Nov 3, 1992

COCOA NEGOTIATIONS RESUME

Geneva 2 Nov (Chakravarthi Raghavan) -- Negotiations for the conclusion of the Fifth International Cocoa Agreement resumed here Monday with producers trying to persuade the consumers to agree to a joint financing of a 'withholding' scheme to restore supply-demand balance and shore up prices.

The resumed meeting of the UN Cocoa Conference is due to run till 13 November.

At the end of the last session in July, an agreement had been reached on a scheme for coordinated production management policies which, over the medium to long-term would restore global equilibrium.

But to conclude an agreement the two sides have still to reach an agreement on a price range and

the floor price, on a withholding scheme which in the short-term would shore up prices and linked to it the issue of financing such a scheme.

According to the International Cocoa Organization (ICCO), cocoa prices on 30 October were $1029.09 or SDR 731.96 per tonne. On the previous day the ruling prices were respectively $1041.26 and SDRs 740.53.

Before it went into executive sessions and committees to continue the negotiations, the conference plenary, meeting under the chairmanship of Peter Lai of Malaysia (who is functioning as an independent chairman) heard Cote d'Ivoire as the spokesman of the producers and Netherlands as spokesman of the consumers, as well as a plea by the Minister for Cote d'Ivoire, Alain Gauze.

Speaking for the producers, Kouame N'Guessan of Cote d'Ivoire, said the current session, a "crunch" session for the fifth agreement, had to show "tangible results" in North-South cooperation. The producing countries of the South exported commodities and imported manufactures from the consuming countries of the North.

And unless the producing countries of the South, particularly the sub-Saharan African countries, who faced a debilitating debt servicing burden and deteriorating terms of trade, could earn money by their exports, they could not buy the products of the North.

In 1985-86, N'Guessan said, it needed five tonnes of cocoa to buy one car. Now in 1990-1991, it required 18 tonnes to purchase the same car. The producers, in pressing for an effective and equitable agreement, were not asking for charity, but international cooperation to ensure that they were able to earn through their exports to import goods from the North. He also underlined the need for encouraging cocoa and chocolate consumption in the industrialized countries and referred in this connection to the high consumption taxes levied as well as the use of vegetable oil substitutes for cocoa in chocolates.

Referring to the agreement at the last session for production policies, the producer spokesman said at the last meeting of the Cocoa Producers alliance in Kuala Lumpur (18-25 October), the producers had decided to take all measures to reduce production.

The alliance members, who accounted for 85 percent of the world production, had agreed to set up a standing committee of all the member-countries and also bringing in non-members like Indonesia and the Congo (which were observers at the alliance) to oversee the programme.

A number of producing countries had also announced at their meeting, beginning the cocoa year 1992-1993 to cut production over the short to medium term.

It was however necessary to ensure security of supplies, to guard against a crop failure for climate reasons, there was need to have a scheme for assurance of supplies. The producers wanted to participate in such a scheme, but there should be some 'fairness' and the consumers should contribute to 50 percent of the costs of financing such a scheme. The European Community and other consumers who had called for a withholding scheme should show comprehension and agree to a financing scheme. "Any intransigence on their part will only stall the negotiations."

At the last session, the consumers had made clear that before they could be called upon to bear the burden of financing the with-holding scheme, producers who were in arrears to the ICCO on the levies they had collected from their exports should first pay them up. Cote d'Ivoire had then pointed out that countries in arrears were heavily indebted and unable to service their debts because of the collapse of commodity prices.

Jan Van Sluisveld of Netherlands, speaking for the consumers, viewed N'Guessan's speech as "interesting" and said the consumers would work constructively to finalise an agreement. Though their room for manoeuvre was limited, consumers had not come to Geneva with any rigid position, he said.

The available statistics showed that cocoa and chocolate consumption was increasing, with some exceptions due to economic and political reasons (a reference to the former Soviet Union, where in the aftermath of the breakup and the economic crisis consumption has fallen sharply) Gauze noted that the producers at their Kuala Lumpur meeting had adopted credible measures to act collectively in the face of the hostile environment facing them.

The consumers must appreciate the crisis facing the producers, particularly in Africa where they were undertaking major adjustment measures but which needed support by augmenting their incomes. He appealed for "revitalization" of the negotiations to reach an accord. He made a particular appeal to the European Community which had the Lome cooperation agreement with the ACP countries and called upon the Community to show "political will to remove the obstacles that are compromising the development programmes being undertaken by the ACP countries.

As he had announced at Kuala Lumpur, Cote d'Ivoire had taken steps to cut by 15-20 percent supplies on the international market. The other producers had also agreed to take measures to rationalise the supplies.

The Commission of the European Community, in response said, that it had an open mind and wanted an agreement with economic clauses that would be efficient and effective. But for an agreement to be reached, both sides would have to move from their position to reach a common point.