25-28 May 1989
Washington D. C./ Westfields U. S. A.
Since we met last year in Moscow world politics have undergone dramatic sea changes. Winds of peace are blowing; though not necessarily winds of justice, freedom or ecological responsibility. There are signs that a more cooperative world is emerging. Yet this cooperation is by no means all-embracing. In a number of areas and over a multitude of pressing problems it is lack of cooperation which still prevails. There is in short no room for complacency. If the first successful steps to deal with longstanding challenges and expectations are to be consolidated and expanded across the spectrum of global issues, lucid and courageous leadership is essential.
A TIME OF STRATEGIC CHANGES
1. The renewed detente between the United States and the Soviet Union is a strategic change of global importance. Having concluded the first effective disarmament treaty in history and having begun to demolish a whole class of nuclear weapons, the superpowers now have to meet global expectations that this process will continue. The spectre of nuclear annihilation may have dimmed but it has not yet disappeared. Efforts must be made to ensure that the window of opportunity for further disarmament is kept open. Negotiations on mutually balanced reductions of conventional forces as well as strategic arms with strict adherence to existing treaties, such as the Anti-Ballistic Missile (ABM) Treaty, and further steps to decrease nuclear arsenals to an agreed level should be completed without delay. The abolition of chemical warfare potential and the conclusion of a comprehensive nuclear test ban are essential.
2. The changes that have taken place in the Soviet Union have largely been met either with patronizing attitudes or with an equally paralyzing sense of suspicion. Neither attitude lives up to the aspirations of a world community anxious for a period of secure and sustainable peace. The nations of the West, both individually and in the North Atlantic Treaty Organization (NATO), have yet to construct a post-cold war agenda. The absence of such an agenda may not only undermine the political cohesion of the West but may mean that vital opportunities within the present situation are missed.
3. The recent rapprochement between the Soviet Union and the People`s Republic of China is of paramount strategic importance. Based on the solution to a number of regional conflicts and opening up an avenue to reducing the military expenditure of both powers in order to shift expenditure to civil economic purposes, it has been welcomed by the world at large and has, in turn, created expectations for the peaceful solution of other regional conflicts.
4. Both countries have publicly stressed that their rapprochement is not at the expense of third parties. Smaller nations in the region are, however, concerned about the long-term strategic consequences. The improvement in Sino-Soviet relations has to stand the test of constructive policy initiatives vis-a-vis these neighbouring countries.
5. The radical change in relations between the United States, the Soviet Union and the People's Republic of China has initiated a period of promising stability among the great powers, which in turn may have important implications for the solution of a series of regional conflicts. Nevertheless, while agreements among the global powers are welcome, dangers to global stability remain. On the one hand, the stability in their relations may not necessarily prevent increases in defense spending and arms stockpiling nor the development of nuclear weapons potential by other nations. On the other hand, it will not necessarily exclude new regional conflicts nor prevent the delay in the peaceful settlement of some existing conflicts. To this end it must be stressed that the global powers should continue to acknowledge a special responsibility, in the framework of the United Nations, not only for the peaceful settlement of regional disputes but also for the prevention of a flare-up of new conflicts and encourage regional organizations to play a constructive role.
6. From a grand strategic perspective there is, however, an area of international relations which may well prove disruptive to the world's global fabric. The open trading system is under threat. The rhetoric of open markets abounds yet in reality protectionist measures are constantly on the increase. Emerging free trading zones show signs of developing into a means of stifling and strangling external competition, hitting the developing countries the hardest. Some of these emerging free trading zones derive their legitimacy from factors such as cultural identity and political self assurance. It cannot be emphasized too strongly that the strategic consequences of protectionist measures could be disastrous, ultimately endangering international cooperation.
7. Much of the developing world is in crisis. Unless countered by cohesive strategies, the economic and social deterioration in these countries may seriously disrupt the strategic and political environment. In particular, the progress made towards democracy in Latin America may be reversed if the financial and economic problems of these countries are left unaddressed. In the shadow both of an increasing debt burden and of an ongoing financial drain and with the escalation in drug trafficking these nations have little chance to live up to their responsibilities for solving their domestic problems.
8. In this connexion, the world must recognize the gravity of the drug problem and its terrifying consequences and must develop policies, strategies and financial programmes to cope with, and eventually eliminate, its sinister consequences for humanity. The InterAction Council stresses the vital need to fight the growth, spread, trafficking and use of drugs by means of international agreements between all the countries involved.
9. Population growth has acquired a grand strategic dimension. If humankind continues along its present path, huge imbalances in economic wealth aggravated by population growth in the various regions of the world, may become a source of conflict possibly degenerating into war. While in 1987 the aggregate gross national product (GNP) of all the developing countries accounted for 16% of world GNP, their population represented 76% of a total world population of 5 billion. Moreover, virtually all of the population increase between now and the year 2000 will take place in the developing countries further exacerbating this imbalance. The InterAction Council considers it of great importance that developing countries strengthen their population policies and it urges all countries, in particular the United States, to contribute to and to increase their funding of international population assistance programmes.
