US Department of State Dispatch Supplement VOL. 3, NO 5

Title:

Group of Seven (G-7) 1992 Economic Summit

PA Source: Office of Public Communication, Bureau of Public Affairs Date: Aug, 15 19928/15/92 Description: Munich, Germany July 6-8, 1992 Category: Speeches, Testimony, Statements Category: Fact sheets Category: Policy Briefs (Gist) Category: Chronologies Region: Whole World Country: United States, Germany, Italy, Canada, Japan, United Kingdom, France Subject: Trade/Economics, History, International Organizations, Development/Relief Aid, North America Free Trade, United Nations, International Law, Environment, State Department, Nuclear Nonproliferation, Democratization [TEXT]

Economic Summit Communique

Issued by the leaders of the Group of Seven (G-7) following the economic summit, Munich, Germany, July 8, 1992 1. We, the Heads of State and Government of seven major industrial nations and the president of the Commission of the European Community, have met in Munich for our eighteenth annual Summit. 2. The international community is at the threshold of a new era, freed from the burden of the East-West conflict. Rarely have conditions been so favourable for shaping a permanent peace, guaranteeing respect for human rights, carrying through the principles of democracy, ensuring free markets, overcoming poverty and safeguarding the environment. 3. We are resolved, by taking action in a spirit of partnership, to seize the unique opportunities now available. While fundamental change entails risk, we place our trust in the creativity, effort and dedication of people as the true sources of economic and social progress. The global dimension of the challenges and the mutual dependencies call for world-wide cooperation. The close coordination of our policies as part of this cooperation is now more important than ever.
World Economy
4. Strong world economic growth is the prerequisite for solving a variety of challenges we face in the post-Cold War world. Increasingly, there are signs of global economic recovery. But we will not take it for granted and will act together to assure the recovery gathers strength and growth picks up. 5. Too many people are out of work. The potential strength of people, factories and resources is not being fully employed. We are particularly concerned about the hardship unemployment creates. 6. Each of us faces somewhat different economic situations. But we all would gain greatly from stronger, sustainable non-inflationary growth. 7. Higher growth will help other countries, too. Growth generates trade. More trade will give a boost to developing nations and to the new democracies seeking to transform command economies into productive participants within the global marketplace. Their economic success is in our common interest. 8. A successful Uruguay Round will be a significant contribution to the future of the world economy. An early conclusion of the negotiations will reinforce our economies, promote the process of reform in Eastern Europe and give new opportunities for the well- being of other nations, including in particular the developing countries. We regret the slow pace of the negotiations since we met in London last year. But there has been progress in recent months. Therefore we are convinced that a balanced agreement is within reach. We welcome the reform of the European Community's [EC] Common Agricultural Policy which has just been adopted and which should facilitate the settlement of outstanding issues. Progress has been made on the issue of internal support in a way which is consistent with the reform of the Common Agricultural Policy, on dealing with the volume of subsidised exports and on avoiding future disputes. These topics require further work. In addition, parties still have concerns in the areas of market access and trade in cereal substitutes that they seek to address. We reaffirm that the negotiations should lead to a globally balanced result. An accord must create more open markets for goods and services and will require comparable efforts from all negotiating partners. On this basis we expect that an agreement can be reached before the end of 1992. 9. We are committed, through coordinated and individual actions, to build confidence for investors, savers, and consumers: confidence that hard work will lead to a better quality of life; confidence that investments will be profitable; confidence that savings will be rewarded and that price stability will not be put at risk. 10. We pledge to adopt policies aimed at creating jobs and growth. We will seek to take the appropriate steps, recognizing our individual circumstances, to establish sound macro-economic policies to spur stronger sustainable growth. With this in mind we have agreed on the following guidelines: -- To continue to pursue sound monetary and financial policies to support the upturn without rekindling inflation; -- To create the scope for lower interest rates through the reduction of excessive public deficits and the promotion of savings; -- To curb excessive public deficits above all by limiting public spending. Taxpayers' money should be used more economically and more effectively. -- To integrate more closely our environmental and growth objectives, by encouraging market incentives and technological innovation to promote environmentally sound consumption and production. As the risk of inflation recedes as a result of our policies, it will be increasingly possible for interest rates to come down. This will help promote new investment and therefore stronger growth and more jobs. 11. But good macroeconomic policies are not enough. All our econo- mies are burdened by structural rigidities that constrain our potential growth rates. We need to encourage competition. We need to create a more hospitable environment for private initiative. We need to cut back excess regulation, which suppresses innovation, enterprise and creativity. We will strengthen employment opportunities through better training, education, and enhanced mobility. We will strengthen the basis for long-term growth through improvements in infrastructure and greater attention to research and development. We are urging these kinds of reforms for new democracies in the transition to market economies. We cannot demand less of ourselves. 12. The coordination of economic and financial policies is a central element in our common strategy for sustained, non-inflationary growth. We request our Finance Ministers to strengthen their cooperation on the basis of our agreed guidelines and to intensify their work to reduce obstacles to growth and therefore foster employment. We ask them to report to our meeting in Japan in 1993.
United Nations Conference On Environment and Development (UNCED)
13. The Earth Summit has been a landmark in heightening the consciousness of the global environmental challenges, and in giving new impetus to the process of creating a world-wide partnership on development and the environment. Rapid and concrete action is required to follow through on our commitments on climate change, to protect forests and oceans, to preserve marine resources, and to maintain biodiversity. We therefore urge all countries, developed and developing, to direct their policies and resources towards sustainable development which safeguards the interests of both present and future generations. 14. To carry forward the momentum of the Rio Conference, we urge other countries to join us: -- in seeking to ratify the Climate Change Convention by the end of 1993, -- in drawing up and publishing national action plans, as foreseen at UNCED, by the end of 1993, -- in working to protect species and the habitats on which they depend, -- in giving additional financial and technical support to developing countries for sustainable development through official development assistance (ODA), in particular by replenishment of IDA [International Development Association], and for actions of global benefit through the Global Environment Facility (GEF) with a view to its being established as a permanent funding mechanism,-- in establishing at the 1992 UN General Assembly the Sustainable Development Commission which will have a vital role to play in monitoring the implementation of Agenda 21, -- in establishing an international review process for the forest principles, in an early dialogue, on the basis of the implementation of these principles, on possible appropriate internationally agreed arrangements, and in increased international assistance, -- in further improving monitoring of the global environment, including through better utilisation of data from satellite and other earth observation programmes, -- in the promotion of the development and diffusion of energy and environment technologies, including proposals for innovative technology programmes, -- by ensuring the international conference on straddling fish stocks and highly migratory fish stocks in the oceans is convened as soon as possible.
Developing Countries
15. We welcome the economic and political progress which many developing countries have made, particularly in East and South-East Asia, but also in Latin America and in some parts of Africa. However, many countries throughout the world are still struggling against poverty. Sub-Saharan Africa, above all, gives cause for concern. 16. We are committed to dialogue and partnership founded on shared responsibility and a growing consensus on fundamental political and economic principles. Global challenges such as population growth and the environment can only be met through cooperative efforts by all countries. Reforming the economic and social sector of the UN system will be an important step to this end. 17. We welcome the growing acceptance of the principles of good governance. Economic and social progress can only be assured if countries mobilise their own potential, all segments of the population are involved and human rights are respected. Regional cooperation among developing countries enhances development and can contribute to stability, peaceful relations and reduced arms spending. 18. The industrial countries bear a special responsibility for a sound global economy. We shall pay regard to the effects of our policies on the developing countries. We will continue our best efforts to increase the quantity and quality of official development assistance in accordance with our commitments. We shall direct official development assistance more towards the poorest countries. Poverty, population policy, education, health, the role of women and the well-being of children merit special attention. We shall support in particular those countries that undertake credible efforts to help themselves. The more prosperous developing countries are invited to contribute to international assistance. 19. We underline the importance for developing countries of trade, foreign direct investment and an active private sector. Poor developing countries should be offered technical assistance to establish a more diversified export base especially in manufactured goods. 20. Negotiations on a substantial replenishment of IDA funds should be concluded before the end of 1992. The IMF [International Monetary Fund] should continue to provide concessional financing to support the reform programmes for the poorest countries. We call for an early decision by the IMF on the extension for one year of the Enhanced Structural Adjustment Facility and for the full examination of options for the subsequent period, including a renewal of the facility. 21. We are deeply concerned about the unprecedented drought in southern Africa. Two thirds of the Drought Appeal target has been met. But much remains to be done. We call on all countries to assist. 22. We welcome the progress achieved by many developing countries in overcoming the debt problems and regaining their creditworthiness. Initiatives of previous Summits have contributed to this. Nevertheless, many developing countries are still in a difficult situation. 23. We confirm the validity of the international debt strategy. We wel-come the enhanced debt relief extended to the poorest countries by the Paris Club. We note that the Paris Club has agreed to consider the stock of debt approach, under certain conditions, after a period of three or four years, for the poorest countries that are prepared to adjust, and we encourage it to recognise the special situation of some highly indebted lower-middle-income countries on a case by case basis. We attach great importance to the enhanced use of voluntary debt conversions, including debt conversions for environmental protection.
Central and Eastern Europe
24. We welcome the progress of the democracies in Central and Eastern Europe including the Baltic states (CEECs) towards political and economic reform and integration into the world economy. The reform must be pursued vigorously. Great efforts and even sacrifices are still required from their people. They have our continuing support. 25. We welcome the substantial multilateral and bilateral assistance in support of reform in the CEECs. Financing provided by the EBRD [European Bank for Reconstruction and Development] is playing a useful role. Since 1989, total assistance and commitments, in the form of grants, loans and credit guarantees by the Group of 24 and the international financial institutions, amounts to $52 billion. We call upon the Group of 24 to continue its coordination activity and to adapt it to the requirements of each reforming country. We reaffirm our readiness to make fair contributions. 26. We support the idea of working with Poland to reallocate, on the basis of existing arrangements, funds from the currency stabilization fund, upon agreement on an IMF programme, towards new uses in support of Poland's market reform effort, in particular by strengthening the competitiveness of Poland's business enterprises. 27. The industrial countries have granted substantial trade concessions to the CEECs in order to ensure that their reform efforts will succeed. But all countries should open their markets further. The agreements of the EC and EFTA [European Free Trade Association] countries aiming at the establishment of free trade areas with these countries are a significant contribution. We shall continue to offer the CEECs technical assistance in enhancing their export capacity. 28. We urge all CEECs to develop their economic relations with each other, with the new independent states of the former Soviet Union as well as more widely on a market-oriented basis and consistent with GATT [General Agreement on Tariffs and Trade] principles. As a step in this direction we welcome the special cooperation among the CSFR [Czech and Slovak Federal Republics], Poland and Hungary, and hope that free trade among them will soon be possible. 29. Investment from abroad should be welcomed. It is important for the development of the full economic potential of the CEECs. We urge the CEECs to focus their policies on the creation of attractive and reliable investment conditions for private capital. We are providing our bilateral credit insurance and guarantee instruments to promote foreign investment when these conditions, including servicing of debt, are met. We call upon enterprises in the industrial countries to avail themselves of investment opportunities in the CEECs.
New Independent States Of the former Soviet Union
30. The far-reaching changes in the former Soviet Union offer an historic opportunity to make the world a better place: more secure, more democratic and more prosperous. Under President Yeltsin's leadership the Russian government has embarked on a difficult reform process. We look forward to our meeting with him to discuss our cooperation in support of these reforms. We are prepared to work with the leaders of all new States pursuing reforms. The success is in the interest of the international community. 31. We are aware that the transition will involve painful adjustments. We offer the new States our help for their self-help. Our cooperation will be comprehensive and will be tailored to their reform progress and internationally responsible behaviour, including further reductions in military spending and fulfillment of obligations already undertaken. 32. We encourage the new States to adopt sound economic policies, above all by bringing down budget deficits and inflation. Working with the IMF can bring experience to this task and lend credibility to the efforts being made. Macroeconomic stabilisation should not be delayed. It will only succeed if at the same time the building blocks of a market economy are also put into place, through privatisation, land reform, measures to promote investment and competition and appropriate social safeguards for the population. 33. Creditworthiness and the establishment of a dependable legal framework are essential if private investors are to be attracted. The creditworthiness of the new States will in particular be assessed by the way in which they discharge their financial obligations. 34. Private capital and entrepreneurial commitment must play a decisive and increasing part in economic reconstruction. We urge the new States to develop an efficient private business sector, in particular the body of small- and medium-sized private companies which is indispensable for a market economy. 35. Rapid progress is particularly urgent and attainable in two sectors: agriculture and energy. These sectors are of decisive importance in improving the supply situation and increasing foreign exchange revenue. Trade and industry in our countries are prepared to cooperate. Valuable time has already been lost because barriers to investment remain in place. For energy, we note the importance of the European Energy Charter for encouraging production and ensuring the security of supply. We urge rapid conclusion of the preparatory work. 36. All Summit participants have shown solidarity in a critical situation by providing extensive food aid, credits and medical assistance. They also have committed technical assistance. A broad inflow of know-how and experience to the new States is needed to help them realise their own potential. Both private and public sectors can contribute to this. What is needed most of all is concrete advice on the spot and practical assistance. The emphasis should be on projects selected for their value as a model or their strategic importance for the reform process. Partnerships and management assistance at corporate level can be particularly effective. 37. We stress the need for the further opening of international markets to products from the new States. Most-favoured-nation treatment should be applied to trade with the new States and consideration given to further preferential access. The new States should not impede reconstruction by setting up barriers to trade between themselves. It is in their own interest to cooperate on economic and monetary policy. 38. We want to help the new States to preserve their highly- developed scientific and technological skills and to make use of them in building up their economies. We call upon industry and science in the industrial countries to promote cooperation and exchange with the new States. By establishing International Science and Technology Centres we are helping to redirect the expertise of scientists and engineers who have sensitive knowledge in the manufacture of weapons of mass destruction towards peaceful purposes. We will continue our efforts to enable highly-qualified civil scientists to remain in the new States and to promote research cooperation with Western industrial countries. 39. We welcome the membership of the new States in the international financial institutions. This will allow them to work out economic reform programmes in collaboration with these institutions and on this basis to make use of their substantial financial resources. Disbursements of these funds should be linked to progress in implementing reforms. 40. We support the phased strategy of cooperation between the Russian Government and the IMF. This will allow the IMF to disburse a first credit tranche in support of the most urgent stabilisation measures within the next few weeks while continuing to negotiate a comprehensive reform programme with Russia. This will pave the way for the full utilisation of the $24 billion support package announced in April. Out of this, $6 billion earmarked for a rouble stabilisation fund will be released when the necessary macroeconomic conditions are in place. 41. We suggest that country consultative groups should be set up for the new States, when appropriate, in order to foster close cooperation among the States concerned, international institutions and partners. The task of these groups would be to encourage structural reforms and to coordinate technical assistance.
Safety of Nuclear Power Plants In the New Independent States Of the former Soviet Union and In Central and Eastern Europe
42. While we recognise the important role nuclear power plays in global energy supplies, the safety of Soviet-design nuclear power plants gives cause for great concern. Each State, through its safety authorities and plant operators, is itself responsible for the safety of its nuclear power plants. The new States concerned of the former Soviet Union and the countries of Central and Eastern Europe must give high priority to eliminating this danger. These efforts should be part of a market-oriented reform of energy policies encouraging commercial financing for the development of the energy sector. 43. A special effort should be made to improve the safety of these plants. We offer the States concerned our support within the framework of a multilateral programme of action. We look to them to cooperate fully. We call upon other interested States to contribute as well. 44. The program of action should comprise immediate measures in the following areas: -- operational safety improvements; -- near-term technical improvements to plants based on safety assessments; -- enhancing regulatory regimes. Such measures can achieve early and significant safety gains. 45. In addition, the programme of action is to create the basis for longer-term safety improvements by the examination of: -- the scope for replacing less safe plants by the development of alternative energy sources and the more efficient use of energy, -- the potential for upgrading plants of more recent design. Complementary to this, we will pursue the early completion of a convention on nuclear safety. 46. The programme of action should develop clear priorities, provide coherence to the measures and ensure their earliest implementation. To implement the immediate measures, the existing G-24 [Group of 24] coordination mandate on nuclear safety should be extended to the new States concerned of the former Soviet Union and at the same time made more effective. We all are prepared to strengthen our bilateral assistance. In addition, we support the setting up of a supplementary multilateral mechanism, as appropriate, to address immediate operational safety and technical safety improvement measures not covered by bilateral programmes. We invite the international community to contribute to the funding. The fund would take account of bilateral funding, be administered by a steering body of donors on the basis of consensus, and be coordinated with and assisted by the G-24 and the EBRD. 47. Decisions on upgrading nuclear power plants of more recent design will require prior clarification of issues concerning plant safety, energy policy, alternative energy sources and financing. To establish a suitable basis on which such decisions can be made, we consider the following measures necessary: -- The necessary safety studies should be presented without delay. -- Together with the competent international organisations, in particular the IEA [International Energy Agency], the World Bank should prepare the required energy studies including replacement sources of energy and the cost implications. Based on these studies the World Bank and the EBRD should report as expeditiously as possible on potential financing requirements. 48. We shall review the progress made in this action programme at our meeting in 1993. 49. We take note of the representations that we received from various Heads of State or Government and organizations, and we will study them with interest.
Next Meeting
50. We welcome and have accepted Prime Minister Miyazawa's invitation to Tokyo in July 1993.

