financial policy and the nature of aid to developing countries. Many of the resolutions at the conference dealt with some facet of this issue, which will be with the world for a long time.
The developing countries felt deeply that a new set of trade principles must be developed to govern future international trade relations. These principles are to be the Magna Carta of the world's "new international division of labor." Principles were drafted at the conference, some labeled general and others special, although it is hard to distinguish between the two groups. These principles were adopted by virtue of the developing countries voting yes, while the developed countries frequently abstained or voted no. In short, what UNCTAD adopted was a set of principles which does not have general agreement. It was agreed before the conference broke up that a major task is to reëxamine these trade principles, seek to shape them into a coherent whole, and to achieve more general agreement.
One other substantive issue should be noted-that dealing with preferential treatment for the manufactured products of developing countries when exported to developed countries. Among the developing countries, some of the more advanced might benefit from trade preferences. Those which are less advanced, and have practically no industry, would not benefit from preferences on goods they do not even produce as yet; on the other hand, they would, for the most part, have nothing to lose either. Some countries in Africa, however, now enjoy preferential trade treatment in the European Economic Community and might be in a worse position if they had to share these on an equal basis with other developing countries. Here, therefore, the interests of developing countries diverged. And here effective compromising was done at the committee level. It was agreed that preferences which involved discrimination against developing countries should be eliminated only along with "the effective application of measures . . . providing at least equivalent advantages ..." for the countries losing these exclusive preferences. What these "equivalent advantages" should be were hinted at but never really spelled out in detail.
A similar, and perhaps even more important, compromise was worked out among the 75 to deal with the problem of the African countries which might lose their preferential entry into the European Common Market for such products as coffee and cocoa, on which the Europeans maintain tariffs for the express purpose of favoring their former colonies.
These were important compromises on issues on which feeling runs deep among the developing countries. Latin America, for example, has long resented the discrimination it faces in marketing its coffee in the European Common Market. But the fact that a compromise was possible was a tribute to the power both of logrolling and of the desire of the 75 to maintain unity.
There are other important lessons to be derived from the discussions at the conference. One is that the developing countries want change. They want a "new" international division of labor, which implies that the present one is bad. They want and have a "new" trade forum. They want "new" trade principles. They want new and different techniques of aid, not necessarily at the sacrifice of the old, but in addition to what is now being done. They want new trade rules to replace the most-favored-nation concept and instead deliberately to favor the developing countries.
There was some nervousness on the part of many developing countries in much of this. If aid techniques are to be altered, what about those countries doing fairly well in aid receipts? The other side of the trade-preference coin is trade discrimination. Some of the more advanced of the developing countries, those on the borderline and uncertain of their proper classification, were privately concerned that they might not be among the countries receiving preference and that they would therefore be discriminated against. These misgivings were not publicly aired, but were privately expressed. The unity of the 75 was too precious for public doubts.
However, the key fact is that the world's poorer countries want change. To the extent that their proposals are not accepted, this is often interpreted as a desire to maintain the status quo and is resented.
The developing countries are irritated by what they sometimes believe is the patronizing air adopted by the representatives of developed countries. The lesson of avoiding condescension must be learned and relearned. The press in the developed countries often reported that one important function of UNCTAD was education, and by this was meant the education of representatives from developing countries. The fact that education might also work in the other direction tended to be ignored.
It is hard to state which way the education went in this instance. People who attend such conferences, whether from developed or developing countries, are never quite the same 12 weeks and hundreds of thousands of words afterwards. Something of the other fellow's viewpoint does come through. Presumably, open-minded and inquiring delegates from both developed and developing countries learned something, and closed-minded ones learned nothing, no matter what their national origin or the level of development of their country.
Insensitivity to the emotions and viewpoint of other people is not unique to representatives of developed countries. It also works the other way. Representatives of developed countries did not relish it when they were accused of being negative, or of being advocates of the status quo, only because they did not accept proposals of developing countries in precisely the words in which they were offered. Also, the running up of inevitable majorities by the developing countries, asking the other fellow to do something, was a technique which inevitably irritated the representatives of developed countries.
These same delegates were also struck by what often seemed to them to be a double, or even triple, standard on the part of the developing countries. The standard went something as follows: no developing country would make demands on any other developing country, on the assumption that they already were doing all that was possible; developing countries would make demands on what the U.N. calls the centrally planned economies, i.e. the Communist countries, but would not be insistent when the Communists balked or wished to rephrase these demands in their own language; finally, developing countries would make uncompromising demands on what the U.N. calls the market economies, i.e. the Western industrialized countries, and would not only reject the latter's attempts at modification, but would even express dissatisfaction when demands were not accepted precisely as made.