ENERGY FOR A HABITABLE WORLD
10. Energy issues have to be addressed in terms of their interrelationship with population growth, economic development and the environment. Based on the findings of a high-level expert group, chaired by Mr. Pierre Elliott Trudeau , the InterAction Council has undertaken a comprehensive assessment of the relationship between energy use and the global environment.
11. Present patterns of energy consumption - essentially the use of fossil fuels such as coal, oil and gas - are a central cause of the increasing greenhouse effect, climatic warming and the deterioration of the global environment. Yet despite governments` increased awareness about their implications, including consequences for the security and survival of entire nations, effective corrective action aimed at curbing carbon dioxide (CO2) emissions has not been taken.
12. Undoubtedly, there is a pressing need for further research in many fields as set out below. Nevertheless, a great deal of research has already been done and results have been achieved. Some new scientific and technical solutions have already emerged. The need for further research must not be used as an excuse for political inaction. The long lead time for remedial efforts to show effects calls for immediate action by all countries, both individually and collectively. No country can escape the risks of global warming. The cost of inaction now will be staggering in a few years. As an immediate first step, countries must commit themselves to realistic, but substantive goals for reducing the use of fossil fuels and their emissions. The transition to a world without excessive reliance on fossil fuels requires that countries continuously adjust their mix of energy use. During the period of transition, nuclear energy will play a role. The United States, Japan, Western Europe, the other OECD nations and the Soviet Union as major energy consumers carry a special responsibility to instigate a general policy leading to a reduction of greenhouse gas emissions.
13. The industrialized countries (OECD) should jointly agree on targets for the reduction of fossil fuels and the emission of greenhouse gases, should adopt legislation implementing such agreements and should empower the International Energy Agency to monitor and report regularly on adherence. Similar monitoring systems should be set up for countries in other regions.
14. Population growth and the need for economic growth in developing countries pose a dilemma as they result in a steadily rising energy demand which is essentially satisfied from fossil fuel sources which increases the threat to the global climate. Industrialized countries should therefore follow the commendable lead of the Netherlands and earmark funds for a new global fund which should help developing countries obtain and introduce technologies to improve energy-use efficiency and reduce environmental risks. Likewise, international financial institutions and bilateral aid agencies should adapt their lending programmes towards the promotion of technological leapfrogging in developing countries.
15. Short, medium and long-term measures are required. In the short run, considerable amounts of energy can be saved through conservation measures and efficient production and use, which would also bring about financial savings. As technology has already advanced enormously, even very ambitious commitments could be implemented.
16. Prices have proved an effective tool in influencing energy consumption. Their level should reflect the need to reduce ecological risks. The demand for fossil fuels could be lowered through levies and changes in energy subsidies. Adjustments in pricing will be effective if all countries act in concert thereby avoiding interference with their competitive positions. Research and development funds and energy subsidies should be reviewed to ensure that they favour efficiency measures as well as environmentally sound energy production.
17. In the medium-term, a shift in the mix of fossil fuels from coal and oil to gas can contribute to a reduction in the level of greenhouse emissions.
18. In the long run, all countries should drastically change their research and development priorities towards a massive promotion of renewable energies. The InterAction Council calls upon the industrialized countries, in particular the Summit Seven at their forthcoming meeting in Paris, to spearhead and fund a substantial, ten-year programme of co-operative research into the economical use and introduction of solar energy and photovoltaics on a large scale. Funding should begin at once. Renewable energies and in particular hydropower, if produced in the right conditions, must remain an important source of energy.
19. Leaders of all countries must personally address the immense dangers to our future resulting from indiscriminate energy use and must initiate the required policy adjustments. The InterAction Council calls on the leaders of the industrialized countries, the Soviet Union and China to take the lead in speedily convening a global conference aimed at the early adoption of a convention on the stabilization of the composition of the atmosphere and the establishment of effective and innovative institutions.
20. The 1970s could be characterized as a decade devoted to energy security, when even coal production was promoted for the sake of reducing dependency on other energies. The 1990s must become the decade of reconciling energy policies with both security and environmental requirements - implying the massive promotion and introduction of environmentally sound non-fossil energies.
21. At its future sessions, the InterAction Council will continue to assess developments in this area. Specifically it will publicly identify those countries which have realized the goals set by the international community in the environmental area and those that have fallen short of these standards.
THE NEED FOR ECONOMIC ADJUSTMENT
22. Today's global economy contains an impressive number of positive features. Having undergone a period of steady growth the industrialized countries (OECD) are registering higher growth rates than anticipated; unemployment has slightly declined; inflation rates, despite recent increases, remain relatively low. The Newly Industrialized Economies of Asia (South Korea, Taiwan, Singapore and Hong Kong) have maintained double-digit growth rates and are about to gain the status of industrialized countries; the People's Republic of China and the Soviet Union as well as some of the other centrally planned economies and some third world countries have engaged in a process of economic restructuring.