Political Declaration

Issued at the Group of Seven (G-7) economic summit, Munich, Germany, July 7, 1992
Shaping the New Partnership
I
1. We, the leaders of our seven countries and the representatives of the European Community, support the democratic revolution which has ended the East-West confrontation and has fundamentally changed the global political landscape. Since we last met, further dramatic changes have accelerated progress towards democracy, market-based economies, and social justice. The way has been opened for a new partnership of shared responsibilities, not only in Europe which at long last is reunited, but also in the Asia-Pacific region and elsewhere in the world. We are entering an era where confrontation has given way to cooperation. 2. This new partnership will take many forms. The former adversaries of East and West will cooperate extensively on economic, political and security issues. We look for the world-wide development of similar patterns of cooperation within regions and between regions. As developed countries, we offer continuing support and assistance to developing countries. We believe that transnational problems, in particular the proliferation of weapons of mass destruction, can be solved only through international cooperation. Partnership will flourish as common values take root, based on the principles of political and economic freedom, human rights, democracy, justice and the rule of law. We believe that political and economic freedom are closely linked and mutually reinforcing and that, to that end, good governance and respect for human rights are important criteria in providing economic assistance. 3. The countries of Central and Eastern Europe and the new states of the former Soviet Union can now seize unprecedented opportunities - - but they also face enormous challenges. We will support them as they move toward the achievement of democratic societies and political and economic freedom. We encourage them to create a stable constitutional and legal framework for their reform programmes and commend their efforts to cut substantially the proportion of public spending devoted to the military sector. 4. The treaty signed at Maastricht by the twelve members of the European Community is a historic step on the way to European Union. Its implementation will enhance political stability on the European continent and open up new opportunities for cooperation. 5. Since we last met, the creation of the North Atlantic Cooperation Council has enhanced the cooperative relationship of the North Atlantic Alliance with countries in Central and Eastern Europe and with the states of the former Soviet Union. WEU [Western European Union], too, is strengthening its relationship with countries in Central and Eastern Europe. 6. The need for international cooperation has also been underlined by new instabilities and conflicts due to resurgent nationalism and interethnic tensions. Communal and territorial disputes are being settled by force, causing death, destruction, and widespread dislocation of innocent people throughout the former Yugoslavia, in parts of the former Soviet Union, and elsewhere in the world. 7. The full and immediate implementation of all CSCE [Conference on Security and Cooperation in Europe] commitments is essential in building security and stability in Europe. All CSCE states must solve their disputes by peaceful means and guarantee the equal treatment of all minorities. We call upon the Helsinki CSCE Summit to take decisions to strengthen the CSCE's capabilities for conflict prevention, crisis management and peaceful resolution of disputes. We also look forward to the establishment of a security cooperation forum at the Helsinki Summit. In this regard, we welcome the recent decisions by NATO foreign ministers and WEU ministers on support for peacekeeping operations carried out under the responsibility of the CSCE . We support the development of a regular and productive dialogue between Japan and the CSCE on matters of common concern. 8. In the Asia-Pacific region, existing regional frameworks, such as the ASEAN [Association of South East Asian Nations] Post- Ministerial Conferences and the Asia-Pacific Economic Cooperation, have an important part to play in promoting peace and stability. We are seriously concerned at the present situation in Cambodia and urge all parties concerned to support UNTAC [UN Transitional Authority in Cambodia] and uphold the still fragile peace process to bring it to a successful conclusion. 9. We welcome Russia's commitment to a foreign policy based on the principle of law and justice. We believe that this represents a basis for full normalization of the Russian-Japanese relationship through resolving the territorial issue.
II
1. The end of the East-West confrontation provides a historic opportunity, but also underlines the urgent need to curb the proliferation of nuclear weapons, other weapons of mass destruction and missiles capable of delivering them. We are firmly of the view that the indefinite extension of the nuclear Non-Proliferation Treaty [NPT] at the 1995 Review Conference will be a key step in this process and that the process of nuclear arms control and reduction must be continued. The motivation for nuclear proliferation will also be reduced through efforts to advance regional security. 2. We urge countries not yet parties to the NPT to join. We look forward to the early adherence to the NPT as non-nuclear weapons states of Ukraine, Kazakhstan and Belarus as well as the other non- Russian states of the former Soviet Union. We shall continue through bilateral contacts and the International Science and Technology Centres in Moscow and Kiev our efforts to inhibit the spread of expertise on weapons of mass destruction. We attach the highest importance to the establishment in the former Soviet Union of effective export controls on nuclear materials, weapons and other sensitive goods and technologies and will offer training and practical assistance to help achieve this. 3. The world needs the most effective possible action to safeguard nuclear materials and to detect and prevent the transfer or the illicit or clandestine production of nuclear weapons. Nuclear cooperation will in the future be conditional on adherence to the NPT or an existing equivalent internationally binding agreement as well as on the adoption of full-scope International Atomic Energy Agency [IAEA] safeguards, as recently laid down by the Nuclear Suppliers Group. The IAEA must receive the resources necessary to strengthen the existing safeguards regime and to conduct effective special inspections of undeclared but suspect nuclear sites as one means of achieving this. We will support reference by the IAEA of unresolved cases of proliferation to the UN Security Council. 4. We reaffirm our willingness to share the benefits of peaceful nuclear technology with all other states, in accordance with our non-proliferation commitments. 5. We will continue to encourage all countries to adopt the guidelines of the Missile Technology Control Regime [MTCR] and welcome the recent decision by the plenary session of the MTCR to extend the scope of the guidelines to cover missiles capable of delivering all kinds of weapons of mass destruction. Each of us will continue our efforts to improve transparency and consultation in the transfer of conventional weapons and to encourage restraint in such transfers. Provision of full and timely information to the UN Arms Register is an important element in these efforts. 6. We will continue to intensify our cooperation in the area of export controls of sensitive items in the appropriate fora to reduce threats to international security. A major element of this effort is the informal exchange of information to improve and harmonize these export controls. 7. Arms control agreements which have been signed by the former Soviet Union, in particular the START [Strategic Arms Reduction Treaty] and CFE [Conventional Forces in Europe] treaties, must enter into force. The full implementation of the CFE Treaty will create the foundation for the new cooperative security framework in Europe. We welcome the far-reaching follow-on agreement on strategic nuclear weapons concluded by the United States and Russia in June as another major step towards a safer, more stable world. Further measures, in particular the unilaterally announced elimination of ground-launched short-range nuclear weapons by the United States and the former Soviet Union, should be carried out as soon as possible. We support Russia in its efforts to secure the peaceful use of nuclear materials resulting from the elimination of nuclear weapons. The Geneva negotiations for a convention on the effective global ban on chemical weapons must be successfully concluded this year. We call on all nations to become original signatories to this convention.
III
1. The new challenges underline the need for strengthening the United Nations, taking account of changing international circumstances. Since our last meeting in London the tasks and responsibilities of the United Nations have further increased in a dramatic way, especially in the area of crisis prevention, conflict management and the protection of minorities. The United Nations has played a central role in the international response to developments in the Gulf, in Cambodia, in the former Yugoslavia and in other regions of the world. 2. We support the UN role in maintaining international peace and security. The accession to the UN of new states has reinforced the importance of this role. We call upon all these new member states to abide by their solemn undertakings to uphold the purposes and principles of the UN Charter. 3. We reaffirm our commitment to cooperate on existing refugee problems. We deplore action by any state or group against minorities that creates new flows of refugees and displaced persons. 4. We support moves undertaken so far by the Secretary-General to reform the Organization, including the appointment of a high-ranking emergency relief coordinator. The Secretary-General's report "An Agenda for Peace" is a valuable contribution to the work of the United Nations on preventive diplomacy, peace-making and peace- keeping. We assure him of our readiness to provide the political support and resources needed to maintain international peace and security. 5. We strongly support improved cooperation between the UN and regional arrangements and agencies as envisaged in Chapter VIII of the UN Charter, which have an increasing role in solving conflicts. 6. In closing this Declaration, we reaffirm that recognition of the inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world. Human rights are not at the disposal of individual states or their governments. They cannot be subordinate to the rules of any political, ideological or religious system. The protection and the promotion of human rights remain one of the principal tasks of the community of nations.

Helmut Kohl: Chairman's Statement

Issued following the Group of Seven (G-7) economic summit, Munich, Germany, July 8, 1992
Nagorny Karabakh, Moldova, Ossetia
We deplore the continued fighting in Nagorny Karabakh. We urge the parties to the conflict to cease hostilities immediately and appeal to them to allow additional measures to be carried out such as troop disengagement and the return of refugees to their native areas. We emphasize that we shall on no account recognize faits accomplis brought about by force. We appeal to all parties to the conflict to participate in the negotiations in Rome and later in Minsk with a view to finding a just and lasting political settlement in line with CSCE [Conference on Security and Cooperation in Europe] principles. We observe with deep concern the escalation of the conflict on the left bank of the Dniestr in the Republic of Moldova. We urgently appeal to all parties concerned to cease hostilities at once and to refrain from any attacks. We support the efforts to achieve a peaceful settlement made by the Presidents of the Republic of Moldova, Romania, the Russian Federation and Ukraine at the summit meeting of littoral states of the Black Sea in Istanbul on 25 June 1992, and support their appeal to the CSCE to help find a solution. We are pleased to note that the ceasefire in southern Ossetia is being largely observed and appeal to all parties concerned to do everything in their power to expedite a peaceful settlement of the conflict in Georgia. The political leaders in southern and northern Ossetia are again urged to sign and abide by the ceasefire agreement negotiated between the Presidents of the Russian Federation and Georgia. We call upon the parties concerned to quickly bring about a peaceful settlement of the dispute on the basis of CSCE principles, and to respect the territorial integrity of the states affected and the rights of the minority populations living there.
The Baltic States
Equal treatment of all minorities in the Baltic states is a basic ingredient of peace and stability in the area. We understand the concern of the Baltic states about the deadlocked negotiations with Russia on the withdrawal of former Soviet forces. We are also aware of the practical problems facing Russia in removing them. However, these problems must not be allowed to hinder the application of the principle of international law to the effect that military forces may not be stationed on the territory of another state without its consent. It is therefore important to quickly reach agreement in the current negotiations on a timetable for the withdrawal of the troops.
Middle East
We reaffirm our unqualified support for the Middle East peace process initiated by the Madrid peace conference. We express the hope that the direct bilateral negotiations between the parties to the conflict, as well as the multilateral negotiations on regional issues, will lead to a just, lasting and comprehensive peace settlement based on Security Council resolutions 242 and 338. We welcome the progress made by all five multilateral working groups at their recent first meetings. These talks are a major part of the efforts to promote confidence-building between the nations affected on the road to peace in the Middle East. We appeal to all sides to create an atmosphere of confidence and trust.
Iraq
We note that Iraq still refuses to comply with all resolutions of the Security Council without reservation. We shall continue to demand the elimination of all Iraqi weapons of mass destruction and the release of all prisoners. We warn the Iraqi regime against repressive actions against all the peoples of Iraq in violation of UN Security Council resolution 688. Iraq must accept the responsibility for the well-being of its citizens and for the equal treatment of its minorities. It is essential for Baghdad to comply with Security Council resolutions 706 and 712 so that food and medical supplies can be distributed on an equitable basis. We condemn any use of force against those who provide help to the population.
Korea
We welcome the progress achieved in the dialogue between North and South Korea. It gives us reason to hope for a further reduction of tension. We are concerned about North Korea's suspected nuclear weapons programme. The IAEA [International Atomic Energy Agency] Safeguards Agreement must be fully implemented and an effective bilateral inspection regime must be put into practice.
China
The recent developments towards economic reform in the People's Republic of China are encouraging. We also want to see China making greater efforts towards political reform. The situation with regard to human rights calls for considerable further improvement. We welcome China's accession to the Non-Proliferation Treaty and her application of the guidelines and parameters of the Missile Technology Control Regime. We hope that China will play a more constructive role in the international sphere.
The Mediterranean
We consider it necessary to devote more attention to developments in the Mediterranean. Our aim must be to launch joint efforts to enable the countries concerned to develop in a way that will both maintain peace and security and at the same time promote understanding of the principles of democracy and ensure greater respect for human rights. We support the recent efforts of the Secretary General of the United Nations to find a solution to the Cyprus conflict. We call on all sides to cooperate with the Secretary General to seize the present opportunity to negotiate a settlement to this long-standing and tragic problem along the lines of Security Council resolution 750.
Africa
In Africa respect for basic human rights, political pluralism and market economy systems are gaining ground. We will continue to support this pro-cess of political and economic reform. Substantial progress towards the complete dismantling of apartheid in South Africa has been interrupted by another instance of brutal violence. We call on all sides to resume negotiations as soon as possible and make greater efforts to prevent violence. We appeal to all parties concerned to continue through the negotiations on the path to democracy devoid of racial barriers. Sustainable economic growth is essential for an enduring solution of South Africa's problems. The situation in the Horn of Africa is still alarming. Ethnic strife in Ethiopia continues even after the controversial elections. The ending of anarchy, chaos, violence and hunger in Somalia still depends on the willingness of numerous local groupings to allow the United Nations, the International Committee of the Red Cross and other organizations to bring in food and medical supplies for the people. We welcome and support the UN peace mission for Somalia, UNOSOM.
Latin America
We appreciate the progress achieved in consolidating democracy and market economy structures in Latin America. In this connection we welcome the efforts of the OAS [Organization of American States]--including sanctions--to secure Haiti's return to constitutional order. We also look forward to Peru's return to constitutional order. We welcome the signing of the peace agreement for El Salvador and the efforts of both parties to implement it quickly. We encourage efforts in other countries of the region to settle ongoing conflicts. There is growing recognition in the region that the mastering of global challenges such as environmental protection and drug trafficking, calls for close international cooperation. We are prepared to participate in and support cooperation in the region. The growing links between terrorist organizations and drug traffickers fill us with concern. The steps Argentina and Brazil have taken to allow full inspection of their nuclear activities, and their decision to give effect to the Treaty of Tlatelolco and to consider signing the comprehensive safeguards agreement with the IAEA, will be conducive to cooperation in this sphere as well.
Drugs
Through our initiatives of recent years we have considerably strengthened international cooperation to combat drug trafficking. Meanwhile well over twenty countries, as well as the European Community and various international organizations, including the UN International Drug Control Programme, are involved in the work of the Financial Action Task Force to investigate the laundering of drug money, and of the Chemical Action Task Force to prevent chemicals being diverted to the illicit manufacture of drugs. The fight against drugs remains a major challenge. In order to meet this challenge effectively we shall continue our efforts to achieve broad international cooperation. In this context we attach special importance to the role of the United Nations, especially its Drug Control Programme.
Terrorism
We condemn terrorism in all its forms and reaffirm our resolve to cooperate in combatting it. We call upon all countries involved to renounce support for terrorism, including financial support, and to take effective action to deny the use of their territory to terrorist organizations. We denounce equally strongly the taking of hostages. We welcome the recent release of two hostages in Lebanon. We call again for the immediate and unconditional release of all hostages who may still be held and for an accounting for all persons taken hos-tage who may have died while being held. We underline the need for Libya to comply with [UN] Security Council Resolutions 731 and 748 promptly and fully. We call upon all countries to enforce rigorously the sanctions against Libya so that those responsible for the bombings of PA [Pan Am flight] 103 and UTA [flight] 772 may be brought to justice and Libya's support for terrorism is ended. We support the measures of the International Civil Aviation Organization aimed at increased security in Civil Aviation. We consider the Convention on the Marking of Plastic Explosives for the Purpose of Detection to be a significant step towards this aim.

Communique on the Yugoslav Crisis

Issued at the Group of Seven (G-7) economic summit, Munich, Germany, July 7, 1992 We, the leaders of our seven countries who represent the European Community, are deeply concerned about the ongoing Yugoslav crisis. We strongly condemn the use of violence in the former Yugoslavia and deplore the suffering inflicted upon its population. We particularly deplore those actions directed against civilian populations, as well as the forced expulsion of ethnic groups. Although all parties have contributed to this state of affairs, the Serbian leadership and the Yugoslav Army controlled by it bear the greatest share of the responsibility. We support the EC Conference on Yugoslavia chaired by Lord Carrington as the key forum for ensuring a durable and equitable political solution to the outstanding problems of the former Yugoslavia, including constitutional arrangements for Bosnia and Hercegovina. We call on all parties to resume negotiations in that conference in good faith and without preconditions. We welcome the close consultations between the conference chaired by Lord Carrington, the EC [European Community], the U.N. and the other parties concerned with the Yugoslav crisis. These consultations could lead to the holding of a broader international conference to address unresolved questions, including issues related to minorities. We stress the absolute need for the parties in former Yugoslavia to show the will for peace, which is indispensable to success and without which the peoples of former Yugoslavia will continue to suffer. The tragic humanitarian situation, especially in Bosnia and Hercegovina, is unacceptable. We fully endorse the efforts of the international community to provide relief. We welcome the efforts made in achieving the opening of the airport of Sarajevo; and we support actions taken by UNPROFOR [UN Protective Force] to secure the airport. The blockade of Sarajevo must be lifted, and the shelling of the town stopped in order to sustain a comprehensive relief operation. We express our gratitude to all participants in the airlift to Sarajevo and the supply of its population. We appeal to all parties in Bosnia and Hercegovina not to imperil the humanitarian effort. We firmly warn the parties concerned, including irregular forces, not to take any action that would endanger the lives of those engaged in the relief operation. Should these efforts fail due to an unwillingness of those concerned to fully cooperate with the United Nations, we believe the Security Council will have to consider other measures, not excluding military means, to achieve its humanitarian objectives. The airlift to Sarajevo can only be the beginning of a larger humanitarian effort. Safe access by road to Sarajevo, as well as to other parts of Bosnia and Hercegovina in need, must be guaranteed. The needs of the hundreds of thousands of refugees and displaced persons require further significant financial support. We are willing to contribute and ask others also to make fair contributions. We underline the need for Serbia and Croatia to respect the territorial integrity of Bosnia and Hercegovina and for all military forces not subject to the authority of the government of Bosnia and Hercegovina to either be withdrawn or disbanded and disarmed with their weapons placed under effective international monitoring. We call on all parties to prevent the conflict from spreading to other parts of the former Yugoslavia. We urge the Serbian leadership to respect minority rights in full, to refrain from further repression in Kosovo, and to engage in serious dialogue with representatives of Kosovo with a view to defining a status of autonomy according to the draft convention of the EC Conference on Yugoslavia. Sanctions decided by the U.N. Security Council in Resolution 757, as well as all other provisions of relevant U.N. resolutions, must be fully implemented. We support the efforts of the U.N. peacekeeping forces in implementing the U.N. peace plan for Croatia in all its elements. We demand that Serbs and Croats extend their full cooperation to the U.N. peace plan and make every effort to bring the bloodshed in Croatia to an end. We do not accept Serbia and Montenegro as the sole successor state of the former Yugoslavia. We call for the suspension of the delegation of Yugoslavia in the proceedings of the CSCE [Conference on Security and Cooperation in Europe] and other relevant international fora and organizations.

