The Multinational Monitor


I N T E R N A T I O N A L   P O L I C Y

Reagan's Third World Policy: No Holds Barred

The new Administration heralds a significant shift in the U.S. approach to the Third World. Forecasts on eight areas of policy suggest the extent of Reagan's impact on developing countries.

by John Willoughby

The nations of South and Central America have been battered by the Carter administration's economic and diplomatic sanctions linked to its undifferentiated charges of human rights violations ... We deplore the Marxist Sandinista takeover of Nicaragua and the Marxist attempts to destabilize El Salvador, Guatemala, and Honduras. We do not support United States assistance to any Marxist government in this hemisphere and we oppose the Carter administration's aid program for the government of Nicaragua. However, we will support the efforts of the Nicaraguan people to establish a free and independent government.

- 1980 Republican National Platform

Even as the new administration is just settling in, it is possible to foresee what plans the Republican hard-liners have for North-South economic relations. Reagan's policy decisions in this arena will provide the framework for his military and diplomatic initiatives.

The following eight predictions -some based on past statements of Reagan and his top advisors, others on informed speculation---underscore the strong pro-multinational bias of the new administration.

1. The Reagan Administration will dismantle Carter's human rights policies.

One of the not-so-subtle paradoxes of Reagan's victory is that the Moral Majority's candidate has pledged to abolish moral considerations in the waging of U.S. foreign policy.

Instead of Washington lectures to dictatorships which torture their citizenry, we will be treated to statements from Jeane Kirkpatrick, the new ambassador to the United Nations, on the need to support "moderate autocrats friendly to American interests."

General Augusto Pinochet of Chile, General Alfredo Stroessner of Paraguay, and President Ferdinand Marcos of the Philippines will be welcomed by the hard-headed master of the White House.

The Reagan Administration is certain to abolish the State Department's Interagency Group on Human Rights and Foreign Assistance coordinated by Deputy Secretary of State Warren . Christopher. The "Christopher Group" reviewed every sensitive foreign aid disbursement during the Carter years and attempted to balance Carter's perceived security considerations with his desire to confront dictatorships on human rights issues.

Never before had a U.S. administration dealt with :humanitarian issues on such a high level. And not concidentally, never before had conservative, militaristic states been so uncomfortable with the U.S. government.

South and Central America will be seriously affected by Reagan's return to a more traditionally-conceived U.S. foreign policy. As for South Africa, the new administration is not likely to preach about the evils of white supremacy; and it is almost certain to be more sympathetic to that government's attempts to retain neo-colonial control over Namibia. In East Asia, Reagan's election was greeted with ill-concealed joy in South Korea and Taiwan, both regimes- counting on stronger U.S. support.

Although its functioning will be debilitated, the basic legal framework of the U.S. human rights policy will remain. The president is required by law to appoint an Assistant Secretary of State for Human Rights, and the State Department still must submit annual reports on Human Rights in Congress. Reagan will undoubtedly appoint people who are not committed to the aggressive human rights policy established by Carter. Human rights reports will be lighter and- less substantive.

The legal framework nevertheless will provide liberal members of Congress and non-governmental organizations with the means to agitate for changes in administration policy. Already there are indications that the Catholic hierarchy in the United States will work hard to counter continued U.S. support for the El Salvador government.

2. The Reagan administration will end governmental restrictions on the arms trade.

Jimmy Carter came to the presidency with a specific pledge to use the power of his office to reduce arms sales which had skyrocketed during the early 1970s. His administration placed restrictions on the kinds of weapons exported by U.S. arms manufacturers. In spite of those efforts, arms sales set record highs in 1980.

Reagan will fail to enforce these restrictions and perhaps even eliminate them completely. The Pentagon will become an even more aggressive promoter of advanced weaponry arms sales. The militarization of the Third World will escalate.

3. The Reagan Administration will eliminate nonstrategic bilateral economic assistance and link U.S. military and economic aid more closely together.

Robert E. Neuman, head of Reagan's State Department transition team, recently promised "a fundamental change of course in foreign `; policy that will be avowedly nationalistic." This "Fortress America" theme trumpets a more explicit effort to promote foreign aid only if it is directly useful in the struggle for world influence.

A new foreign aid policy that follows the xenophobic instincts of Congress should be easy to sell. Reagan and Alexander Haig will prepare package deals of economic and military assistance to "friendly" regimes for "national security" reasons. This approach may succeed in expanding aid disbursements over the next four years-- a result which would be at odds with the desires of isolationists within the Republican ranks.

Meanwhile, the link between financial assistance and socio-economic reforms within aid-receiving countries will be broken completely.

4. The Reagan Administration will cease to enforce the Foreign Corrupt Practices Act.

The Foreign Corrupt Practices Act, passed with Carter Administration approval in 1977, has been used by the Securities and Exchange Commission. But the law has been under constant attack by multinationals (See Multinational Monitor, February, 1980).

The Republicans view the attempts of the mid-1970s to regulate multinational activity as part of the "Watergate syndrome." Reagan is pledged to lift even these tame restrictions on giant corporations.

5. The Reagan Administration will strengthen the subsidization capacities of the Export-Import Bank and the Overseas Private Investment Corporation.

