US Elections
CONFIDENTIAL
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14 The election of Mr Bush and appointment of Mr Baker as Secretary of State should
mean that there will be no radical change in US debt policies, in particular global
schemes will continue to be off-side. The Omnibus Trade Law, signed by President
Reagan in August, appears, however, to place the Administration under a number of
obligations regarding debt. By end-February the Treasury must make an interim
report on the feasibility of an International Debt Management Authority (intended as
a self-financed body which would purchase debt at a discount), consideration has to
be given to the efficacy of reducing debt through a one-off special SDR allocation
(a report was due by 23 November of this year), and the three members of ICERC are
obliged to conduct a study of the regulatory barriers to negotiated debt reduction
by 23 February next year.
GATT: Uruguay Round mid-term review
15 An opportunity to earn trade surpluses is a basic requirement if LDCs are to
service their debts. Progress on liberalisation at Montreal was disappointing.
Although an agreement to reduce tariffs on tropical products was announced at the
start of the meeting, implementation will be held up, effectively until a deal is
struck between the US and EC on the pace of liberalisation of trade in temperate
foods. The two sides remained deadlocked and in response Argentina (a major food
exporter), supported by other Latin Amercian countries, threatened to withhold
support for a programme of negotiations on trade services. The talks will resume
in Geneva next April.
Assessment
16 Slower OECD growth, higher interest rates and lower commodity prices will
aggravate debt servicing problems. Against this, a partial recovery of oil prices
following the OPEC agreement will relieve more debt pressures than it will create.
17 The rapid conclusion of Brazil's bank package, the prospect of a reasonable Fund
programme for Nigeria, and the early implementation of the "Toronto" menu for the
poorest countries by the Paris Club, clearly score as among the successes of the
last three months. Set against these, however, is the disagreement between the IMF
and World Bank over Argentina, while negotiations with Egypt and smaller middle
income debtors remain stalled. Trinidad has had to reschedule for the first time
and may well be followed by Colombia. Attention may need to be focussed on a