Fact Sheet: Economic Summits 1981-92

Leaders of the Group of Seven (G-7) industrial countries--the United States, Japan, France, Germany, the United Kingdom, Italy, and Canada--plus the President of the European Commission, have discussed and made decisions on a wide range of international economic and political issues at economic summit meetings that have been held annually since 1975. The following information provides background on each of the 12 summits since 1981.
Munich July 6-8, 1992
Summary
Leaders at the Munich summit emphasized the necessity of achieving stronger world economic growth as a prerequisite for solving the problems of the post-Cold War era. Concern over lack of progress in the global trade negotiations, the future of high-risk nuclear reactors still operating in the former Soviet republics, and the civil war in the former Yugoslavia dominated the discussions. Russian President Boris Yeltsin joined G-7 leaders at the close of the summit to review the pace of reform efforts in his country.
Economic Accomplishments
-- Pledge to work collectively and individually to promote sustainable world economic growth, encourage investment, and create new employment opportunities. -- Support for conclusion of the Uruguay Round of multilateral trade negotiations by the end of 1992. -- Call for the new independent states of the former Soviet Union to continue economic reform policies aimed at building market economies. Support for financial credits and a debt rescheduling program for Russia and the creation of consultative groups for Russia and other new independent states. -- Pledge to continue efforts to increase the quality and quantity of official development assistance in accordance with existing commitments, with emphasis on the poorest countries.
Political Accomplishments
-- Pledge to continue shipments of humanitarian aid to Bosnia- Hercegovina, combined with support for more vigorous enforcement of UN Security Council sanctions against Serbia-Montenegro, including the use of military force if necessary. -- Agreement on the need to safeguard nuclear materials and to prevent the transfer or illicit production of nuclear weapons. Call for a multilateral effort to improve the safety and management of Soviet-design nuclear power plants. -- Recognition of the progress of the new states of Central and Eastern Europe in achieving economic and political reform, and a call for increased investment by the industrialized countries to supplement these efforts. -- Support for the role of the United Nations in maintaining international peace and security and recognition of the need to strengthen the conflict prevention and crisis management capabilities of the Conference on Security and Cooperation in Europe. -- Call for all countries to carry forward the momentum of the UN Conference on Environment and Development by publishing national action plans by the end of 1993, providing additional technical and financial assistance to developing countries, and implementing commitments on climate change, protection of forests and oceans, and preservation of marine resources.
London July 15-17, 1991
Summary
The London summit emphasized the need to strengthen the international order following the revolutions in Central and Eastern Europe and the intervention against Iraq in the Gulf. Looking ahead to the upcoming UN Conference on Environment and Development in 1992, participants pledged support for a variety of initia-tives designed to integrate environmental considerations into government policies. A unique feature of the London meeting was the special invitation to Mikhail Gorbachev to meet at the conclusion of of the summit with the heads of the G-7 (Group of Seven) industrialized countries. Talks focused on the economic situation in the Soviet Union.
Economic Accomplishments
-- Recognition of the successful efforts of the Paris Club to negotiate debt reduction packages for lower middle-income countries to improve their potential for economic growth. -- Commitment to secure stable worldwide energy supplies, remove barriers to energy trade and investment, encourage high environmental and safety standards, and promote international cooperation on research and development in these areas. -- Agreement on the necessity of enhancing both the quality and quantity of support for priority development issues, such as alleviating poverty, improving health education and training, and providing additional debt relief for the least developed countries.
Political Accomplishments
-- Commitment to continued support for reform efforts in Central and Eastern Europe and to the integration of these countries into the international economic system. -- Commitment to achieve a frame-work convention on climate change and a preliminary agreement on management, conservation, and sustainable development of forests before the UN Conference on Environment and Development in June 1992. -- Pledge to promote mobilization of financial resources to assist developing countries with environmental problems, support stronger international efforts to deal with environmental disasters, and increase cooperation in environmental science and technology.
Houston July 9-11, 1990
Summary
The Houston summit was held against the backdrop of movement toward democracy and freer markets in many parts of the world, including elections in Central and Eastern Europe and Nicaragua, momentum toward German unification, and political reforms in the Soviet Union. The summit leaders agreed on most international economic and political issues, but intense discussions were needed on agricultural subsidies in the Uruguay Round of multilateral trade negotiations, economic assistance to the Soviet Union, and global warming before consensus could be reached.
Economic Accomplishments
-- Agreement on progressive reductions in internal and external support and protection of agriculture and on a framework for conducting agricultural negotiations in order to successfully conclude by December 1990 the Uruguay Round of multilateral trade talks under the auspices of the General Agreement on Tariffs and Trade (GATT). -- Request to the International Monetary Fund (IMF), the World Bank, the Organization for Economic Cooperation and Development, and the European Bank for Reconstruction and Development to undertake, in close coordination with the European Community (EC), a study of the Soviet economy, to make recommendations, to establish the criteria under which Western economic assistance could effectively support Soviet reforms, and to submit a report by the end of 1990. -- Support for aid to Central and Eastern European nations that are firmly committed to political and economic reform, including freer markets, encouragement of foreign private investment in those countries and improved markets for their exports by means of trade and investment agreements. -- Pledge to begin talks, to be completed by 1992, on a global forest convention to protect the world's forests.
Political Accomplishments
-- Promotion of democracy throughout the world by assisting in the drafting of laws, advising in fostering independent media, establishing training programs, and expanding exchange programs. -- Endorsement of the maintenance of an effective international nuclear nonproliferation system, including adoption of safeguards and nuclear export control measures, and support for a complete ban on chemical weapons.
Paris July 14-16, 1989
Summary
The Paris summit marked the celebration of the 200th anniversary of the French Revolution and the Declaration of the Rights of Man. It also was the first economic summit meeting for President Bush, who had just returned from trips to Poland and Hungary. These developments reinforced for the summit leaders the importance of supporting political and economic reform in Eastern Europe. The leaders also expressed strong concern about environmental and narcotics issues; at least one-third of the economic declaration dealt with the environment.
Economic Accomplishments
-- Agreement on several multilateral trade issues, including a pledge to make effective use of the GATT dispute settlement mechanism, to avoid new restrictive trade measures inconsistent with the GATT, and to make further substantial progress in the Uruguay Round in order to complete it by the end of 1990. -- Commitment to a strengthened debt strategy that will rely, on a case-by-case basis, on such actions as economic reforms by developing countries, more resources by a financially stronger World Bank and the IMF, continued debt rescheduling by creditor governments, and more voluntary, market-based debt reductions by commercial banks. -- Continued cooperation in foreign exchange markets. -- Support for ending as soon as possible and not later than the end of the century the production and consumption of chlorofluorocarbons covered by the Montreal Protocol on Substances that Deplete the Ozone Layer. -- Commitment to limit the emissions of carbon dioxide and other greenhouse gases as well as conclusion of an international framework convention on global climate change. -- Support for the preservation of tropical forests and condemnation of the practice of dumping waste in the oceans. Political Accomplishments -- Call for a meeting of all interested parties to discuss concerted assistance to Poland and Hungary and a request that the EC coordinate these efforts. -- Support for effective programs to stop illegal drug production and trafficking, including assistance to the anti-drug efforts of producing countries and the United Nations, increased international cooperation to seize drug proceeds and prevent money laundering, and support for a 1990 interna- tional conference on cocaine and drug demand reduction. -- Continued strong condemnation of international terrorism by states, including hostage taking and attacks against international civil aviation. -- Condemnation of political repression in China and agreement to suspend the shipment of arms and the extension of loans to China.
Toronto June 19-21, 1988
Summary
The summit, one of the most harmonious of the 1980s, marked the end of the second 7-year cycle of economic meetings. The leaders expressed satisfaction at their accomplishments in bringing down inflation in the 1980s and laying the basis for sustained strong growth and improved productivity. Among still unresolved problems, they noted the emergence of large payments imbalances among major countries, greater exchange rate volatility, and continuing debt service difficulty in developing countries. In response to these developments, the leaders made further refinements in the multilateral surveillance system to improve the coordination of their economic policies. They also committed themselves to further trade liberalization at the Uruguay Round and offered new initiatives to relieve the debt burden of the poorest developing countries.
Economic Accomplishments
-- Improvement of the multilateral surveillance system by adding a commodity price indicator to the existing indicators monitored by the seven nations, and by integrating national structural policies into the economic coordination process. -- Support for efforts at the Uruguay Round to achieve trade liberalization in all areas including trade in services, intellectual property rights (such as copyrights and trademarks), and trade- related investment measures, to strengthen the GATT's surveillance and enforcement mechanism, and to reduce all direct and indirect subsidies affecting agricultural trade. -- Support for a $75-billion general capital increase for the World Bank to strengthen its capacity to promote adjustment in middle- income developing countries. -- Agreement to relieve the debt burdens of the poorest developing countries, particularly in Sub-Saharan Africa, by urging creditors to grant partial debt forgiveness, reduced interest rates, and/or lengthened debt maturities. -- Support for the ratification of the Montreal agreement on the ozone layer and the completion of other ongoing negotiations on emissions and the transport of hazardous wastes.
Political Accomplishments
-- Confirmation of the policy of constructive dialogue and cooperation between East and West, particularly in the light of greater freedom and openness in the Soviet Union. -- Reaffirmation of previous summit agreements to combat terrorism and support for the policy of no takeoffs for hijacked aircraft once they have landed. -- Support for US government initiatives to improve cooperation against narcotics trafficking.
Venice June 8-10, 1987
Summary
The Venice summit took place against a backdrop of escalating tension in the Persian Gulf. On the economic front, summit leaders addressed the continuing issue of how to reconcile domestic economic policies with the need for a more stable international monetary, financial, and trading system.
Economic Accomplishments
-- Reaffirmation that further shifts in exchange rates could be counterproductive. -- Agreement on the need for effective structural adjustment policies, especially for creating jobs. -- Agreement to improve the multilateral trading system under the GATT and to bring about wider cover-age of world trade under agreed, effective, and enforceable multilateral discipline. -- Agreement that the long-term objective in agriculture is to allow market signals to influence the orientation of production, and to work in concert to adjust agricultural policies, both domestically and in the Uruguay Round. -- Call for newly industrialized countries with rapid growth and large external surpluses to reduce trade barriers and allow their currencies more fully to reflect underlying economic conditions.
Political Accomplishments
-- Agreement affirming the principle of freedom of navigation in the Persian Gulf and the importance of the free flow of oil and other traffic through the waterway, and supporting the adoption of just and effective measures by the UN Security Council to resolve the conflict. -- Agreement on the need for more effective national efforts and international coordination to prevent the acquired immune deficiency syndrome (AIDS) from spreading further.
Tokyo May 4-6, 1986
Summary
The Tokyo meeting, by achieving significant economic and political declarations, was hailed as one of the most successful economic summits in recent memory. There was greater specificity about attempts to increase policy coordination and a decision to begin a new round of trade talks. On the political side, the joint statement on terrorism was a landmark achievement. One reason for the success was that leaders at the Tokyo meeting had considerable experience dealing with each other at previous summits.
Economic Accomplishments
-- Establishment of new arrangements to assess the consistency and compatibility of their economic policies, based on economic indicators, and including enhanced surveillance over exchange rates. -- Formation of a new Group of 7 (finance ministers of summit nations) to achieve greater economic policy coordination. -- Agreement to use the September 1986 GATT ministerial meeting in Uruguay as a platform for launching the new round of multilateral trade negotiations and to support an extension of GATT discipline to new areas such as services, intellectual property, and investment. -- Recognition of the need to cooperate to redirect agricultural policies and adjust the structure of agricultural production in light of world demand. -- Endorsement of measures to assist Third World development, including the US initiative to alleviate debtor country problems, in order to encourage implementation of effective structural adjustment policies, and increased financial support to the International Development Association and the IMF.
Political Accomplishments
-- Agreement on a tough statement denouncing international terrorism, vowing to fight it relentlessly and singling out Libya as a key target in the fight against terrorism. -- Call for a new international convention requiring information exchanges on nuclear accidents and emergencies, in the wake of the accident at the Chernobyl nuclear power station. -- Commitment to continued East-West dialogue and negotiation, and support for a balanced, substantial, and verifiable arms reduction agreement.
Bonn May 2-4, 1985
Summary
The summit participants undertook to pursue, individually and cooperatively, policies conducive to sustained growth and higher employment. Building on common, agreed principles for achieving these goals, the leaders indicated specific priorities for their own national policies. The United States asked the Federal Republic of Germany and Japan to stimulate their economies. The leaders undertook to seek to make the functioning of the world monetary system more stable and more effective and discussed ways to reach more realistic exchange rate relationships.
Economic Accomplishments
-- Agreement to work to strengthen their economies, halt protectionism, improve international monetary stability, increase employment, and reduce social inequities. -- Promise to follow prudent economic policies, including the exercise of firm control over public spending to reduce budget deficits. -- Agreement to give increased impetus to preparations for the launching of new multilateral trade negotiations under the auspices of the GATT.
Political Accomplishments
-- Support for the US negotiating position in the arms control talks with the Soviet Union, which was urged to act positively and constructively to reach agreement. -- Commitment to fighting the common threat posed by growing international drug trafficking and abuse, including the coordination of legislation to thwart international drug smuggling.
London June 7-9, 1984
Summary
The meeting marked the passage from a period of constructing firm domestic bases for noninflationary growth to one of enhancing the openness of international trade and finance. As the previous Williamsburg summit signaled the beginning of recovery and offered an outline of future strategies in the international economy, the London summit gave a clearer focus to future tasks and actions. There was a strong endorsement of the basic anti-inflationary stance first advocated by President Reagan at the Ottawa summit in 1981. The political declarations were the cornerstone of the London summit.
Economic Accomplishments
-- Agreement to continue and strengthen policies to reduce inflation, interest rates, and budget deficits and to control monetary growth. -- Commitment to work toward making their economies more competitive and flexible to reduce unemployment and develop new technologies. -- Agreement to take steps to ease the repayment terms of Third World debtor countries working to improve their economic performance.
Political Accomplishments
-- In a 500-word Declaration on Democratic Values, affirmation of their commitment to a rule of law which respects and protects the rights and liberties of every citizen and provides a setting in which the human spirit could develop in freedom and diversity. -- Determination to pursue the search for extended political dialogue and long-term cooperation with the Soviet Union and its allies and endorsement of US willingness to resume nuclear arms control talks with the Soviet Union. -- Commitment to consult and cooperate in expelling or excluding known terrorists from their countries. -- Hope for a peaceful and honorable settlement to the Iran-Iraq conflict.
Williamsburg May 28-30, 1983
Summary
The United States hosted a very successful summit as virtually all President Reagan's economic and political objectives were fulfilled. As Western economies were beginning to recover, the allied leaders accepted several US economic policies (e.g., lower taxes, more emphasis on private sector initiative). The allies acknowledged the need for united action to bring about domestic and global economic growth. The joint statement on intermediate-range nuclear forces (INF) also was an important victory for the United States because it specifically endorsed the diplomatic and military strategy that the United States and its NATO allies were pursuing in relation to the Soviet Union. The introduction of more flexibility and informality into the proceedings (e.g., fewer previously prepared texts) contributed to the successful meeting.
Economic Accomplishments
-- Agreement on broad strategies to consolidate domestic and international economic recovery, including steps to reverse the trend toward protectionism, promote greater convergence of economic performance, and encourage the development of new technologies. -- Commitment to reduce structural budget deficits by limiting the growth of expenditures and to pursue appropriate budgetary and monetary policies to lower interest rates, inflation, and unemployment. -- Decision to convene a meeting of finance ministers to review and improve the operation of the international monetary system. -- Commitment to energy conservation and the development of alternative energy sources. -- Reaffirmation that East-West economic relations should be compatible with the security interests of the allies.
Political Accomplishments
-- Agreement to achieve lower levels of arms through serious arms control negotiations with the Soviet Union, and a commitment to proceed with INF deployment if the negotiations failed to result in an accord.
Versailles June 4-6, 1982
Summary
The summit was surrounded by contro-versy over the issue (settled 6 months later) of oil pipeline equipment sanctions against the Soviet Union, including the question of the applicability of US law to European companies. The leaders agreed to pursue greater coordination of their economic policies and to seek convergence of economic performance, at a time of recession in the Western industrial countries.
Economic Accomplishments
-- Establishment of a multilateral surveillance system to enable countries to consult on economic policies and seek convergence of economic performance as the primary vehicle for achieving stable exchange rates. -- Agreement to pursue prudent monetary policies and achieve greater control of budgetary deficits in order to bring down high interest rates. -- Prudent use of government export credits to the Soviet Union and its allies. -- Efforts to improve the multilateral system controlling the export of strategic goods to the Soviet Union and its allies. -- Approval of a preparatory process of negotiations on assistance to developing countries and development of other forms of practical cooperation with them.
Political Accomplishments
-- Call for an immediate halt to violence by all parties in Lebanon, in the wake of the Israeli invasion there.
Ottawa July 19-21, 1981
Summary
This summit was a "get-acquainted" session between President Reagan and the other allied leaders. The President emphasized his domestic economic policies to promote sustainable, market- oriented, and non-inflationary growth. He also called attention to the potential for erosion of Western security resulting from excessive dependence on Soviet energy resources (notably natural gas) and the export of strategic goods to the Soviet Union.
Economic Accomplishments
-- Agreement that the goals of reducing inflation and unemployment were highest priority and that low and stable monetary growth was essential to bring down inflation. -- Commitment to liberal international trade policies and continued opposition to protectionist pressures. -- Commitment to accelerated development and use of all energy sources and encouragement of greater public acceptance of nuclear energy. -- Agreement to consult and coordinate economic policies relating to East-West trade and to ensure that these policies were compatible with political and security objectives. Agreement on the need to upgrade existing controls on exports of strategic goods to the Soviet Union and its allies.
Political Accomplishments
-- Condemnation of the continuing Soviet occupation of Afghanistan. -- Condemnation of international terrorism. -- Disapproval of the escalation of tension and the continuing acts of violence in the Middle East.