The 1980 Republican National Platform has given Ronald Reagan contradictory advice on export policy. On the one hand, the Republicans argue that: "For too long, our trade policy has been geared toward helping our foreign trading partners. Now, we have to put the United States back on the world export map. We helped pull other countries out of the post-World War II economic chaos; it is time to remedy our own crisis."

On the other hand, the Republicans pledge themselves "to work with our trading partners to eliminate subsidies to exports and dumping."

Reagan's commitment to promote exports will eventually lead him away from a purely free trade position. Although the Republicans have a tradition of being more opposed to trade financing by quasi-public banks than the Democrats have, the decision to leave William Simon out of any new Republican Administration is a signal that the militant laissez-faire principles of some Republicans may be ignored by the more pragmatic business leaders on the Reagan team.

Recently, C. Fred Bergsten, Carter's Assistant Secretary of the Treasury, proposed that Congress establish an enlarged export credit fund so that the United States could meet the `unfair competition' of French firms. Reagan is likely to pursue this policy aggressively. In addition, the Overseas Private Investment Corporation, the agency which provides investment insurance to firms establishing foreign subsidiaries, will be given a boost.

6. The Reagan Administration will continue the Carter policy of resisting general protectionist pressures, while instituting ad hoc policies that attempt to preserve declining industries.

Reagan's approach will, however, promote U.S. businesses more aggressively than Carter's, caring less about environmental or health matters. It is likely to use American concern about its international competitive position to weaken still further environmental restrictions on domestic industry. He also will allow companies to export commodities which are deemed too hazardous-to sell in the United States.

7. The Reagan Administration will refuse to participate meaningfully in any New International Economic Order negotiations.

Despite the hopes raised by the appointment of Andrew Young to the United Nations, Carter's. foreign policy innovations did not translate into any commitment for a New International Economic Order (NIEO). In this sense, the hostile response of the new Administration to any Third World proposals to change the structure of the world economy will not substantially alter U.S.-Third World relations.

Reagan will be deaf to Third World concerns. It is unlikely that he will agree to any NIEO export earnings stabilization schemes or to any general program which indexes the prices of raw materials to those of manufactured goods. The shift by the Republicans to a more bilateral focus rules out significant international solutions to world economic problems.

8. The Reagan Administration - will continue to support the International Monetary Fund, but it will work to limit the development aid capacities of the World Bank.

One of the first major international economic decisions with which Reagan will be faced is whether or not to support the International Development Association of the World Bank. The IDA is the soft-loan window of this major multilateral development bank, and it is the cornerstone of its "basic human needs" development programs. The World Bank's traditional hard-loan `development' program is also under attack, as the bank has yet to receive from Congress the U.S. subscription for capital expansion.

During the recent lame duck Congress, Reagan" refused to lobby Republican opponents of the Bank for passage of these authorizations and appropriations. This hesitancy parallels the Wall Street Journal's "skepticism about the World Bank. The Journal, in a December 15 editorial, argues for the reversal of "the bank's more hare-brained schemes" that Robert McNamara promoted.

Reagan will probably use Congress' distrust of multilateral development banks to force the bank to reduce those "hare-brained schemes" that might attempt to meet the basic human needs of the world's poorest. The conservative new leader of the World Bank, A.W. Clausen, may agree with this perspective, although he has publicly praised McNamara's leadership of the Bank.

If Reagan does not support the International Development Association, the new administration will nevertheless continue Washington's backing for the International Monetary Fund.

With close ties to Walter Wriston of Citibank, and with Donald Regan, the former head of Merrill-Lynch, as Secretary of the Treasury, Reagan will be encouraged to retain the Fund in its traditional role as "policeman on the international beat," as Business Week likes to call it.

Clearly, the Reagan administration will be more pro-multinational than its predecessor, both in rhetoric and in practice. Moreover, its return to aggressive bilateral diplomacy chiefly concerned with the Soviet threat will both pave the way for closer relationships with repressive, pro-Western dictatorships and attempt to create a domestic climate which could legitimate counterinsurgency activity sponsored by Washington.

Despite this ominous shift, we should not overestimate the changes Reagan's militarism will bring. In Carter's final two years, his Administration pledged to intervene in the Middle East if them were any threat to oil supplies, established an aggressive military presence in the Indian Ocean, and pushed for legislation which would give the CIA much more freedom to operate in secrecy.

The new administration's international economic policy will continue these aspects of the Carter legacy: Reagan's repudiation of the New International Economic Order will not significantly worsen the negotiating climate between North and South. Furthermore, Reagan's aggressive support for U.S. business overseas will be following a trend in American foreign policy which no president has elder attempted to reverse.

It would be a mistake to assume that Reagan's pro-business policies will automatically serve U.S. corporate interests more effectively than Carter's more liberal programs did. Only if Reagan can neutralize foreign opposition and generate a broad domestic consensus around his policies, will he be able to advance the interests of his business supporters beyond where they stood with Carter.

The Reagan plans, however, are unlikely to be greeted with great enthusiasm by moderate Third World leaders. Thus, Reagan's effectiveness will depend on the might of the U.S. economy, as well as on the ability to marshall domestic political unity.

What will follow then depends on responses by Reagan's critics, both in the Third World and in the United States.

John Willoughby is an economics professor at American University

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