266. Sir, may I begin by congratulating you on your election to the presidency of the General Assembly. This is an appropriate recognition both of your own personal achievements and of the important role your country is playing in international affairs. New Zealand will fully support you in your endeavour to make this session a productive one, just as we fully support the Secretary-General in his efforts to make the United Nations more effective in the search for peace and development.
267. Less than two weeks ago I had the pleasure of representing New Zealand at the independence celebrations of the new State of Saint Christopher and Nevis. Today I join others in congratulating the international community's newest Member in being represented for the first time at the United Nations. It is a salutary reminder to us all that one of the first acts of such a young and small country has been to register, in a formal sense, its interest in this Organization. We in New Zealand have no difficulty understanding that. By most counts, we are ourselves a young and small country. Our welfare can be profoundly influenced for better or worse by external developments very largely outside our control. Some four decades ago, when the Charter of the United Nations was negotiated, we held high hopes that through international co-operation we would achieve a measure of political and economic security which a country like New Zealand could not hope to realize alone.
268. Time and experience have tempered our earlier expectations. In recent years we have seen the Soviet Union invade Afghanistan in flagrant violation of the Charter. Similarly, the invasion of Kampuchea by Viet Nam has been followed by nearly five years of occupation, thereby preventing the political settlement that the Assembly has urged repeatedly. The essential character of the apartheid system remains intact, in spite of the strongest condemnation by the international community. Day by day we witness the continuing suffering of various peoples and countries in the Middle East, indicating to us once more that peace and security cannot be achieved by force of arms alone. In one of those areas of conflict- Lebanon—New Zealand welcomes the cease-fire and hopes that it paves the way for a more lasting settlement among the parties involved.
269. The Antarctic region stands in sharp contrast to these troubled areas throughout the world. For over 20 years the Antarctic Treaty" has succeeded in making Antarctica an area of international co-operation and preventing it from becoming the object of international dissension. The Treaty is open to any Member of the United Nations and it remains in force indefinitely. It makes a very effective contribution to achieving the purposes of the United Nations. We assume that any study carried out by the Organization will fully recognize this fact and seek to reinforce the Treaty rather than to weaken it.
270. Antarctica is one example of what can be achieved by practical international co-operation. The South Pacific is another. At least once a year the heads of all the independent Governments in our region meet together in the South Pacific Forum to talk over common problems and to work out ways of dealing with them. So far we have succeeded in keeping our part of the world peaceful. We are, however, concerned about the continuation of nuclear testing in the South Pacific. We appreciate the offer made by the French Government to allow qualified experts from countries in the area to visit the testing site and check the effectiveness of the safety precautions followed by the French authorities. But the question is not merely one of safety precautions; it is about the use of a relatively peaceful part of the world for an essentially warlike purpose.
271. We realize that this problem cannot be dealt with on a purely regional basis, and that is why New Zealand, like other countries in the South Pacific and elsewhere, attaches great importance to the negotiation of a comprehensive test-ban treaty. To be effective, such a treaty would need to be fully verifiable. Given good will and effort on all sides, we believe this problem can be overcome. The conclusion of a comprehensive test-ban treaty would do much to strengthen the 1968 Treaty on the Non- Proliferation of Nuclear Weapons and to limit the nuclear arms race.
272. The part of the world in which New Zealanders live is one of the few areas of relative tranquillity. Nevertheless we are from time to time sharply reminded of the limitations both of international law and of normally accepted standards of civilized behaviour. The ruthless and totally unjustified attack by the Soviet Union on a civilian airliner has provided such a reminder. The Soviet Union must accept full responsibility for this act of brutality. What is truly outrageous is that the Soviet Government claims this action was fully in accordance with Soviet law. In plain language they seem to be saying that if tomorrow a civilian airliner from any one of our countries mistakenly flew over Soviet territory then they reserve the right to shoot it down.
273. The limits to international co-operation are thus plain—all to plain—to see, yet the membership of the United Nations remains intact, and we welcome to the fold a new Member from the Caribbean region.