Fact Sheet: International Monetary Fund

Background
In July 1944, the UN Monetary and Financial Conference at Bretton Woods, New Hampshire, created a framework of international economic cooperation to reverse the protectionist trade policies and competitive exchange rate devaluations that damaged the world economy in the 1930s. A key agency in the new arrangement, the International Monetary Fund (IMF), was established in December 1945, with headquarters in Washington, DC. One of the chief differences between the IMF and its sister institution, the World Bank, is that IMF assistance addresses balance-of-payments problems, while World Bank assistance is aimed more at promoting economic development.
Membership
The IMF provides a permanent forum for its members to cooperate on international monetary policies to promote sustainable growth in the world economy. Formally, it is a UN specialized agency. IMF membership is a prerequisite to membership in the World Bank, and the two institutions work together closely. Mongolia and Albania joined the IMF in 1991. In May and June 1992, Switzerland, Russia, Armenia, Kyrgyzstan, Estonia, Lithuania, and Latvia became IMF members. The remaining former Soviet republics (Azerbaijan, Belarus, Georgia, Kazakhstan, Moldova, Tajik-istan, Turkmenistan, Ukraine, and Uzbekistan) are expected to join shortly.
Funding
Each member contributes to the IMF's general resources according to its quota, expressed in Special Drawing Rights (SDRs*), which is generally based on its relative economic and financial importance in the world economy. Quotas, in turn, determine IMF voting share and access to Fund resources. At its May 1990 meeting, the IMF's interim committee agreed to a 50% increase in quotas to about SDR 136.6 billion. The United States will retain the largest quota, with about 17.6% of total shares. Japan and Germany will share second position with about 5.5% each, and the United Kingdom and France will share the next position with just under 5% each. Implementation of the quota increase is linked to ratification by members of an amendment to the Articles of Agreement to allow suspension of voting and related rights of members that fail to fulfill their obligations to the Fund.
Operations
The IMF has regulatory, surveillance, and financial functions that apply equally to all members. It conducts regular reviews of national economies and the world economy, advises members on sound economic policies, and seeks to ensure compliance with IMF rules to eliminate exchange restrictions and maintain orderly exchange rate arrangements. The Fund cooperates with the World Bank, particularly in developing comprehensive reform programs for their poorest members. The IMF also cooperates with the General Agreement on Tariffs and Trade (GATT) and the Bank for International Settlements (BIS). The IMF also provides adjustment assistance to members facing balance-of-payments difficulties. In response to the developing country debt crisis in the 1980s, the IMF created new facilities and medium-term financing arrangements designed to support members' economic adjustment efforts. IMF programs stress sound fiscal and monetary policies, appropriate interest and exchange rates, and reliance on market forces. Under the strengthened international debt strategy endorsed in 1989, the IMF renewed its efforts to help debtor countries pursue market-oriented policies by supporting debt and debt-service reduction operations negotiated between commercial bank creditors and reforming debtor countries. Particular emphasis has been given to measures that encourage new foreign investment and the repatriation of flight capital. To date, nine countries (Mexico, Philippines, Costa Rica, Chile, Venezuela, Uruguay, Morocco, Nigeria, and Argentina) have negotiated IMF arrangements with special Fund resources to support debt and debt- service reduction operations. Most countries undertake IMF-supported adjustment programs because they face unsustainable external and internal economic imbalances and reduced access to international credit. IMF financial and tech-nical assistance allow adjustment in a more orderly manner than would be possible otherwise. Economic policy reforms also improve a member's access to new bank loans and official donor assistance. Fund disbursements and commitments increased significantly in 1991 in response to rising demands on IMF resources to support economic adjustment efforts, and the economic effects of the Persian Gulf-related increase in oil prices. New loan commitments rose from $3.1 billion in 1990 to $11.2 billion in 1991. Drawings on IMF resources totaled $10.1 billion in 1991, compared with $5.8 billion in 1990. The IMF's net outstanding credit also increased over this period, from $28.2 billion to $32.1 billion. Continuing adjustment efforts among IMF members, as well as the entry of the republics of the former Soviet republics, are expected to keep demand for Fund resources at a high level in coming years. In response to the financial effects of the Persian Gulf crisis, the IMF in November 1990 adopted a series of modifications to its lending policies. These included a temporary provision allowing members to draw on IMF resources to offset the effects of increased oil import costs. This provision disbursed more than $3 billion in timely balance-of-payments assistance to 15 members during 1991. Arrears to the Fund grew in the 1980s, totaling more than $4.5 billion in late 1990. At its May 1990 session, the interim committee endorsed a strengthened arrears strategy to reward sound economic performance and discourage accumulation of arrears. Under the new approach, an existing arrears country will be able to earn "rights" toward extraordinary financing to settle its arrears. These rights are based on sustained economic performance under a Fund-monitored program. Strengthened remedial measures will include suspension of voting and representation rights of members that do not fulfill their Fund obligations. As of May 1992, the IMF had approved "rights" accumulation programs for Peru and Sierra Leone (with a program for Zambia pending), while Honduras, Guyana, and Panama had cleared their IMF arrears with the help of bilateral support groups. The growth in IMF arrears has slowed significantly since the initiation of this new strategy.
Box: US POLICY AND THE IMF
The United States strongly supports the IMF and its central role in the international financial system. IMF activities complement a key US foreign policy objective: maintaining a stable, open world trade and payments system. The IMF is also expected to play a leading role in promoting market-oriented reforms in the new states of the former Soviet Union and in Eastern Europe, in addition to assisting less developed debtor countries in other regions of the globe.

Fact Sheet: World Bank

The World Bank provides advice on long-term finance and policy issues to developing countries. It promotes economic growth and works to raise living standards by investing in productive projects and by prompting the adoption of sustainable economic and financial policies. Reducing poverty is the Bank's top priority. Although the Bank traditionally has financed infrastructure such as roads and power facilities, it "invests" in people by expanding opportunities for education, health care, and housing. The World Bank also emphasizes agriculture and rural development. It provides structural adjustment loans to help countries reduce obstacles to self- sustaining growth through market-oriented and institutional reforms. Its multilateral character and professional expertise put it in a strong position to advise countries undertaking these programs. The Bank increasingly is emphasizing environmental considerations and development of private sector activities in its programs and projects.
Funding
The World Bank Group comprises four funding institutions: -- The International Bank for Reconstruction and Development (IBRD) obtains most of its resources from borrowing in private capital markets, backed by its member governments' guarantees. Despite the economic difficulties facing many IBRD borrowers, most maintain excellent repayment records. The IBRD's superior financial reputation keeps the cost of borrowing low and, therefore, allows it to lend on favorable, market-based terms. It regularly earns a profit, which it uses to improve its financial position and finance new loans. -- The International Development Association (IDA) finances most of its lending operations from direct contributions from developed country members. In December 1989, donors agreed to a 3-year replenishment of $14.6 billion. They are negotiating the 10th replenishment. -- International Finance Corporation (IFC) funding comes from members' subscriptions (contributions) and from borrowings. An increase in the IFC capital base has been approved and is being ratified by members. -- The Multilateral Investment Guarantee Agency (MIGA) is funded from members' subscriptions.
Burden-sharing
The United States is the largest contributor to the World Bank, with 18% of IBRD subscriptions. Most of this is in the form of capital subject to call only when required to meet the obligations of the IBRD. Only 3% of the latest US capital subscription requires a direct budgetary outlay. The IBRD has the added advantage of leveraging the money actually paid in by borrowing in private capital markets. Since its founding, the Bank has lent more than $113 for each dollar of capital paid in by the US Government. The US share of the latest (9th) IDA replenishment is 21.6%. For each dollar the United States contributes to the IDA, other countries contribute about four.
US Interest
The US position as a world leader depends on an open and growing economy based on economic and political freedom. By promoting open, market-based economic systems, the World Bank has proved to be a cost-effective instrument for promoting the US interest in integrating the developing countries into the international trade and financial system. It reinforces the US aid program by providing substantial assistance in many countries where the United States has important political and security interests. The Bank helps to meet US humanitarian and environmental concerns by assisting in alleviating poverty, encouraging sound environmental policies, and rebuilding countries affected by natural disasters. It also serves US commercial interests by expanding markets for US exports and financing the purchase of US goods and services.
The Future
As it builds on its traditional strengths in the design and financing of sound investment projects, the World Bank also must remain flexible to respond to the changing needs of borrowers. It has embarked on major assistance programs for Central and East European countries and the new independent states of the former Soviet Union. Measures to support economic growth will continue to be at the center of its lending program. The Bank will be called upon to promote private sector development, to catalyze capital flows, and to ensure that all resources are used in an effective and environmentally sustainable manner. In 1990, the World Bank launched the Global Environment Facility, in conjunction with the UN Development Program and the UN Environment Program. The facility, funded by $1.2 billion in direct donor contributions, co-financing, parallel finances, and the Bank's retained earnings, provides grants to developing countries to assist them in implementing programs that help protect the global environment.
Box: World Bank Group
International Bank for Reconstruction and Development.
Founded in 1945, the IBRD lends at market-related rates of interest to countries at more advanced stages of development. In its 1991 fiscal year, the IBRD made loan commitments valued at $16.4 billion to 42 countries. Cumulative lending at the end of fiscal year (FY) 1991 was $203 billion.
International Development Association.
The IDA was established in 1960 to provide credits on concessional terms to the poorest countries, those that cannot afford alternative financing. It committed $6.3 billion to 44 countries in FY 1991. Total IDA credits since its founding were $64.5 billion at the end of FY 1991.
International Finance Corporation.
Since its establishment in 1956, the IFC has sought to mobilize resources for private sector development. In FY 1991, the IFC invested $1.5 billion in loans and equity capital to private businesses in 46 developing countries.
Multilateral Investment Guarantee Agency.
The MIGA, which began operating in June 1988, insures private foreign investment in developing countries against non-commercial risks such as expropriation, civil strife, and inconvertibility.

Fact Sheet: European Community

The European Community (EC) is comprised of three separate communities: the European Coal and Steel Community, established in 1951; the European Atomic Energy Community, and the European Economic Community, both established in 1957. Since 1978, the three have been referred to collectively as the EC. The EC has 12 members: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and the UK. A major goal of the Community is the completion by the end of 1992 of a unified economic area or "single market," with free movement of persons, goods, services, and capital. In December 1991, at Maastricht, Netherlands, EC members agreed to amendments of the EC treaties which will move the Community in the direction of greater economic, monetary, and political union, including more unified foreign and security policies. The Maastricht Treaty on European Union must be approved by all EC countries prior to implementation. Despite a national referendum in Denmark on June 2, 1992, rejecting the treaty, other EC members are proceeding with plans to ratify the treaty by the end of 1992.
US-EC Relations
The United States and the EC maintain a continuing dialogue on political and economic issues of mutual interest and engage in direct negotiations on trade and investment issues. The European Community is the United States' largest trading partner. Total US- EC trade exceeded $190 billion in both 1990 and 1991. In 1991, US imports from the EC were $86 billion and represented 18% of total US imports. In 1991, US exports to the EC were $103 billion and represented 24% of total US exports. In 1991, the US trade surplus with the European Community rose to $17 billion, up from $6 billion in 1990. The United States and the Community are each other's most significant source of direct investment. By the end of 1990, the Community had $230 billion invested in the United States, and the United States had about $173 billion invested in the EC. The United States continues to support the EC's plan to develop an integrated market by the end of 1992. It is in the interest of both sides that the program be implemented in an open fashion without new trade barriers. The United States holds regular meetings with the Community to discuss various aspects of the 1992 program and to resolve trade differences, many concerning agriculture. In its negotiations with the Community on trade and investment issues, the US Government works to ensure that American interests are not discriminated against in post-1992 Europe. The global reform of agricultural policies remains an important US objective and a major task of the current Uruguay Round of multilateral trade negotiations. The United States long has discussed foreign and trade policy issues on an ad hoc basis with the Community. These arrangements were formalized by the Declaration on US-EC Relations of November 20, 1990, which institutionalized regular consultation and cooperation on political, economic, scientific, educational, and cultural matters. As agreed in the declaration, the US President meets twice annually with the head of state or government of the presidency country and the president of the EC Commission. The secretary of state meets twice annually with the EC foreign ministers and as necessary with the foreign ministers of the "troika" countries (the EC presidency country, its predecessor, and its successor). The secretary also meets twice annually, along with some cabinet colleagues, with the EC Commission. Discussions include a broad range of issues: maintenance of international peace and security in areas such as the Gulf, the Middle East, and Central America; the Uruguay Round and other international trade issues; support for the emerging democracies of Eurasia; and cooperation in science and technology.
EC Institutions and Presidency
Since July 1967, the three communities have functioned with common institutions. Major EC institutions are the EC Commission, the Council of Ministers, the European Parliament, and the Court of Justice. Member states agree to relinquish a degree of national sovereignty to EC institutions and to cooperate in the joint administration of these powers. The Commission, made up of 17 members appointed by common agreement of the 12 governments, has primary responsibility for initiating and implementing EC policy in areas that fall under EC treaties (for example, the internal market, external trade, and agricultural policy). The Council of Ministers, representing the member states, occupies the preeminent position in the current institutional power balance and decides on the Commission's proposals. The Parliament, the only EC institution that directly represents European citizens, has significant power over budgetary matters and can amend or reject certain legislation approved by the Council. The Court, which has a role similar to that of the US Supreme Court, is the final authority on the interpretation of EC laws. Each member state serves as President of the Council for 6 months in rotation. The presidency country presides at all meetings of the member states and serves as spokesman in dealing with countries on intergovernmental matters, including efforts to coordinate the foreign policies of the member states. This foreign policy coordination process, known as European Political Cooperation, is one of seeking consensus for joint action by the 12 members on international political issues, such as the Gulf crisis and refugee aid, the Middle East peace process, South Africa, Central America, and the Conference on Security and Cooperation in Europe.
European Integration
The process of European integration was strengthened by the implementation in 1987 of the Single European Act (SEA), which increased the scope of the Community's legislative and executive authority. The SEA endorsed economic and monetary union and outlined a series of directives necessary to eliminate all physical, technical, and fiscal barriers to completion of the internal market by January 1, 1993. It also formalized procedures for cooperation in the area of foreign policy. At the landmark Maastricht summit in December 1991, EC members approved additional proposals which, if ratified by national parliaments, will forge even closer economic, monetary, and political ties within the Community. The EC is expected to establish a single European Central Bank and a single currency (the ECU) by the end of the decade, although all 12 member countries may not enter the new arrangements at once. The draft treaty also sets in motion a further acceleration of political integration, including elements of a common foreign and security policy. The question of how fast to proceed with enlargement of the Community while strengthening EC institutions, (the "widening" versus "deepening" issue), continues to be a major topic for discussion among member states. An intergovernmental conference is scheduled to be held in 1996 to evaluate the progress of economic and monetary integration and to consider greater coordination of foreign policy and security matters.
EC Economy
As a result of German unification on October 3, 1990, the population of the EC is now roughly 345 million. By the end of 1990, it had a gross domestic product (GDP) of $6 trillion and an average per capita GDP of $17,400. An important aspect of the EC's economy is its Common Agricultural Policy, a complicated system of price supports, subsidies, and protection to European farmers that consumes more than half the EC budget. EC member states agreed to an important reform of that policy in May 1992. The EC is the largest trading entity in the world. In 1990, EC member country exports were almost $1.4 tril-lion, or about 40% of total world exports, while EC exports to non-EC countries were $535 billion, or 16% of world exports. Exports within the EC were $836 billion. Germany is the largest exporter in the EC.
Relations With Other Countries
EC countries have long-standing political and economic ties with the new independent states of Eurasia. The Community has provided significant economic assistance to the emerging democracies and has eased access to its markets for them. A new kind of "European agreement" has been created, which consists of industrial, technical, and scientific cooperation, financial assistance, and political dialogue. In December 1991, association agreements were signed between the EC and Czechoslovakia, Hungary, and Poland. Talks are underway with Bulgaria and Romania. In 1989, the EC Commission began coordinating aid from the 24 Organization for Economic Cooperation and Development countries to Central and Eastern Europe. The objective is to strengthen the process of political and economic reform, with emphasis on improving the private sector. The European Bank for Reconstruction and Development (in which the United States is an active member) was established in 1990 to support investment and the development of market economies in these countries. In January 1992, the Community announced that it would seek to negotiate new agreements with the former Soviet republics to replace the 1989 Trade and Cooperation agreement signed by the EC and the Soviet Union. On May 11, 1992, the EC signed cooperation agreements with Albania, Estonia, Latvia, and Lithuania. In April 1992, the EC and the six-country European Free Trade Association plus Liechtenstein initialed an agreement to broaden their existing free trade agreement and create a European Economic Area. The Community has placed priority on improving relations with developing countries. The Lome Convention, a framework for EC development cooperation with African, Caribbean, and Pacific countries, was established in 1975. It now encompasses 69 countries. In 1989, a 10-year agreement was signed to provide aid to development projects, free access to EC markets for almost all manufactured imports from those countries, and incentives to promote European investment in developing countries. The EC is linked with a number of countries in the Mediterranean by association agreements which provide duty-free access for industrial products and direct grants and loans. EC economic ties to Asia and Latin America usually are bilateral agreements that allow preferential access and certain kinds of development aid. Austria, Cyprus, Finland, Malta, Sweden, Switzerland, and Turkey have applied for membership in the EC.