As an example, one of the demands made at the conference was that developed free-market countries should eliminate internal taxes levied on such tropical beverages as coffee and cocoa, on the grounds that these taxes impede consumption. In some European countries, the elimination of these long-standing taxes, while desirable, is also difficult since alternative sources of revenue must be found. Nevertheless, the developing countries continued to insist on the elimination of these taxes, and properly so.
A device in Communist countries comparable in effect if not in purpose is the large margin between import and retail prices for tropical products. These, too, impede consumption. It was suggested that these margins in the centrally planned economies should reflect only normal distribution costs and profit. The representatives of centrally planned economies objected to this, and quite vociferously. They said that retail prices were immaterial in a planned economy. They implied that the only purpose of retail prices was to act as a market-clearing mechanism. They argued that anyone advocating a reduced import-retail price margin in order to stimulate imports just did not understand what a planned economy was all about. The issue, of course, is important to the Communist countries in that it raises the issue of consumer sovereignty; but the argument that limiting the margin between import and retail price is impossible for a planned economy is no more convincing than the argument that a free-market economy cannot control its internal taxes.[i]
The important point that delegates noticed was that the developing countries, while they did bargain hard with the Communist countries, did not insist on maintaining their demands in the final resolutions, but instead accepted expressions of good intent, using language drafted by the Communist countries saying that they would increase their imports from developing countries.
It is hard to state why the demands placed on the Western industrialized countries and Japan tend to be greater than those placed on the Soviet Union. The reason given by most representatives at the conference was that the free-market economies tend to be more responsive to such pressure, and the Communist countries less so. In other words, the developing countries presumably exert pressure against the industrialized market countries because they hit pay-dirt; they exert less pressure against the developed Communist countries because their demands tend more easily to be sloughed off. Also, of course, the Western countries represent far more significant markets. Another reason might be that the developing countries are only now beginning to get used to treating the Soviet Union as a developed country, and their demands on it may increase as time passes. This is a portent for Moscow to ponder.
Perhaps the greatest danger that can come from these mutual irritations is that each side loses its appreciation of the aspirations and sensitivities of the other side. This is a lesson both sides must learn.
On the part of the developing countries, closing statement after closing statement reflected disappointment that UNCTAD, after only 12 weeks, had not solved all of the problems of economic development. For example, the final declaration of the 75 countries notes: "They [the 75] do not consider that the progress that has been registered in each of the major fields of economic development has been adequate or commensurate with their essential requirements."
A great danger is that in the developed countries a plague-on-your-house feeling will develop, prompted by the seeming insensitivity of developing countries to the viewpoint of others, the rolling up of majority votes, and the double and triple standard referred to earlier. Such a reaction could be tragic, in that it could result in the developed countries losing sight of the very real problems which the developing countries have in achieving adequate economic growth.
There was much talk in the closing days as to whether the conference was a "success" or "failure," but it was never quite clear what these words meant. To some developing countries, success meant stating all their demands in unvarnished form, without any alteration in wording, in order that these might serve as a charter for what the developing countries thought must be done. To most developing countries, it seemed more important to arrive at some agreed resolutions "in recognition of the need for a coöperative effort in the international field."
If one conceives of UNCTAD as a start, then if it made a good start, it was successful. One would assume that from the viewpoint of the developing countries a good start was made. The developing countries will have a forum in which to examine their problems systematically and to seek remedies to what they consider are now the defects in the world's trading system. From their viewpoint, this must be considered a major achievement.
From the viewpoint of the developed countries, the real issue certainly must be the extent to which international action can be taken to help the developing countries solve the real problems which they face. Economic development is a complex process, possibly the most complex process of human endeavor. Certainly, there is agreement among all men that greater prosperity for each is desirable for all.
The issue for the United States, therefore, must be: What can be done by all countries-developed and developing-to help achieve this greater prosperity? Viewed in this way, "failure" is to permit conditions to develop in the world which would prevent these coöperative international actions from being taken to achieve higher living standards throughout the world. "Success" will be measurable as greater prosperity is achieved.
[i] At about the time this discussion was taking place, an article appeared in the Summer 1964 issue of The New Hungarian Quarterly, written by Róbert Hardi, an economist at the Karl Marx University of Economics in Budapest and Deputy Manager of KONSUMEX (Commodity Trading Enterprise). Mr. Hardi wrote that the socialist countries could undertake internal actions to stimulate imports from the developing countries. First among these, he wrote, "would be a decrease in the prices of tropical products on the home markets, resulting in increased demand. Price decreases of this type have recently taken place in a number of socialist countries. In Hungary a decrease in the price of coffee has, for instance, brought about a 100 percent increase in the volume of sales."