274. The reason, I suggest, is obvious. However difficult it has been to develop habits of international cooperation on these major political issues, there is no practical alternative for the overwhelming majority of countries.
275. I believe that today this applies with equal force to the international economy. International economic linkages are such that in practical terms no single country any longer has freedom of action. That is the consequence of several decades of sustained growth in world trade, production and investment. The interdependent world economy has arrived on our doorsteps, and the world has little idea how to manage it.
276. The theory behind economic interdependence is not new. We always knew that the health of any individual economy was linked in no small measure with the health of its major trading and investment partners. There is nothing novel in pointing to the close connections between, say, trade and financial flows.
277. What is new is that the practical significance of those linkages has increased to such an extent and with such rapidity that we have failed to adapt sufficiently our institutions and our thinking so as to be able to cope with those linkages.
278. New Zealand respects the competence of the principal economic institutions such as IMF, the World Bank and GATT. As originally conceived after the war, they each had their role—IMF was concerned principally with short-term balance of payment adjustment and maintaining exchange rate stability, the Bank was concerned with development and GATT dealt with trade.
279. The growth of interdependence has totally blurred these tidy dividing lines. The long-term resolution of the debt burden built up over recent years is inextricably linked with the resolution of the problems of protectionism. The old phrase that debt is deferred trade sums up the reality that it is only through increased exports that the interest and principal repayments can ever be met.
If protectionism chokes off that possibility, then the debt problem assumes very different proportions.
280. It is not just a question of interdependence between issues such as debt and trade, development and growth. It is also a question of the interdependence between countries, between regions, between North and South.
281. The current economic crisis facing many less developed countries has obscured the fact that until recently the growth performance of many of those countries was particularly strong. It has been estimated that in the 25-year period 1950 to 1975 the per capita gross Rational product of the developing countries as a whole grew at an average rate of 3.5 per cent per annum. Even though we knew this left a number of countries with unacceptable levels of poverty, this was a remarkable historic achievement. It was matched by creditable progress in such crucial indices as a steady rise in life expectancy and adult literacy.
282. Because of these developments it was clear by the beginning of the 1980s that it was no longer accurate to see the concept of dependence flowing one way only. By the 1980s the economic health of developed countries was beginning to be influenced profoundly by the economic performance of their less developed neighbours.
283. This is what interdependence means. It was visibly demonstrated last year when the expected recovery of the developed and affluent countries members of the Organization for Economic Co-operation and Development [OFCD] did not eventuate in the second half of 1982 very largely because of a sudden downturn in the demand for their exports to the less developed world. Faced with acute financing difficulties caused by a contraction in commercial bank lending, many of the more heavily indebted countries had no option but to pursue adjustment policies based largely on slashing imports. This impaired their own development needs. It impaired the OECD's recovery.
284. From the suffering of the Second World War a system for international economic co-operation was developed. Those who designed that system had in mind a world economy that was very different from the interdependent world economy we live in today. In many respects those post-war arrangements achieved their central objectives. Many of the key elements, such as currency convertibility, are still as relevant today as they were then. The successes of that system of trade and payments created the global economy we have today. I believe the international community must now move on to the next phase of international economic co-operation and begin the task of managing that interdependence.
285. To describe the scope and magnitude of that task I have used the term "a new Bretton Woods". For over a year, at a variety of international forums, I have urged the international community to initiate the comprehensive examination of the world's trade and payments system that is the first necessary step towards a new Bretton Woods. The conference as such should be regarded as the last step, the culmination of the most careful preparatory process of analysis and discussion.
286. During that time there has been considerable debate over the future of the trade and payments system. There have also been unmistakable signs of a recovery in the United States economy, and the immediate danger of default by the most heavily indebted countries has been averted by various rescue operations.
287. The key question, I believe, is whether the recovery and these rescue operations will in practice set back the growing consensus in favour of a comprehensive examination of the underlying structural difficulties facing the world economy. There is a serious danger that this will be the case. The remedy, however, lies entirely in our own hands.