Fact Sheet: European Bank For Reconstruction and Development

Designed to create a development bank for the countries of Central and East-ern Europe, the Articles of Agreement for the European Bank for Reconstruction and Development (EBRD) were signed on May 29, 1990, in Paris. The EBRD formally came into existence on March 28, 1991, when members repre-senting two-thirds of total capital subscriptions had deposited their instruments of ratification, acceptance, or approval. The inaugural meeting of the Board of Governors took place on April 15, 1991.
Structure
The EBRD's principal decision-making body is the 23-member Board of Directors, 11 appointed from the European Community (EC) and its member countries and 12 appointed by non-EC countries. Some major policy decisions must be referred to the Board of Governors, comprising the finance ministers or their designates from each of the member countries. Jacques Attali, a former adviser to the French President, is the EBRD President. He is supported by five vice presidents, one of them from the United States, and staff. The bank's headquarters are in London.
Membership
In its first year of operation, the bank has had to respond to the breakup of its largest borrowing member, the Soviet Union. All 12 of the former Soviet republics are eligible for EBRD membership, and 11 (Georgia is the exception) have applied for and been accepted as members by the Board of Governors. Membership for Georgia is expected in 1992. The Baltic states were admitted to the bank as separate countries on October 29, 1991. Also in 1992, the bank must deal with the issues relating to the disintegration of another borrower, the former Yugoslavian Government. The bank's other members are: Albania (admitted in 1991), Australia, Austria, Belgium, Bulgaria, Canada, Cyprus, Czechoslovakia, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, South Korea, Liechtenstein, Luxembourg, Malta, Mexico, Morocco, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States, European Community, and European Investment Bank.
Principal Features
The EBRD was created to promote the development of open, market- oriented economies and private entrepreneurial initiative and to support the transition to pluralism and multi-party democracy in the countries of Central and Eastern Europe and the former Soviet Union. The EBRD's total capital is set at10 billion European currency units (ECU), about $12.6 billion, with 30% paid-in and the remainder subject to call. The bank's capital is denominated in ECU. Capital subscriptions can be made in ECU, US dollars, or Japanese yen. With 10% of the bank's capital, the United States is the single largest shareholder. The EC and its member countries together hold 51% of the EBRD's capital. Japan and the four largest West European countries each hold 8.52%. The former republics of the Soviet Union hold 6% and the other Central and East European countries, including the Baltic states, 6.25%. Lending operations began in April 1991. In its first 12 months, the bank made commitments to finance 19 pro-jects worth about $780 million. EBRD expects to lend about $1.2 billion in 1992 and up to $2 billion in 1993. At least 60% of the EBRD's resources must be devoted to the private sector, including state-owned firms moving to private ownership and control. The balance is available for infrastructure and environmental projects supporting private sector development and for loans to state-owned enterprises operating competitively. The EBRD is the only multilateral development bank that specifies environmental objectives in its charter. The former USSR agreed to limit its borrowing for an initial 3-year period to the level of its paid-in capital (about $216 million). After the dissolution of the USSR, members agreed that the limitation was no longer appropriate and that the bank should continue to focus on Central and East Europe, including the Baltic states. Thus, through the end of 1994, at least 60% (measured annually on a cumulative basis) of EBRD financing will be provided to Central and East Europe and the Baltic states. After December 1994, this lending target can be changed by a vote of two-thirds of the directors. EBRD's Board of Directors has now approved most of the bank's regulations, legal agreements, and operating guidelines. These policies are sound, particularly the bank's financial poli-cies. The bank's environmental policies and procedures generally mirror the provisions of the World Bank. In contrast to the World Bank, the EBRD provisions have no requirements for environmental impact assessments and public participation.

Gist: GATT and the International Trading System

The General Agreement on Tariffs and Trade (GATT), which entered into force in 1948, sets rules for international trade and provides a forum for multilateral trade negotiations. The United States is among the founding members and is a chief author of the GATT. It now has 103 members, known as contracting parties, which account for almost 90% of world trade. An additional 29 countries apply GATT rules. International trade has grown dramatically in volume, importance, and complexity since the inception of the GATT. This growth has occurred partly as a result of a consensus among GATT members that the world's economic welfare depends on freer trade, without the risk of escalating trade restrictions and distortions. Seven rounds of multilateral negotiations under the GATT have succeeded in reducing average tariffs in the industrial countries from more than 40% in the early 1950s to less than 5% today. The 1974-79 Tokyo Round established additional international agreements (codes) on rules of conduct in non-tariff areas: use of subsidies and countervailing duties, technical barriers to trade (standards), import licensing procedures, anti-dumping actions, government procurement, customs valuation, and trade in bovine meat, dairy products, and civil aircraft.
Uruguay Round
The eighth and current series of negotiations--the Uruguay Round-- was launched in 1986 in Punta del Este, Uruguay. It is the most comprehensive round of multilateral trade negotiations ever attempted. Issues that have been discussed for the first time include trade in services, foreign investment, and protection of intellectual property (patents, trademarks, and copyrights). Fifteen negotiating groups were established to deal with the various issues. The Uruguay Round originally was scheduled to conclude in Brussels in December 1990. Although progress was made in many important areas, critical issues, especially reform in agriculture, remain unresolved. Therefore, the round was extended to provide more time to reach a successful conclusion. In December 1991, GATT Secretary General Arthur Dunkel released a "draft final act" upon which the current negotiations are based.
US Policy
The top US trade priority is successful conclusion of the Uruguay Round. Success could result in more than $4 trillion of global economic expansion during the next 10 years. Failure could result in an increase in unilateral protectionist measures by many countries. Increasing protectionism would slow the world's economic growth and retard the development of Central America and the emerging democracies. The United States has made it clear that, at a minimum, it wants comprehensive reform of agricultural trade with the European Community; expanded market access for goods and services; meaningful disciplines in the intellectual property, services, and investment; and more complete integration of developing countries into the global trading system. A top priority for the United States is agreement on new market- oriented rules to reduce, and ultimately to eliminate, the numerous government measures which distort world trade in agriculture. The United States maintains that fundamental agricultural reform can be achieved only through the negotiation of specific commitments to reduce barriers to market access, export subsidies, and trade- distorting internal price supports, and through an agreement to avoid using sanitary and phytosanitary (plant health) measures to restrict trade. The final Uruguay Round package will include agreements in the new areas of services, trade-related investment measures, and protection of intellectual property. The US objective in services is to allow services providers (such as architects) to operate in foreign markets and compete like local firms. The United States seeks to eliminate or restrict foreign investment rules which have trade-distorting effects or which put foreign investors at a competitive disadvantage with local firms. US goals on intellectual property include higher standards of protection, effective enforcement of those standards, and an effective dispute settlement mechanism. The Uruguay Round, like previous rounds, includes a challenging set of negotiations on market access--tariffs and non-tariff measures restricting trade. The United States has offered to cut its tariffs by one-third, as called for in the Montreal Protocol. The United States continues to pursue its proposal to slash tariffs to zero in important, heavily traded sectors: electronics, pharmaceuticals, wood products, steel, paper, non-ferrous metals, construction machinery, medical equipment, fish, and beer and distilled spirits and to harmonize tariffs at low levels in the chemicals sector. The United States hopes to gain agreement on improved GATT rules for tighter discipline on subsidies and trade restrictions for balance-of-payments reasons, stronger dispute settlement procedures, and greater commitment by developing countries to GATT rules. The US Government has pressed its goal of achieving one set of rules for all GATT members including developing countries, which now account for more than $500 billion in trade.
US Policy on MFN
The United States grants unconditional most-favored-nation (MFN) treatment to most of its trading partners by operation of domestic law. Most countries are entitled to receive MFN treatment from the United States by virtue of their membership in the GATT. MFN status also can be required by a bilateral treaty. In some cases, the United States grants MFN treatment under a bilateral commercial agreement that can be terminated on short notice under certain circumstances. Exports from countries granted MFN treatment are subject to duty at the lowest available non-preferential rates, i.e., those listed under "Column I" of the US tariff schedule. Imports from countries without MFN treatment are assessed substantially higher duties under "Column II" of the US tariff schedule. MFN treatment was withdrawn from most communist countries under the Trade Expansion Act of 1951, which denied MFN treatment to any country under the control of the "world communist movement." The Trade Act of 1974 set new conditions for granting MFN treatment to countries not receiving it on January 3, 1975. These conditions applied to most communist countries, classified as non-market economy countries under the act. First, a non-market economy subject to the 1974 Trade Act must satisfy, or receive a presidential waiver of, the freedom of emigration criteria contained in the Jackson-Vanik amendment to Title IV of that act. The President can grant a waiver of the application of the freedom of emigration provisions if he determines that extension of the waiver would substantially promote freedom of emigration. The President also can find a country in compliance with the amendment (thus making a waiver unnecessary) by virtue of its emigration law and practices. The President can withdraw MFN status at any time if he determines that a country no longer satisfies the Title IV provisions. Second, once these conditions have been met or waived, Title IV also requires conclusion of a bilateral commercial agreement before MFN status is granted. Among the specific issues that are covered in such agreements are reciprocal granting of MFN treatment, safeguards, trade promotion, and adequate protection of intellectual property rights. These agreements have a renewable term of 3 years. Bulgaria, China, and Mongolia receive MFN status under Title IV of the 1974 Trade Act. In April 1992, the President used the authority granted him by Congress to discontinue application of the Title IV conditions to Hungary and Czechoslovakia, which retain their previously granted MFN status. The United States is working to conclude bilateral trade agreements with the new independent states of the former Soviet Union. These agreements are identical to the ones negotiated with the former USSR (with only technical changes to reflect current reality) and approved by the US Senate but not by the USSR at the time of its dissolution on December 25, 1991. The President has recommended that the Jackson-Vanik amendment be waived for the new independent states. Armenia, Kazakhstan, Kyrgyzstan, Russia, and Ukraine had signed agreements as of the end of June 1992. They are in force with Armenia, Russia, and Ukraine and await ratification in the other two. Mongolia also has signed an agreement. MFN status was restored to the three Baltic states, Estonia, Latvia, and Lithuania, which had declared their independence earlier in 1991. --------------------------------------------------------------------------
Box: Fundamentals of GATT
-- Most-Favored-Nation (MFN) Status. GATT members must extend to all other members the most favorable treatment with respect to tariffs and related matters granted to any trading partner. This non- discriminatory treatment ensures that any tariff reduction or other trade concession is automatically extended to all GATT parties, multiplying its liberalizing effects. The GATT allows some exceptions, primarily for customs unions such as the European Community and free-trade areas such as the US-Canada Free Trade Agreement. -- National Treatment. GATT members must give imported goods treatment equal to that accorded domestic goods in domestic markets. Any restrictions applied to imported products also must apply to comparable domestic products. -- Protection Through Tariffs. The GATT generally prohibits quantitative restrictions or quotas. Instead, contracting parties should provide protection by means of tariffs, which are transparent and subject to negotiation in the GATT. -- Dispute Settlement. Parties can challenge trade actions of other parties that may be inconsistent with the GATT. GATT members decide whether to accept by consensus the resulting findings of a panel of trade experts. The new procedures resulting from the Uruguay Round negotiations will result in more automatic and effective resolution of disputes. --------------------------------------------------------------------

Gist: US Trade Policy

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Graphic: US Merchandise Trade, 1991
Data: US Exports: $421.9 Billion. East Asia NIEs*-14%, European Community-25%, Canada-20%, Japan-11%, Latin America-11%, Other Countries-19%, . US Imports: $488.1 billion. East Asia NIEs*-13%, European community-18%, Canada-19%, Japan-19%, Latin America- 13%, Other Countries-18%, * Newly industrialized economis: Hong Kong, Singapore, South Korea, and Taiwan Source: Department of Commerce. ----------------------------------------------------------------------- International trade presents challenges and opportunities for the United States. US policy focuses on promoting free and fair trade among countries to foster growth internationally and in America. The complexity of achieving open trade has increased with the growth of trade in services and intellectual property as well as trade in goods. US policy favors free trade because it promotes robust economic growth by fostering competition and efficient allocation of resources and, therefore, maximizes worldwide income. As importers, countries gain cheaper or otherwise unavailable products and enjoy enhanced competition and effi-ciency in their domestic markets. As exporters, countries expand markets for their most competitive and productive industries. Trade is vital to the US economy. From 1950 to 1990, US real gross domestic product almost quadrupled, while exports grew sevenfold. Jobs related to trade grew three time faster than overall job growth during those 4 decades. In 1991, the United States exported $421 billion and imported $488 billion. The 1991 trade deficit of $66 billion was a significant drop from the record $159 billion in 1987. The Omnibus Trade and Competitiveness Act of 1988 reinforced the US emphasis on opening markets and fair trade. Several provisions aim to open markets through multilateral efforts, such as extending the President's authority to conclude multilateral trade agreements, implementing the international harmonized tariff system, and reducing export control barriers. Extension of "fast-track" authority agreements concluded by March 1, 1993, underlines the US commitment to conclude trade negotiations. This "fast-track" procedure for congressional consideration of the President's implementing legislation on multilateral or bilateral trade agreements sets time limits for that consideration, with no amendments to the agreement allowed.
General Agreement On Tariffs and Trade (GATT)
The GATT has 103 member countries and is the principal multilateral body on international trade. A tenfold growth in the volume of international trade and lower import duties in most industrialized countries since GATT's creation after World War II illustrate its success. Trade has been the engine of world economic growth since World War II. US measures have reduced the average tariff on the its imports from 60% under the Smoot-Hawley Tariff Act of 1930 (which still governs imports from countries to which the United States does not grant most-favored-nation treatment) to 3.4% in 1991, including the one-third of US imports that entered duty-free. Other industrial countries have made similar reductions. The current trade negotiations, the Uruguay Round, which began in 1986, are designed to liberalize trade further. The United States is taking the lead in extending GATT coverage to new areas, such as services, intellectual property, and investment. A key US goal in the Uruguay Round is comprehensive reform of agricultural trade. Other key US goals are expanded market access for goods and services, greater discipline over trade-distorting subsidies, protection of intellectual property rights, and further integration of developing countries into the global trading system.
Bilateral and Regional Agreements
The United States is negotiating a free trade agreement (FTA) with Mexico and Canada to form a North American Free Trade Agreement (NAFTA). This will build upon the US-Canada FTA, which went into effect in 1989, and will eliminate tariffs between the parties by 1998. The US-Canada FTA also liberalized treatment of services and investment. A US-Israel FTA went into effect in 1986. In 1990, President Bush introduced the Enterprise for the Americas Initiative (EAI) with the goal of establishing a hemisphere-wide free trade area. Under the initiative, progress has been made to open markets, reduce barriers to investment flows, reduce official debt, and strengthen the environment throughout the hemisphere. To date, 31 countries have signed framework agreements that established trade and investment councils with the United States. The councils review trade and investment issues of mutual concern.
Agricultural Trade
The United States is the leading exporter of coarse grains and soybeans and a large supplier of wheat, cotton, meat, and horticultural products. US farm exports rose from $26.3 billion in 1986 to $38.4 billion in 1991. A key US goal in the Uruguay Round is to liberalize world farm trade to boost opportunities for US exporters.
Trade in Services
The role of banking, insurance, telecommunications, transportation, construction, and other services in the US economy and in international trade has expanded dramatically over the last 25 years. Services account for about 75% of US gross domestic product and more than 80% of US jobs. Few international agreements cover trade in services, and none apply to developing countries with important services markets. Extending multilateral rules to liberalize such trade further is another major US goal in the Uruguay Round.
Intellectual Property and Trade
Products that embody intellectual property (principally films, music, software, pharmaceuticals, and published works) constitute the second-largest source of foreign export earnings for the United States and, as such, are critical to US competitiveness at home and abroad. Growth in such earnings depends heavily on the ade-quacy and effectiveness of the legal protection available in foreign countries for US owners of intellectual property. The United States is pursuing enhanced international protection for intellectual property owners through its own series of bilateral investment agreements (BITs), agreements with the emerging democracies, the Uruguay Round, and NAFTA.
Trade and LDCs
Trade with developing countries (LDCs) is important to the United States. US merchandise exports to LDCs were $148 billion or 35% of the total in 1991. US imports were $185 bil-lion or 38% of total US imports. The continued openness of US markets enables LDCs to grow and earn foreign exchange needed to buy US goods and to fulfill external debt obligations.
Generalized System Of Preferences (GSP)
Since 1976, the US GSP program has assisted economic development by promoting trade from developing countries by eliminating duties on a wide range of products imported from designated beneficiary countries. In 1991, $13.7 billion worth of goods entered the United States duty free under this program. The Trade and Tariff Act of 1984 extended the GSP until July 1993 and redirected the program toward poorer LDCs. Consistent with the political and economic reforms they have undertaken, the emerging democracies of Central and Eastern Europe and of the former Soviet Union are eligible for the program. The United States is developing options for GSP renewal after 1993.
Trade Protection
Protectionist policies are a major impediment to trade. Tariffs are high in many developing countries. As tariffs in developed countries have declined, other barriers have arisen. These include quotas; orderly marketing and export restraint agreements; quality, environmental, or health standards that are really disguised barriers to trade; "buy domestic" requirements for government entities; government subsidies to protect domestic industry; and government tolerance of private-sector collusion to resist imports. President Bush has declared that the United States is opposed to protectionist policies, saying that protection harms US exporting industries because of higher input prices and retaliation by trading partners. Protection also is costly to consumers.
Relief From Unfair Trade Practices
US law and the GATT permit remedial action when unfair import competition harms US producers. Anti-dumping duties can be imposed if foreign companies sell goods at prices lower than production costs or home market prices. Countervailing duties can be used to offset foreign government subsidies. If US producers prove injury from increased imports, even if the imports are not the result of unfair practices, US law and the GATT also permit action to restrain those imports temporarily while US industry adjusts. Under a revised Title II of the 1974 Trade Act, the US Government also can provide assistance for people and industries affected during the adjustment period. Under Section 301 of the 1988 Trade Act, the US Trade Representative can take action whenever it is determined that a foreign trade practice is unjustifiable, unreasonable, or discriminatory. The United States can suspend or withdraw trade concessions and impose duties or other import restrictions. "Special 301" provisions deal explicitly with the protection of intellectual property rights. -------------------------------------------------------------------
Box: Composition of US Merchandise Trade With the World, 1991
EXPORTS: $422 billion Manufactured goods 82% Machinery 28% Transport Equipment 16% Chemicals 10% Other Manufactures 28% Agricultural Products 9% Crude Materials 9% IMPORTS: $488 billion Manufactured goods 81% Machinery 27% Transport Equipment 16% Chemicals 5% Other Manufactures 33% Agricultural Products 5% Crude Materials 14% Source: Department of Commerce ----------------------------------------------------------------------