Yet these successes must not give rise to a feeling of complacency. The imbalances in the world economy are still dangerous. A large number of less developed countries (LDCs) have been facing economic stagnation and debt overhang. The gap between industrialized countries and less developed countries has widened considerably.
23. The Council deems it unacceptable that fundamental economic disorders should continue unaddressed: the twin deficits of the United States (budget and trade) have yet to be tackled; the tremendous trade surpluses of Japan and of West Germany remain; the largest economy of the world, the United States, continues to suck in a large amount of foreign capital thereby crowding out weaker competitors for these funds, in particular the developing countries; the debt problem is soaring and large parts of the developing world, particularly Africa, Latin America and Eastern Europe, are being abandoned in a state of crisis.
24. The leading economic and financial nations continue to ignore the fundamental need for adjustment, preferring instead to limit their activities to managing the imbalances. This attitude could prove fatal in the near future. Inflation rates are on an upturn. As the burden of readjustment is left to central banks, they may in turn find that their monetary policies are insufficient to cope with the need to fight inflation and recession at one and the same time. Moreover, negligence in times of growth will become fatal in a period of recession as far as adjustment of the budgetary and financial policy mix is concerned.
25. It is imperative, therefore, that the United States correct its internal and external imbalances without delay. The constant budgetary and trade deficits must be corrected within a defined timeframe; the United States` investment rate, private saving and public spending must be brought into equilibrium. In short, the United States still the richest economy in the world, must regain its former status as a net capital exporter.
26. Japan and West Germany must correct their endemic trade surpluses, while other European countries must adjust their trade deficits. Moreover, they must begin to acknowledge that their domestic policies directly affect other countries. All OECD countries plus the Soviet Union and some East European countries must assume responsibility for providing increased funds for official development assistance to less developed countries.
27. The European Community having set 1992 as the date for the completion of its internal market, must be aware of its partners` growing anxiety about whether it will emerge as a "partnership Europe" or as a "fortress Europe". The Community, already in the process of bringing about regional and structural adjustments, must open its markets to the maximum extent possible, in particular to developing countries by removing quotas and by refraining from protectionist action in such areas as so-called anti-dumping policies and the setting of rules of origin.
28. Africa is a continent in despair. Some of the countries of Sub-Saharan Africa have undergone painful adjustment processes yet increased external assistance has not been forthcoming. While it is true that the solution of developing countries problems lies mainly with these countries themselves and in particular with their adoption of an adequate economic policy mix, it remains that without appropriate external financing and technological transfers their developing problems cannot be solved.
29. Trade is a fundamental basis of wealth of the industrialized countries and the prime means by which developing countries can integrate themselves into the global economy. But free trade is under threat. Over the last years the world has moved towards increased protectionism. Afraid of the short term costs of economic adjustments many countries have chosen to forego the long term benefits of free trade relations with other countries choosing instead to apply open or hidden protectionist measures. This process must be reversed. The ongoing Uruguay Round of the General Agreement on Tarriffs and Trade (GATT) must be made a success. To this end restrictions on trade in tropical primary products should be abolished while the GATT should be given greater powers of enforcement. In particular, the European Community, the United States and Japan must reduce their farm subsidies. Landlocked countries such as Nepal or Botswana should receive immediate consideration from transit countries to allow the free flow of goods as determined by various international conventions.
30. Seven years after the eruption of the debt crisis, the debt problem remains unsolved. Time may have been gained to the benefit of the creditor banks but a definitive solution has only been postponed. The crisis continues to constitute a serious obstacle to the efforts of the less developed countries to resume growth and to improve the income levels of their populations. It has to be recognized that this is a problem that will not be solved in the short run.
31. The Brady initiative, which requires urgent formulation and subsequent implementation, represents a step in the right direction. For the first time it recognises the need for debt and debt service reduction. At the same time it reiterates the need for economic reform in the debtor countries, a greater role for the international institutions and additional resources from the commercial banks.
32. In this new phase of the debt strategy, major changes are required from all the players in the problem. Commercial banks should facilitate the elimination of some restrictions in the restructuring arrangement already concluded, and should be more prepared to recognize the market value of the debt of less developed countries.
33. Governments must help by eliminating the obstacles in legal, accounting and fiscal regulations so as to give incentives to commercial banks for debt and debt services reductions. International financial institutions must recognize the importance of their role not only as providers of net resources but in co-operation with their own resources in debt reduction schemes, as catalysts for other sources of funds to debtor countries and as monitors of debtor countries' economic reform programmes. Debtor nations, for their part, must strengthen and maintain their economic adjustment programmes so as to stimulate domestic and foreign investment, resume growth and create adequate initiatives and favorable domestic conditions for capital repatriation.