288. Let me first summarize the international debate as I believe it has evolved over that period. In February 1983 the Brandt Commission's second report proposed a major review of the world's trade and payments system." In March the Movement of Non-Aligned Countries endorsed the Indian Prime Minister's call for a conference on money and finance for development. Following the meeting of OECD ministers in May, at which I repeated my call for a Bretton Woods-type conference, the French President made a very similar proposal. Then, at the Williamsburg Summit the leaders of the industrialized countries issued a somewhat tentative call for their ministers of finance to work with the Managing Director of IMF to prepare the groundwork for what might develop into a high-level international monetary conference. However qualified that endorsement may have been, it was a response from the developed world to the growing weight of opinion favouring a careful examination of these international economic issues. The middle ground, if not clearly delineated, was at least becoming visible.
289. Finally, at the meeting of Commonwealth finance ministers, which concluded in Trinidad and Tobago less than two weeks ago, ministers of finance from 44 countries, representing the diversity of wealth, population and size that is the key characteristic of that grouping, commended the general thrust of a major report entitled "Towards a New Bretton Woods".
290. This was a report compiled by eminent experts from nine Commonwealth countries. Its work on conditionally, liquidity problems, the role of special drawing rights, protectionism and sovereign debt, to mention only a few of the issues covered in the report, will, I hope, be sifted and refined. As the first attempt by an international institution to outline the agenda for such a fundamental examination of the trade and payments system, it deserves careful consideration by the wider international community.
291. Surveying the debate over the past 12 months as a whole, therefore, international opinion seems to have been evolving in a promising direction. We were beginning to move away from the sterile confrontations that have been the hallmark of international economic debate even in recent years.
292. However, we now face the possibility that the recovery—welcome as it is—may have the somewhat predictable result of unravelling a good deal of that growing consensus. If the international community has been increasingly ready to consider the scope for changes to the trade and payments system, it has no doubt been due to the long period of stagflation we have been through. Equally, now that the first clear signs of a recovery in the United States and certain other industrial economies are evident, some of the pressure to examine these long- term issues is off. It may be only realistic to expect that debate to be influenced by short-term fluctuation in the real economy. It would, I suggest, be reasonable to expect a little more vision.
293. In spite of the misgivings of many Governors and the continuing, though privately expressed, disquiet of the international banking community, a message to emerge from the annual meetings of IMF and the World Bank was, regrettably, all too clear. With some of the major industrial countries there was a mood that can be expressed quite simply: now that the recovery is under way, let us put aside all this talk of changes to the trade and payments system.
294. I believe that view is more than short-sighted; it is tragically misplaced. The recovery of industrial countries, in itself undoubtedly the best piece of economic news we have had for some years, will not come to grips with the deep-seated changes that have occurred in the world economy since the formation of the Bretton Woods institutions.
295. In 1982 the world economy went backwards. World production declined by an estimated 2 per cent, and the volume of world trade declined by 2.5 per cent. Had this continued into 1983 I believe it would have put nearly impossible strains on world economic and political stability. The recovery certain developed countries are now experiencing has to be seen against that perspective. It has turned the tide against the forces of contraction of world output and trade unprecedented in our post-war experience. The recovery in demand will strengthen many commodity prices and thus may offer some relief to those countries which, like New Zealand, have suffered disastrous declines in their terms of trade during the last decade. Finally, however, the recovery is not a panacea for the problems of debt, protectionism and development.
296. In the first place the recovery is cyclical in nature and confined to relatively few countries. Even for them the persistence of high interest rates is a serious threat to sustained recovery of their economies.
297. Recovery will not tackle the underlying roots of protectionism, since clearly, the growth of protectionist action predates the recession. Protectionism, which is by no means confined to the OECD countries, will persist in the developed world if only because no one is predicting growth rates which will reduce the number of unemployed, roughly 35 million, in the OECD area.
298. Recovery will not do much to alleviate the debt burdens of many developing countries. The Commonwealth study "Towards a New Bretton Woods" estimates that there are as many as 40 countries which have been reported to have agreed to debt reschedulings or to be in substantial payments arrears. In the 10-month period to June 1983 the value of cross-border debt being renegotiated with commercial banks has been calculated as being over 20 times larger than in any previous year. Debt of this magnitude is a powerful force for uncertainty, a threat to the recovery and a source of instability for these Governments, whatever their political system.