Gist: US Export Controls Foreign Policy Controls

Foreign Policy Controls
Background
Exports are a vital part of the US economy. They provide jobs and enable the country to import goods to meet domestic demand. The United States imposes certain controls, however, to ensure that exports are consistent with foreign policy. Most controls apply to sensitive dual-use equipment and technology that could support activities contrary to US national security and foreign policy interests. They affect less than 5% of the value of current exports. The controls relate to specific foreign policy concerns worldwide and/or to specific countries of concern under the authority of the 1979 Export Administration Act (EAA).
Controls
Terrorism Equipment. Using the authority of EAA Section 6(j), the Secretary of State has designated Cuba, Iran, Iraq, North Korea, Libya, and Syria as countries that repeatedly have provided support for international terrorism. Broad, country-specific export controls are in place for these countries. Crime Control Equipment. These controls regulate the export of crime control and detection instruments, equipment and related technology to all countries, except to NATO member countries or to Japan, Australia, and New Zealand. Generally, licenses are issued unless the United States has human rights concerns about the government of the importing country or the ultimate consignee. Regional Stability. Exports of equipment used to manufacture military arms and equipment and some military transportation equipment are reviewed to ensure that such exports would not contribute to the destabilization of the region or country destination. Anti-Apartheid. The United States prohibits the export to South Africa of all military and police equipment, and all items covered by the UN mandatory arms embargo. Missile Technology. The United States assists other countries in the peaceful uses and exploration of space, but seeks to halt the development of weapons-delivery systems. On a worldwide basis, the United States controls the export of dual-use equipment and materials that are commercial in nature which would also be useful in the development of missile systems. Chemical/Biological Weapons. Licenses are required worldwide (except for the NATO members plus Australia, Austria, Ireland, Japan, New Zealand, and Switzerland) for the export of 50 chemical precursors and certain equipment useful in the production of chemical weapons, and to all destinations for the export of a broad range of bacteria, fungi, protozoa, toxins, viruses, and viroids. All are prohibited to Iran, Iraq, Libya, and Syria. Licenses are required to specified regions and states for certain dual-use equipment that might be relevant to chemical or biological weapons programs. Nuclear Controls. The United States assists other countries to use atomic energy for peaceful purposes but also seeks to halt the spread of nuclear weapons. Thus, the United States controls exports of goods or technology that, if misused by the recipient country, could contribute to the production of nuclear explosive devices. The Atomic Energy Act of 1954, as amended by the 1978 Nuclear Non- Proliferation Act, established the controls. Before permitting an export, the US Government reviews the proposed use of the item, whether the government of the purchasing country has signed the nuclear Non-Proliferation Treaty, and whether the United States has acceptable assurances that the item or nuclear material produced from it will not be diverted to develop nuclear weapons. Short Supply. Controls occasion-ally are necessary to protect the domestic economy from an excessive drain on scarce materials. Congress has legislated restrictions on the export of crude oil, unprocessed Western red cedar logs, and horses for export by sea (to prevent unauthorized slaughter abroad). Supercomputers. For foreign policy reasons, the United States requires the licensing of supercomputer exports worldwide, except to Canada and Japan.
Treasury Department Controls
The Treasury Department controls US trade and financial transactions with Cuba, Iraq, North Korea, Libya, Vietnam, and Serbia-Montenegro. It also controls transactions with Haiti and regulates certain imports from Iran. Certain exceptions to these controls are granted under general or specific licenses issued by the Treasury Department Office of Foreign Assets Control.
Guidance on Exports
Exporters should consult the US Export Administration regulations (copies are available from the US Government Printing Office, 202- 783-3238--stock no. 903-014-00000-8) and the Commerce Department's Office of Export Licensing, Exporter Counseling Division, 202-377-4811. For information on the Treasury Department's trade and financial controls on Cuba, Iraq, North Korea, Libya, Serbia-Montenegro, and Vietnam, exporters should call the Office of Foreign Assets Control, US Department of the Treasury, 202-622-2520.
Strategic Technology Controls
Background
Export of strategically significant technology to certain countries is controlled to deny them access to exports that would increase their military effectiveness. Because modern weapons depend on advanced supporting technologies that have civilian and military ("dual-use") applications, some commercial technology transfers could undermine US national security. Under the Export Administration Act, the Commerce Department must issue a license before any such dual-use technology or equipment can be exported from the United States to a potential adversary. US officials must ensure that no transfers of dual-use technology occur under the guise of civilian projects.
COCOM
The United States cannot effectively control strategic technology because it is not the sole source of many of these products. International cooperation is required. Established in 1949, the Coordinating Committee on Multilateral Export Controls (COCOM) is important in facilitating multilateral cooperation to control strategic goods and technology. Its 17 members are Australia, Belgium, Canada, Denmark, France, Germany, Greece, Italy, Japan, Luxembourg, Netherlands, Norway, Portugal, Spain, Turkey, the United Kingdom, and the United States. COCOM is not based on a treaty or an executive agreement. Instead, it operates by informal agreement and according to the rule of unanimity. COCOM agreements are implemented by each member country on a national basis. COCOM has no formal relationship to NATO. A permanent COCOM secretariat is located in Paris. All 17 member countries are represented by permanent delegates. These representatives are joined routinely by teams of technical experts and policy-level personnel from their countries during substantive meeting and negotiations on new or revised export controls. COCOM countries cooperate in three major areas: -- Publishing national control lists of embargoed equipment (the lists are grouped into three categories: dual-use, atomic energy use, and direct military use) and enacting effective export control systems; -- Considering proposed exports of specific embargoed items from member countries to proscribed countries; and -- Harmonizing national licensing practices for strategic exports and coordinating export control enforcement activities.
Policy Level Developments
Since 1981, a series of high-level COCOM meetings has set policy guidelines to ensure its effectiveness. The dramatic political and economic developments in the former Soviet Union, for example, have prompted the US Government to revise its policies on strategic relationships. At a meeting on June 1, 1992, COCOM members decided to establish a Cooperation Forum on Export Controls and to invite the republics of the former Soviet Union to participate in this forum. The goals of the new forum mirror new strategic relationships. These goals include: -- Significantly wider access by those countries to advanced Western goods and technology; -- Procedures for ensuring against diversion of these sensitive items to military or other unauthorized users; and -- Further cooperation on matters of common concern on export controls. COCOM partners also agreed to an immediate improvement in the availability of advanced telecommunications equipment to the states of the former Soviet Union effective July 1, 1992. This decision will assist these emerging democracies by providing: -- Rapid and reliable telecommunications between the newly independent countries and the West; and -- Modern, cost-effective domestic telecommunications systems. In light of the changed strategic environment, COCOM also is adapting strategic controls to promote democratization, economic reform, and defense conversion in Central and East European countries and the newly independent states of the former Soviet Union. At a meeting on May 23, 1991, COCOM members adopted a new list of controls on only the most sensitive strategic dual-use goods and technologies. It is more than 50% shorter than the dual-use industrial list that it replaced. The computer controls, for example, have been liberalized, and US export license requirements for such goods have been reduced by about 70%. The list provides wide-ranging favorable licensing treatment for the democratizing countries of Central and Eastern Europe, such as Poland and Czechoslovakia, that have established Western-style export controls systems and agreed not to transfer COCOM- controlled technology to prohibited destinations. These countries now receive a presumption of approval for all but a few controlled dual-use items. The Baltic states, Poland, and Czechoslovakia are candidates for removal from the list of proscribed destinations. Hungary was removed from COCOM proscription in May 1992. Discussions with Bulgaria and Romania on the establishment of Western-style export control systems are underway. Implementation of the so-called common standard by all COCOM- member governments in February 1992 will allow for further implementation of the license-free zone for trade in dual-use goods and technology among COCOM member governments and the COCOM cooperating governments of Austria, Finland, Ireland, New Zealand, Sweden, and Switzerland as well as Hong Kong.
Non-COCOM Countries
COCOM tries to inhibit the export or re-export of embargoed commodities from non-COCOM countries to the proscribed countries. COCOM members discuss cooperation on export controls formally and informally with a number of non-COCOM countries. Some non-COCOM countries have adopted export control systems similar to those of COCOM. The United States provides licensing benefits to these countries in recognition of their efforts to control strategic exports.

Gist: North American Free Trade Agreement

[Introduction] The United States, Mexico, and Canada have embarked on free trade negotiations that would create a North American market of more than 360 million consumers and producers and an annual output of more than $6 trillion. The proposed North American Free Trade Agreement (NAFTA) seeks to eliminate restrictions on the flow of goods, services, and investment among the three countries. A successful agreement would be a catalyst for economic growth and development in North America, through increased trade, investment, and job creation.
US Goals
The Bush Administration is determined to negotiate an agreement that is in the best economic interest of the United States. Specific US objectives include: -- Elimination of tariffs either immediately or over a period of years (the maximum period is10 years in the US-Canada Free Trade Agreement); -- Elimination of non-tariff barriers on goods and services, such as import licenses and quotas; -- Establishment of an open investment climate; and -- Adequate and effective protection and enforcement of intellectual property rights (such as patents, copyrights, and trademarks). Achievement of these objectives will benefit a broad spectrum of US businesses, workers, farmers, and consumers.
Negotiations
The NAFTA negotiations began in June 1991. Nineteen working groups were established to handle issues in six broad areas--market access, trade rules, services, investment, intellectual property rights, and dispute settlement. The negotiations were made possible by US congressional action in May 1991, extending the "fast track" procedures for negotiating trade agreements, including the Uruguay Round of multilateral trade talks and the proposed pact with Mexico and Canada. These procedures allow the President to present a trade agreement to Congress for approval without the possibility of amendment. In December 1991, Presidents Bush and Salinas reaffirmed their commitment to concluding a good agreement as quickly as possible. There has been considerable progress in the NAFTA talks during the intensive negotiations which have continued throughout the first half of 1992. Major sessions were held by the chief negotiators in Dallas, Toronto, Mexico City, and Washington, DC. However, US, Mexican, and Canadian negotiators have agreed not to set an arbitrary deadline to conclude an agreement. When there is a negotiated agreement, the Administration will consult with Congress and make a decision when to submit it for approval. Congress and the US private sector remain an integral part of the NAFTA process. President Bush is committed to extensive consultations with both throughout the NAFTA negotiations. This is in the best interest of the United States, Mexico, and Canada, as it helps ensure speedy approval of the agreement and implementing legislation that the executive and congressional branches develop together.
Expanded Trade
Canada and Mexico are the first and third largest trading partners, respectively, of the United States. In turn, the United States accounts for more than two-thirds of the total trade of our two North American neighbors. In 1991, three-way trade amounted to $243 billion, and the NAFTA will eliminate economic barriers and inefficiencies which impede commerce among the three countries. Since 1986, when Mexico began a major opening of its economy (including joining the General Agreement on Tariffs and Trade-- GATT), US exports to Mexico have increased from $12.4 billion to $33.3 billion in 1991. This makes Mexico the third largest US export market, and this growth of 169% is almost twice the rate of overall US export growth in the 1986-91 period. By comparison, US exports to Western Europe increased 93%. US manufacturing exports to Mexico increased from $10.4 billion to $26.7 billion during this period, almost twice the rate of overall growth in US manufacturing exports. Agricultural exports jumped from $1.1 billion to $2.8 billion, making Mexico the third largest customer of US agricultural commodities in 1991. In fact, the United States has swung from a bilateral trade deficit with Mexico in 1986 of $4.9 billion to a surplus of $2.1 billion in 1991. Excluding US petroleum imports from Mexico, the surplus reaches $6.6 billion. However, Mexico still has higher trade barriers than the United States. Its average tariff duty is 10%, compared with 4% in the United States, and significant Mexican non-tariff barriers remain. The United States has much to gain from the elimination or reduction of these barriers under a trade agreement. NAFTA would result in expanded trade with Mexico and the creation of jobs for US workers. It would give US exporters improved access to a market of more than 80 million people and one that is expected to reach 100 million by 2000. Traditional US competitive advantages--geographic, cultural, and historic links--in this important market would be further enhanced by NAFTA. As the Mexican economy has grown, a substantial part of the increased national income generated--as much as 15%--has been spent on US goods and services. Strong growth has begun to occur as a result of President Salinas' economic reforms. Mexico's middle class is increasing as a percentage of the total population, which means a larger market for US goods and services.
Opportunities in Mexico
The United States is the largest source of foreign direct investment in Mexico--$21.4 billion (cumulative) as of the end of 1991. The US Government has a strong interest in encouraging favorable conditions for new and expanded investments in Mexico. US firms investing there tend to use US suppliers and US design and managerial talent. In May 1989, President Salinas expanded the percentage of allowable foreign ownership (in many cases up to as much as 100%) in sectors accounting for nearly two-thirds of Mexico's economic output. He streamlined the approval process for foreign investments. Mexico also has enacted legislation that goes far to respect intellectual property rights. A trade agreement would further improve the investment climate for US firms in Mexico. NAFTA will lead to a more open trade and investment climate that will foster further partnerships and alliances in industry, agriculture, and services. These partnerships can take advantage of the complementary strengths of the three North American economies and will result in more jobs, investment, and economic growth in the United States, Mexico, and Canada.
Benefits to US Workers
NAFTA will increase opportunities for growth, exports, and investment and help the United States keep and create good jobs at good wages. In particular, export growth will produce many new export-related jobs. NAFTA in the aggregate will be a positive development for American workers. A May 1992 study prepared by the US International Trade Commission indicates that US aggregate employment could rise by as much as 2.5% of the workforce as a result of NAFTA. Earlier macroeconomic studies have suggested that the NAFTA will create between 64,000 and 300,000 jobs. American workers are concerned that NAFTA will result in jobs being lost to Mexicans and in US products being replaced by Mexican imports. President Bush is working with Con-gress and labor to develop training and readjustment programs for US workers who may be displaced. The NAFTA will include other mechanisms to ease the transition to free trade. An extended period to phase out tariffs will help ease the adjustment for American workers in sensitive industries. "Rules of origin" will ensure that the gains from preferential treatment under free trade go to NAFTA partners and their workers, rather than to countries outside the region. Furthermore, NAFTA "safeguards" will ease the effects on American workers of any sudden import surges.
Benefits to the Environment
NAFTA goes further than any other comprehensive trade agreement to address environmental concerns across the US-Mexico border and beyond. It will promote sustainable development and recognize the link between economic growth and the need to preserve the environment. Among its environmental provisions, NAFTA seeks to safeguard public welfare and promote improved enforcement of environmental, health, and safety standards. The United States also is pursuing expanded US-Mexico environmental cooperation in parallel with the NAFTA negotiations. The ongoing US-Mexican Integrated Border Environmental Plan builds on a long tradition of cooperative activity in the environmental area. The United States and Mexico are working to improve enforcement of environmental laws that address air and water pollution, hazardous wastes, and chemical spills. In February 1992, environmental groups, industry, and the public participated in the comprehensive report, US Government Review of US-Mexican Environmental Issues. It has enhanced the awareness of NAFTA negotiators of the environmental aspects of trade actions.
Greater Hemispheric Cooperation
The United States is a neighbor and friend of Canada and Mexico. NAFTA provides a unique opportunity to draw North America even closer by building a solid foundation for stronger cooperation, integration, and growth. A trade agreement will give economic and political impetus to US efforts to address other North American problems, such as the environment, the flow of drugs, and immigration. NAFTA will help forge a US-Mexican partnership that could lead to closer cooperation on other foreign policy issues. A North American trade agreement also is important as the cornerstone of a comprehensive Western Hemisphere policy. It will send a strong, encouraging signal throughout Latin America to a new generation of leaders pledged to democracy, human rights, and market economies. Its successful conclusion will provide further impetus to President Bush's long-range vision of a hemisphere-wide system of free trade.
Box: Consultations With Congress and the Public
The Bush Administration is committed to regular, substantive consultations with Congress as the NAFTA negotiations proceed. A strong consultative mechanism is integral to the success of the negotiations and the fast track process. The Administration has had extensive consultations with Members of Congress and with the congressional staff of about 18 House and Senate committees having jurisdiction over the negotiations. The meetings have covered all areas of the negotiations. This process will continue until implementing legislation is passed. The Administration also relies heavily on advice from the private sector and from individual citizens. Forty advisory committees, composed of more than 1,000 private sector representatives, and one committee of state and local government officials provide advice on all US trade negotiations. In August-September 1991, the Office of the US Trade Representative (USTR) held public hearings on NAFTA in six American cities. USTR receives and evaluates a steady stream of recommendations from individuals, companies, trade unions, and associations.

Gist: US-Japan Trade

Background
The United States and Japan are the world's two largest economies, with a combined gross domestic product (GDP) estimated at $9 trillion in 1991, almost 40% of world output. Japan is the United States' second largest market after Canada and its best agricultural customer. The US trade deficit with Japan reached a peak in 1987 at $57 billion, falling to $41.1 billion in 1990 and $43.4 billion in 1991. In the last 5 years, American exports to Japan increased to 70%, while Japanese exports to the United States in the same period rose 8%. In 1991, US exports to Japan were about $48.1 billion, while imports from Japan were $91 billion. About 65% of US exports to Japan are manufactured goods. Major US exports to Japan include agricultural and forest products, aircraft, and data processing equipment. Japanese exports to the United States consist primarily of motor vehicles and parts, data processing equipment, and telecommunications equipment. Macroeconomic factors, such as different rates of savings and investment as a percentage of GDP, are cited most often as the cause for the external imbalances of the United States and Japan. Nevertheless, US trade officials work closely with the Japanese Government to remove market and micro-economic impediments, many of them cultural and structural, which restrict access to the Japanese market. Concern about Japan's competitive challenge and its industrial policies has focused US public attention on the issues of high-technology trade, "economic security," and competitiveness.
Structural Factors
Several official and semi-official Japanese studies recommend that Japanese growth should no longer depend on exports but rather on domestic demand. In fact, domestic demand in Japan during 1985-91 grew faster than external demand. Amid slackened economic activity in Japan, however, concern has increased that growth is again being fueled by gains in the export sector. The Japanese Government is responding to domestic and foreign requests for deregulation of its economy. Japanese consumers, who face high prices for local goods, have become more active in calling for changes. To address the root causes of the global payments imbalances, the United States and Japan launched the Structural Impediments Initiative (SII) in September 1989. In a June 1990 report, each country committed itself to structural reforms. In Japan, these included reforms in the distribution system, exclusionary business practices, keiretsu (interlocking business groups), land use policies, and savings/investment patterns. In turn, the Japanese urged the United States to improve its savings and investment rates, export promotion efforts, workforce training and education, research and development, and corporate behavior. In May 1991, the two sides issued the first annual report on progress on implementing these commitments.
Market Access
In the January 1992 Tokyo summit declaration, the United States and Japan pledged to make their economies the most open in the world and to build a sustainable trade and investment relationship. President Bush and Prime Minister Miyazawa agreed to a global partnership plan of action whose economic component contained new commitments on cooperation in the Uruguay Round, on SII, and a host of sectoral issues. The latter includes government procurement of computers, a market access agreement for paper, and plans by Japanese auto companies to purchase US auto parts and increase imports of American-made cars. Growth in US exports accounts for almost all the improvement in the US trade position: $28.2 billion in 1987, and $48.1 billion in 1991. In fact, during 1985-91 US exports to the world have risen by 93% and to Japan by 113%. The Japanese market for US goods substantially exceeds those of the UK and Germany combined. The United States and Japan have negotiated several agreements aimed at increasing foreign access to Japan's market by lowering tariffs, addressing standards that operate as barriers to trade, and promoting long-term relationships between Japanese companies and foreign suppliers. Other important agreements cover sectors such as Japan's market for beef and citrus, public works, amorphous metals, cellular phones, Japanese public sector computer procurement, and paper. In April 1990, the United States and Japan reached agreements on the three sectors identified for trade liberalization under the Super 301 provisions of the Omnibus Trade and Competitiveness Act of 1988: satellites, super-computers, and wood products. Efforts to improve access to the Japanese market continue in semiannual meetings of the US-Japan Trade Committee, in the Market-Oriented-Sector- Selective (MOSS) talks, and in a number of specific sectors covering trade in goods and services.
Box: US Policy
US trade policy with Japan has several elements, including: -- Negotiations and other market access initiatives that focus on removing barriers to trade in specific Japanese markets; -- Encouragement of structural changes that will open Japan's economy and further increase imports and foreign direct investment; -- Coordination of policies to align bilateral economic trends to foster improved economic balances; and -- Close coordination with Japan in multilateral trade forums, particularly the Uruguay Round. The two countries have worked cooperatively to move negotiations forward in the round in several areas, though unable to bridge differences over reform of world agriculture trade.

Gist: US Economic Relations With East Asia and the Pacific

Background
The East Asian and Pacific region is the world's most economically dynamic area. Japan has become the second largest market economy and, with the United States, one of the world's leading aid donors. The region's newly industrialized economies (NIEs)--Hong Kong, Singapore, South Korea, and Taiwan--have maintained high economic growth rates over the last 2 decades. In the process, they have achieved "middle-income" levels of per capita GNP and have become major participants in international trade. Thailand and Malaysia are fast approaching development levels close to those of the NIEs. Over the last decade, the East Asian and Pacific region has surpassed Western Europe to become the largest regional trading partner of the United States, both as a supplier of US imports and as a customer for its exports. In 1991, US two-way trade with the region was more than $315 billion, 40% more than transatlantic trade. American direct investment in the region reached $66 billion in 1991, 15% of total US overseas investment. The Association of Southeast Asian Nations (ASEAN)--Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand--is America's fourth largest source of imports and its sixth largest export market. In 1991, US trade with ASEAN was $49.7 billion. The United States in 1991 exported more to Singa-pore than to Italy, more to Malaysia than to the countries of the former Soviet Union, and more to Indonesia than to Central and Eastern Europe combined. The United States also is the leading export market for Singa-pore, Thailand, and the Philippines and is the second largest export market for Malaysia. US direct investment in ASEAN totaled $13 billion in 1991. Transportation also links the United States more closely to East Asia and the Pacific. By 1993, air traffic on Pacific routes is expected to overtake Atlantic traffic on a passenger-mile basis. By the year 2000, the Pacific market is projected to account for almost half of total international traffic.
US Support for Economic Reforms
The achievements of the successful Asian economies can be attributed largely to market-oriented, outward-looking strategies of growth, together with the high value these societies have traditionally placed on education, discipline, and hard work. The United States contributes to this success and supports economic reforms by providing: -- The principal market for the region's exports; -- Leadership in promoting an open international trade and financial system; -- Economic assistance to the region's developing nations; and -- A military security umbrella. The Philippines and Indonesia have economic reforms underway that, if sustained, will enable them to capitalize on their impressive potential. Australia and New Zealand also are engaged in difficult economic restructuring and trade liberalization efforts. Some Pacific island mini-countries are not yet fully participating in the region's economic success. Implementation of market-oriented reforms has boosted the economies of Laos and, to a lesser extent, Vietnam, but both countries remain poor. China experienced rapid economic growth during most of the 1980s as it moved toward a more market-oriented system.
Trade Success and Imbalances
The dramatic success of East Asian and Pacific exports in the US market has led to large, unsustainable trade imbalances. In 1991, the United States had trade deficits with Japan ($43 billion), China ($13 billion), Taiwan ($10 billion), and South Korea ($1.5 billion). On the other hand, the United States had a $4 billion trade surplus with Australia in 1991. Congress and US business have intensified the pressure to reduce imports from, and increase US exports to, East Asian and Pacific economies. Some progress in reducing these trade imbalances already is evident. Japan has made progress in opening its markets to foreign goods and services, but concerns remain about the size of Japan's trade surplus. The NIEs, particularly South Korea and Taiwan, also have reduced import barriers to a limited extent. This has helped reduce the overall US trade deficit with the East Asian and Pacific region from $107 billion in 1987 to about $73 billion in 1991. East Asian and Pacific countries have come to recognize that their growth and export successes require them to bear a much larger burden for the health of the world economy. Consequently, they are undertaking appropriate adjustments to help correct international imbalances by: -- Ensuring realistic exchange rates; -- Lowering barriers to imported goods, services, and investment; and -- Adopting macroeconomic and structural policies that encourage growth through increased domestic demand as well as exports. The United States, in turn, must maintain its efforts to reduce domestic fiscal imbalances and to keep its import markets open.
Increasing Regional Cooperation
The United States has been working with East Asian and Pacific economies for several years to strengthen regional economic cooperation. US officials have had extensive consultation with ASEAN, the Asian Development Bank, the UN Economic and Social Commission for Asia and the Pacific, the South Pacific Council, the South Pacific Forum, and the Pacific Economic Cooperation Conference. Many of the region's leaders recently have called for more intensive consultation among the market-oriented economies of the East Asian and Pacific region on macro-economic issues, structural reform, and the health of the world trading system, particularly the current Uruguay Round of the General Agreement on Tariffs and Trade (GATT). Secretary Baker played a key role in the formation of Asia-Pacific Economic Cooperation (APEC), a regional forum based on those principles. The United States works actively with its East Asian and Pacific partners to promote APEC as a new vehicle for regional economic cooperation. At the invitation of then-Australian Prime Minister Hawke, the first APEC ministerial conference convened in Canberra in November 1989. A second ministerial meeting took place in Singapore in July 1990, leading to the creation of work projects in various areas of interest to the original APEC members. A third took place in Seoul in November 1991. Ministerials are planned for Bangkok in September 1992, the United States in 1993, and Indonesia in 1994. -------------------------------------------------------------------------
Box: APEC Members
Australia Malaysia Brunei New Zealand Canada Philippines Indonesia Singapore Japan Thailand South Korea United States --------------------------------------------------------------------

Gist: US International Energy Policy

US international energy policy seeks to ensure adequate supplies of energy for America and its friends and allies. US policy relies on free market mechanisms, international cooperation, and the maintenance of strategic stocks for use in time of severe supply disruptions. US energy policy is concerned with the impact of energy use on the environment. The United States is a leader in the adoption of prudent energy policies, such as the Clean Air Act and the National Energy Strategy, which benefit the economy and the environment.
Background
Increasing America's energy security has been a major policy goal of the US Government since the oil price shocks of the 1970s contributed to high inflation and unemployment. Oil price controls and rationing schemes during that period exacerbated the negative impact that rapidly rising prices had on the economy. The energy policies of the 1980s reversed many of these damaging trends, decontrolling and deregulating much of the energy industry while maintaining a commitment to a clean environment. Adoption of free market mechanisms has encouraged American energy consumers to reduce energy use and to use energy in more flexible ways. Market-driven developments in energy conservation and use technology have reduced energy's share of US gross domestic product, making the economy much less sensitive to energy price changes. Deregulated markets have led to increased energy investment and greater diversity of energy supplies, further adding to the flexible use of energy. These market-based developments have given us new, less disruptive ways to respond to oil price and supply shocks. The security of US energy supplies remains a major concern. In 1991, America imported about 43% of its oil needs. US and world dependence on insecure supplies from the Persian Gulf region continues to grow and could reach 40% of total supply by 2010 from the current level of 25%. This volatile region holds an estimated 65% of total world oil reserves. As noted in the 1991 National Energy Strategy, "energy independence" is unfeasible technically and economically. Economic and environmental considerations diminish the chances for the ultimate development of many of America's most energy-rich areas. The interdependency of world energy markets means supply disruptions in one part of the world will be felt throughout the global market. In the short term, the United States can enhance its energy security by raising energy efficiency throughout the economy, increasing the size of the Strategic Petroleum Reserve, and furthering its participation in international organizations such as the International Energy Agency. In the long term, energy security will be assured by expanding and diversifying US sources of energy and by solving problems of instability in key regions. The Administration works toward these goals by its efforts to rehabilitate the energy sectors in Russia, Ukraine, and other newly independent states; increasing domestic use of alternative fuels; promoting increased production capacity outside the Persian Gulf; and encouraging the Middle East peace talks.
US Energy Policy Initiatives
The National Energy Strategy (NES), will further open and deregulate US energy markets, improve efficiency and flexibility in energy use, and support diversification of world energy supplies. It will: -- Increase domestic oil production and promote more efficient uses of energy; -- Maximize the diversity of global conventional energy resources; -- Foster use of alternative transportation fuels; -- Increase electricity produced from renewable sources such as solar, hydropower, and geothermal; and -- Increase the use of nuclear power. Building on major environmental laws, such as the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, and other measures, the strategy will help reduce air and water pollution from energy use and minimize growth in energy-related pollution. The development of new, advanced energy use practices, including the use of clean coal technology, natural gas, and nuclear energy, is an integral part of the strategy. Full implementation of the strategy awaits passage of comprehensive energy legislation through Congress. If all Administration proposals are accepted, the strategy will assure major gains in environmental quality: -- Emissions of greenhouse gases at or below 1990 levels after the year 2000; -- Improved air quality; and -- Reduced solid waste problems from burning coal. Since release of the National Energy Strategy, more than 90 initiatives that require no statutory action have been implemented. They include: -- Streamlined regulations to im-prove hydropower licensing procedures; -- Establishment of the National Renewable Energy Laboratory; -- Increased funding for energy conservation research and development; -- Enhanced technology transfer program; and -- Increased funding for research and development programs, including electric and hybrid vehicle research, alternative fuel utilization, photovoltaic research, natural gas, advanced oil recovery, and superconductivity. Internationally, US energy policy stresses a collective approach to energy security issues centered on the International Energy Agency and discussions with a wide range of producing countries. Just as at home, the cornerstone of US international energy policy is the extension of market mechanisms. The United States works toward increased trade in energy products, deregulation of foreign energy markets, and the removal of barriers to international energy investment. The US Government engages in vigorous and extensive discussions with energy producing countries and all other oil sector participants to improve understanding and technical operations. The United States seeks to facilitate expansion of trade in energy related goods and services. Pending energy legislation includes provision for commercial technology transfer in coal, renewable energy, and energy efficiency.

Gist: US Policy and Direct International Investment

Direct investment flows promote economic growth and development and benefit the investing and the host country alike. Because freely functioning markets ensure the most efficient and productive allocation of capital, the US Government advocates market-oriented international investment free of discriminatory treatment and opposes measures by other governments that impede or distort investment and related trade flows. President Bush reaffirmed this open investment policy in his December 1991 statement on US Foreign Direct Investment Policy. "The United States, the world's largest source and recipient of direct investment, has a major interest in fostering open investment climates," the President said. "We are committed to our open investment policy in the United States, and we are aggressively seeking to open markets abroad." The United States welcomes foreign investment, both direct and portfolio, and extends to it the same non-discriminatory treatment that it seeks for US investors abroad. Foreign direct investment has benefited the US econ-omy. US efforts to gain protection for US investors overseas should likewise bring benefits to US firms and the host country. For official US accounts, foreign direct investment in the United States is defined as the ownership by a single foreign person, associated group of foreign persons, or foreign government of 10% or more of the voting stock of a US-incorporated firm, or an equivalent interest in an unincorporated firm. Foreign direct investment in the United States grew from $83 billion at the end of 1980 to more than $403 billion at the end of 1990, measured in cumulative historical costs. US direct investment abroad at the end of 1990, measured in market value, was $714 billion, and foreign direct investment in the US was $530 billion. The United States has a number of Treaties of Friendship, Commerce, and Navigation that contain investment protection on national (i.e., non-discriminatory) and most-favored-nation (MFN) treatment, expropriation, and transfers. The United States also has a Bilateral Investment Treaty program to facilitate investment by establishing a framework of standards in key areas such as non-discriminatory treatment of investment, expropriation and compensation, transfer of funds, and dispute settlement. It has negotiated and signed such treaties with 17 countries in Africa, Latin America, Eurasia, and Asia. Eight are in force. Negotiations continue with other countries.
Investment Standards
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Graphic: US and Foreign Direct Investment, 1990 ($billion)

Data: Total US Direct Investment Abroad: $421.5 billion--Canada- 68.4, United Kingdom-65.0, Germany-27.7, Switzerland-23.7, Netherlands-22.8, Japan-21.0, Other 192.9. Data: Total Foreign Direct Investment in the US: $403.7 billion-- Canada-27.7, United Kingdom-108.1, Germany-27.8, Netherlands- 64.3, Japan-83.5, Other-92.3. Source: US Department of Commerce ----------------------------------------------------------------------- In 1976, the Organization for Economic Cooperation and Development (OECD) issued a declaration and several related documents on investment. This land-mark consists of understandings on provision of national treatment to US and foreign firms in OECD countries, incentives and disincentives, and guidelines for multinational enterprises. In 1984, OECD members strengthened another agreement liberalizing capital flows and guaranteeing the right of establishment of US and foreign firms in OECD countries. The United States has taken the initiative in urging the OECD to study a wider investment instrument to include the other protections found in its bilateral investment treaties. The United States aims to place discipline on the use of trade- related investment measures in the current Uruguay Round of multilateral negotiations under the General Agreement on Tariffs and Trade (GATT). These government-imposed measures include local content, export performance, and similar requirements that distort trade and investment flows to the detriment of the United States and the global economy. Under the General Agreement on Trade in Services being negotiated in the Uruguay Round, countries have provisionally established rules that will discipline governments in their ability to regulate investment and trade in services. Talks continues on ways to remove barriers to investment and trade in services. Investment flows are also fostered by the protection of patents, trademarks, copyrights, trade secrets, and other proprietary rights to technology. Another US objective, both bilaterally and multilaterally, is to ensure high international standards of protection for intellectual property. For example, the US Government seeks to bring the trade-related aspects of intellectual property under GATT discipline and to promote international standards for the protection of biotechnology, computer software, and semiconductor chips.
US Programs
US Embassies provide services and assistance to American investors and help ensure that their investments are treated in accordance with bilateral treaty obligations and international law.
Box: Principles of International Investment
The United States supports a liberal market-oriented international investment system which will provide US firms abroad, as well as foreign firms here, the following guarantees: -- National Treatment. Treatment no less favorable in like situations than domestic enterprises. Exceptions should be limited to those required to protect national security and related interests. -- Most-Favored-Nation Treatment. Foreign investors from one country should be accorded treatment no less favorable than the most favorable treatment granted to foreign investors from any other country. -- Protection of Investors' Property. This is necessary to maintain a proper international investment system. Under international law, expropriation of investment is legal only if it is done for a public purpose; is accomplished under due process of law; is non- discriminatory; respects previous contractual arrangements; and is accompanied by prompt, adequate, and effective compensation. -- Protection of Intellectual Property. International recognition of patents, trademarks, copyrights, trade secrets, and other proprietary rights to technology is needed to reward innovation and foster investment flows.