299. Nor can I see any reason why the recovery should reverse the mood—so obvious in most countries—which has been aptly described as "aid weariness". The New Zealand political system is no more immune to that than any other democratic country. However, my experience with our small but highly effective aid programmes in the independent countries of the South Pacific has convinced me that the prevailing modem view of aid is profoundly misplaced.
300. I have advocated putting aid on a firmer basis, possibly by issuing special drawing rights to the countries in greatest need. In any such distribution there may be a useful role for the World Bank, in part because that would put the Bank's finances on a more assured basis.
301. These are only some of the medium- and longer- term issues which I believe the modest recovery in the OECD area will do little to address.
302. The ideas, the issues involved, although technical in nature, have profound political implications. Many countries represented in the Assembly have witnessed directly the political consequences that flow from economic dislocation. Economic growth and stable financial markets will not of themselves preserve the fabric of world peace, but they are powerful positive forces all the same. Many of the elements of the post-war system of economic co-operation are under strain. I believe we, as an international community, now need to develop new political levers to tackle some of the underlying difficulties. We must move beyond the ad hoc responses that have developed to cope with severe, long-term current account deficits. We must reassure heavily indebted countries that there will be adequate financing available while they pursue the long-term process of structural adjustment. The original political mandate of GATT, which is now all but exhausted, must be renewed.
303. The difficulty in all this is to move beyond general expressions of concern to initiate a process which might come to grips with some of these fundamental issues facing the world trade and payments system.
304. Of course, if the complacent mood prevalent in some countries persists there is little that can be done. In that case, the middle ground that I believe was becoming visible until very recently will quickly disappear. We will quit the field and leave it to extremists of varying points of view. We will return to the dubious pleasure of the sterile confrontations of past years.
305. I do not pretend to have a blueprint for the process that might lead to a comprehensive examination of the trade and payments system. There are many possible approaches, involving different timetables and different combinations of people and institutions. The study "Towards a new Bretton Woods", to which I referred earlier, has one such proposal worthy of the Assembly's consideration. Ultimately, the process must be tailored to the needs of the main participants so as to command their support.
306. It is not hard, however, to describe in general terms the criteria for a successful examination of the trade and payments system.
307. First, the basic work must be undertaken by experts of the highest standing, otherwise its analytical competence would be subject to easy and probably fatal challenge.
308. Secondly, these experts must enjoy the confidence of major Governments and have ready access to their political advice. In that way, we might avoid proposals that are completely outside the limits of political possibility.
309. Thirdly, any such group must be of manageable size. In my view this implies a small group of around 15 to 25 members broadly representative of the international community and working closely with the major international economic institutions. We would probably end up with something analogous to the structure of the Interim Committee and the Executive Board of IMF. Unlike the Interim Committee, however, it would be concerned with all the fundamental long-term trade and payments issues, rather than simply determining the current policy of IMF.
310. Fourthly, a conference, involving participation on a far wider international basis, should be seen as a conclusion rather than a beginning. The Commonwealth finance ministers saw a Bretton Woods-type conference in this context very much as an end to the process rather than a commencement.
311. It is more difficult to be definitive about the timetable when agreement on the process described above still escapes our grasp. I believe there is an urgent need to begin the task now, and I believe that the general proposition has wide support. If we accept the projections which imply an annual rate of growth in the key industrial countries of 3 to 4 per cent into 1984, then this gives us some flexibility to implement any changes agreed at what we might call the study group level. If we delay the start of our examination too long, then we face the possibility of yet another cyclical downturn in the world economy. A return to an even less auspicious macro-economic climate could sound the death-knell to the implementation stage of the exercise.
312. The point requires no labouring. There is a real and pressing need to get on with the job of re-examining the system and working out how to adapt it to the needs of the period we live in. Delay is dangerous. To avert the threat, we should aim to have broad international agreement to implementing changes in the trade and payments system by, say, 1985. The process of preparing for it should begin straight away, certainly by the beginning of 1984. The time for action is now.