Gist: Developing Country Debt

[Introduction] The ability of many developing countries to pay their foreign debt deteriorated in the 1980s. The United States and other creditors responded by developing a flexible, case-by-case approach. The United States has encouraged debtors to undertake economic reforms and persuaded banks, governments, and international financial institutions to support such efforts. In 1985, the United States introduced an international debt strategy designed to improve and sustain growth in debtor countries (the Baker Plan). In March 1989, US Treasury Secretary Nicholas Brady outlined proposals for strengthening this international debt strategy. In 1990, the United States complemented that effort with bilateral efforts to reduce official debt and to encourage other creditor governments to do the same.
Origins of the Crisis
Several factors contributed to the debt crisis of the early 1980s. Inappropriate domestic policies in many debtor countries resulted in large budget deficits, heavy investment in inefficient public enterprises, overvalued exchange rates, and restrictions on trade and investment. Many countries used substantial borrowing to maintain these policies, financing consumption rather than investing in infrastructure or productive enterprises. They relied on short- term, variable-rate loans that made them vulnerable to rising interest rates. External shocks, such as the 1979 oil price jump, a sharp increase in international interest rates, a drop in commodity prices, and recession in the developed countries compounded the burden on many heavily burdened countries. Finally, commercial banks overestimated the ability of these economies to generate the necessary foreign exchange to repay the debt.
The Initial Response
In 1982, the United States and other creditors developed rescue packages to deal with the immediate cash-flow problems of major debtors arising from commercial debt. This approach succeeded in averting default by major debtor countries and in keeping the international financial system intact. By mid-1985, however, new commercial lending to developing countries had declined sharply. Debtor governments were concerned about inadequate economic growth that often failed to keep pace with population growth.
The Baker Plan
In October 1985, then-Treasury Secretary James A. Baker, III, proposed the Program for Sustained Growth, a broad, long-term strategy to restore the creditworthiness of debtor countries by promoting sustainable growth. The program's main element, structural reform, called for comprehensive economic policy changes that would foster growth. The program called on commercial banks to provide new money to debtor countries to help finance growth and on new lending by international financial institutions linked more closely to economic reform. Reforms would permit market forces and private enterprises to play a larger role in the economy, reduce budget deficits, encourage greater domestic saving and investment, and liberalize trade and investment. The Baker Plan helped developing countries recognize that sustainable growth requires a commitment to market-oriented policies. In addition, US banks reduced the impact of a major default by adding to bank capital and selling or swapping some debt. Voluntary debt reduction mechanisms sprang up, with varying degrees of success.
The Brady Plan
Despite progress made under the Baker Plan, low investment and capital flight continued and new commercial bank lending failed to occur as expected. Many debtor countries applied economic reforms inconsistently and failed to achieve sustained, non-inflationary growth. In March 1989, US Treasury Secretary Brady outlined a series of proposals to strengthen the international debt strategy. His proposals built upon the Baker Plan but also recognized the role of voluntary debt reduction and debt service reduction as a source of financial support for economic reform. Under the Brady Plan, countries typically refinance their debt using discount bonds at market interest rates, par bonds with reduced interest rates, and enhancements in the form of zero coupon bonds, and cash payment of arrears. The Brady approach emphasizes new investment and repatriation of domestic flight capital. The International Monetary Fund and World Bank play a central role in this strategy by encouraging debtor policy reforms and catalyzing financial support. Dramatic progress has been made under the Brady Plan. Ten countries (Argentina, Bolivia, Chile, Costa Rica, Mexico, Morocco, Nigeria, Philippines, Venezuela, and Uruguay) have concluded agreements with debt-reduction options. Brady Plan agreements cover more than 60% of total commercial bank debt of the major debtor countries. Similar negotiations are at various stages with Brazil, Bulgaria, the Congo, Cote d'Ivoire, Ecuador, Gabon, Guyana, Honduras, Jordan, Nicaragua, Paraguay, and Poland. Countries such as Mexico and Chile have progressed in attracting private foreign capital, as evidenced by their ability to regain access to international capital markets.
Official Debt

Graphic: Developing Country Debt by Region, 1991

Data: Europe 14%, Western Hemisphere 29%, Asia 26%, Africa 16%, Middle East 15%. Source: World Bank The success of the enhanced debt strategy in gaining voluntary, market-based reduction of commercial debt has shifted some emphasis from commercial to official bilateral (government-to- government) debt. Creditor governments have supported country reform efforts by rescheduling official bilateral debt, both interest and principal, through the Paris Club, an informal affiliation of creditor governments. In fall 1988, the Paris Club implemented the Toronto economic summit mandate to provide debt relief to heavily indebted, low- income, Sub-Saharan African countries. "Toronto terms" offered three options for providing debt relief: 33% debt reduction; concessional interest rates; or extended maturities. In 1990, these terms were extended to poor countries in other regions on a case- by-case basis. In December 1991, the Paris Club implemented the London economic summit mandate to provide even more generous terms to the poorest of the poor countries. First proposed by UK Prime Minister John Major in Trinidad, these expanded Toronto or "Trinidad terms" added an option to reduce debt by up to 50%. Nicaragua, Benin, Tanzania, and Bolivia were the first countries to receive reschedulings under Trinidad terms. In addition, in response to the 1990 Houston economic summit's mandate, the Paris Club devised more generous terms for lower middle-income countries (LMICs)--those not poor enough to qualify for Trinidad terms but severely indebted (i.e., debt-to-GNP ratios greater than 50%). Morocco, El Salvador, Nigeria, Congo, Honduras, Jamaica, Philippines, Peru, Dominican Republic, Cote d'Ivoire, and Jordan have received reschedulings on LMIC or "Houston terms," which extend the repayment period to 20 years (10-year grace period) for official development assistance loans, and 15 years (8- year grace period) for loans that are not official development assistance. In April 1991, the Paris Club agreed to special reschedulings designed to reduce Poland's debt by 50% on a net present value basis in the context of multi-year economic restructuring agreements. The United States, citing the need to provide extraordinary assistance to Poland in its transition from a centrally planned to a free market economy, approved a 70% reduction in May 1991. At the end of 1990, the United States canceled Egypt's $6.7-billion military debt. In May 1991, Egypt's Paris Club creditors followed this action with a 50% debt reduction. In 1989, Congress provided authority to forgive economic assistance loans by the US Agency for International Development (USAID) to countries in Sub-Saharan Africa and other least developed countries that are undertaking economic reform. In 1990, Congress provided authority to forgive food assistance (PL-480) loans to least developed countries. Almost $2.3 bil-lion owed by 25 African, Latin American, and South Asian countries was forgiven under these authorities in 1991.
The Enterprise for the Americas Initiative
In June 1990, President Bush proposed the Enterprise for the Americas Initiative (EAI) to support the process of democratic change and economic reform throughout the Western Hemisphere. The EAI is an integrated program to increase trade, pro-mote capital flows, ease debt burdens, and improve the environment. To reinforce incentives for economic reform, the United States proposed to reduce the existing non-military debt of Latin American and Caribbean countries that: -- Undertake macroeconomic and structural reforms; -- Liberalize their investment regimes; and -- Conclude agreements with commercial bank creditors. In October 1990, Congress granted authority to reduce PL-480 debt under the EAI. In FY 1991, the United States forgave $263 million in PL-480 debt to Chile, Bolivia, and Jamaica. Interest payments on the new reduced PL-480 debt are made in local currency into environmental funds that support local, grassroots environmental projects in the host country. The Administration has requested authority under EAI to reduce USAID loans and sell part of the non-concessional debt held by the US Export-Import Bank and the Commodity Credit Corporation to facilitate investment, environmental, or development projects.
Soviet Debt Deferral
In January 1992, 17 creditors of the former Soviet Union agreed to defer $3.2 billion in 1992 debt payments to address the successor states' short-term liquidity problems. No US loans were included in this deferral. ------------------------------------------------------------------------
Box: Developing Country External Debt, 1991
Brazil 115 Mexico 88 India 70 Argentina 60 Indonesia 53 Poland 42 Nigeria 35 Egypt 32 Philippines 29 Source: World Bank -----------------------------------------------------------------------

Gist: Agriculture in US Foreign Poicy

Background
Expansion of agricultural exports is a key US trade policy objective. The two major goals of US international agricultural policy are: -- A more open, equitable trading environment to improve export opportunities for agricultural products of the United States as well as those of emerging democracies and developing countries; and -- Greater cooperation on food aid and security and on agricultural development in developing countries. The United States, a major participant in global efforts to address food issues, is a member of the UN Food and Agriculture Organization, the World Food Program, and the International Fund for Agricultural Development. It belongs to the International Coffee Organization, the International Sugar Organization, the International Wheat Council, the International Cotton Advisory Committee, and the International Jute Organization.
US Agricultural Trade
The United States is the world's leading exporter of coarse grains and soybeans and a large supplier of wheat, cotton, meat, and horticultural products. Until recently, the US market share for these commodities had been eroded by the European Community and others, including several developing countries. After bottoming out in 1987 at 12%, by 1990, the latest year for which world data are available, the US share of world agricultural trade had rebounded to 14%. For more than 3 decades, the United States has had positive agricultural trade balances. In 1991, $38.4 billion of agricultural products accounted for 9% of US export earnings, about $500 million below 1990. Export earnings dropped from 1990 levels for key bulk commodities such as grains, soybeans, and cotton but rose significantly for higher-value fruit, nuts, vegetables, and livestock. The United States imports agricultural products from many countries. In 1991, imports totaled $22.1 billion. Coffee was the largest single import item, at almost $2 billion.
Agricultural Issues
US farm supports rose from $4 billion in fiscal year (FY) 1981 to $26 billion in FY 1986. However, the increasing market orientation of US farm production because of the 1985 Farm Act resulted in a drop in US spending on farm programs to $10 billion by FY 1991. The 1990 Farm Act aims to accelerate market orientation, maintain farm income growth through expanding exports, and enhance the environment. Although the volume of world trade in agriculture rose in the 1980s, the unit value of traded commodities declined slightly. Worldwide, government policies and support programs have cushioned agricultural producers from the need to adjust to market changes caused by improved technology and reduced demand. The result has been chronic surpluses and huge government expenditures to support farming. The United States works for the comprehensive reform of agricultural exports that distort free market competition.
Agricultural Trade Policy
The Administration places a high priority on resolving agricultural problems multilaterally and bilaterally. The United States promotes agricultural reform through Uruguay Round multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT) and through the Organization for Economic Cooperation and Development. The United States was instrumental in putting agriculture on the agenda for the round, which began in 1986. Comprehensive reform of agricultural trade is key to its success. In December 1991, GATT Director General Arthur Dunkel released a "draft final act" covering all issues in the round, including agriculture. The United States viewed this as a basis for concluding the Uruguay Round negotiations. In March 1992, the United States submitted agricultural data sets and reduction commitments on market access, internal support, and export subsidies, as called for in the Dunkel text. However, Uruguay Round agricultural negotiations remain at an impasse. Bilaterally, the Administration seeks to improve market access for US products. Bilateral negotiations or other dispute settlement procedures are often in progress on a variety of agricultural commodities. For wheat and certain other commodities, the United States selectively provides export subsidies through the Export Enhancement Program and several other similar programs to compete with subsidized agricultural exports from other countries and to pressure those countries to negotiate toward a freer and fairer agricultural trade system. -------------------------------------------------------------------------
Box: US Export Programs
The Department of State supports trade promotion programs of the US Department of Agriculture (USDA), particularly through US Embassies. These are important aids to increasing agricultural exports. Major programs are: -- Commodity Credit Corporation (CCC) credit guarantees are the largest US agricultural export program. In FY 1991, US agricultural exports registered under credit guarantees totaled $4.5 billion. Mexico, Algeria, South Korea, Egypt, and the Soviet Union accounted for almost 90% of the total. -- PL-480. Title I is a long-term market development, food assistance and humanitarian relief tool, a useful means of meeting economic development, and other foreign policy goals. Several recipients, e.g., Brazil, South Korea, Turkey, and Taiwan, have "graduated" from the Title I program to become large commercial customers for farm products formerly provided on concessional credit. -- Cooperator Market Development Program joins 36 non-profit agricultural commodity associations with USDA's Foreign Agricultural Service in market development activities throughout the world. The program enables the US Government and private industry to pool resources so that each gets more mileage out of these activities. -- Market Promotion Program (MPP), authorized in the 1990 Farm Act at an annual level of $200 million, helps US producers increase their exports through consumer and trade promotions, media advertising, educational programs, and technical services. More than 60 non-profit organizations, producer cooperatives, and other private firms have been allocated funds in FY 1992. -- Export Enhancement Program (EEP), primarily a trade policy tool, helps US exporters compete in selected markets with subsidized exports, particularly those of the European Community. Exporters who have completed sales to targeted countries are awarded bonuses, which in FY 1991 totaled $917 million, and in FY 1992 (through May 1, 1992) had reached more than $730 million. -- Dairy Export Incentive Program (DEIP) enables US exporters to meet prevailing world prices for targeted dairy products and destinations. Exporters who have completed sales to targeted countries are awarded bonuses, which in 1991 totaled $46 million and in CY 1992 (through May 1, 1992) had reached more than $30 million. ----------------------------------------------------------------------------
Box: US Agricultural Trade, 1980-91
Exports Imports 1991 38.4 22.1 1990 40.2 22.5 1989 39.7 21.5 1988 35.3 21.0 1987 27.9 20.7 1986 26.3 20.9 1985 31.2 19.7 1984 38.0 18.9 1983 34.8 16.4 1982 30.1 15.5 1981 43.8 17.2 1980 40.5 17.3 -----------------------------------------------------------------------------

Gist: Generalized System of Preferences

Background
The Generalized System of Preferences (GSP) eliminates duties on a wide range of products imported into the United States from designated beneficiary countries. It assists economic development by promoting trade rather than aid. By eliminating US import duties on about 4,300 product categories, the GSP makes products more competitive in the US market. In 1991, imports of $13.7 billion entered the United States duty free under the GSP. This represents about 4% of total US imports. Several product groups are excluded by law from the GSP, including textiles and apparel, certain footwear, leather goods, and certain electronic, steel, and glass products. Discussion about a system of tariff preferences began in 1964 at the first UN Conference on Trade and Development (UNCTAD). Authority was obtained in 1971 to establish preferences under the General Agreement on Tariffs and Trade (GATT). In 1976, the United States became the 19th developed market-economy country to implement a GSP program. In 1984, Congress extended the US program until July 4, 1993. The United States is developing options for the renewal of the GSP program after 1993.
Importance to the United States
The GSP benefits developing countries and the United States. By increasing developing country export opportunities, it helps stimulate industrialization, employment, and economic growth. The United States benefits because the additional foreign exchange earnings allow these countries to buy more US exports and to repay international debts. In addition, US consumers and firms pay less for goods and inputs. The GSP symbolizes the US commitment to economic development and demonstrates that the United States shares with other developed countries the costs of promoting development.
Eligibility
The President has designated 115 countries and 26 dependent territories as eligible. The law requires that the President determine that a country has satisfied certain criteria before it can become a beneficiary. Mandatory criteria involve respect for worker rights, expropriation, terrorism, and non-membership in the Organization of Petroleum Exporting Countries. Discretionary criteria include fair market access for US products and adequacy of protection of intellectual property rights. Additional criteria apply if a communist country is to receive GSP. Between 1987-90, Chile, Paraguay, Burma, the Central African Republic, Liberia, and Sudan were suspended from GSP status. In 1990, Paraguay, Chile, and the Central African Republic were reinstated because of substantial improvements in their worker rights records. In 1991, Bulgaria was designated as a beneficiary country. In 1992, Lithuania, Latvia, and Estonia became eligible. The new independent states of the former Soviet Union are among the countries that will be reviewed for eligibility.
Competitive Need Limits
The law places two automatic "competitive need" limits on GSP eligibility. During the preceding year, if any beneficiary has supplied more than 50% of total US imports of a product or more than a certain dollar figure ($97 million in 1991) of that product, the President must withdraw its eligibility. Competitive need limits do not apply to the 38 least developed beneficiary countries. In addition, as required under the 1984 legislation renewing the GSP program, the President completed a 2-year general review in January 1987. More than $3 billion in GSP imports were found sufficiently competitive. They were thus subject to lower competitive needs limits of 25% of total US imports of a product or more than a certain dollar figure ($37.9 million in 1991) of that product. The President has since waived these lower limits on several occasions.
Graduation
If a country's per capita GNP exceeds a certain limit ($10,405 in 1990), its benefits are automatically terminated after a 2-year phaseout. (The ceiling is indexed to growth in US GNP.) By this criterion, in July 1988, Bahrain, Bermuda, Nauru, and Brunei Darussalam "graduated" from the program. (Bahrain regained GSP status in 1990.) The President also has authority to graduate beneficiaries that have reached such a level of economic development and competitiveness that they no longer need preferences to compete in the US market. On this basis, Hong Kong, South Korea, Singapore, and Taiwan left the program in January 1989.
Annual Review
The US Government reviews the program each year beginning June 1 to assess modifications in product and country eligibility. Interested parties, including beneficiaries, can ask that products be removed from or added to the list of eligible items. They also can request a review of the beneficiary status of any designated country on the basis of the statute's trade, investment, and worker rights criteria. (###)