Nov 16, 1990

"OLD SOLUTIONS AREN'T WRONG JUST BECAUSE THEY ARE OLD".

GENEVA, NOVEMBER 14 (TWN)— "Old solutions are not wrong just because they are old, and some medicines never worked not because they were ineffective but because the patient never tried them", the Group of 77 has said in reiterating the continuing validity of the 1976 Integrated Programme for Commodities (IPC).

Speaking for the Group of 77 in the Committee on Commodities, Mohamed Rifaah of Egypt said that while his group recognised the new dimensions of the commodity problem, it believed "we should add to what has been achieved and not start from a vacuum".

"The real and right solution to the problem of commodities of developing countries", Rifaah said, "requires that these countries should be enabled to obtain a larger and fairer share of the wealth generated out of their primary commodities. In other words, a larger share of the prices of the final products".

This could be achieved through a multitude of policies and measures, especially adequate financing, access to technology, diversification and access to markets for processed exports of Third World countries and the committee should direct its efforts towards this objective.

The discussions in the committee showed that beyond the general recognition of the need to improve the economic situation of the Third World countries, many of whom are still highly dependent on commodities and commodity export earnings, and some vague talk of producer/consumer cooperation, there was little common ground even on objective analysis of the causes.

The Group B countries even appeared to be fighting shy of recognising the facts of the situation, for fear of its interference with their pet ideological stances or their common thrust in the Uruguay Round was brought out in the Group B statement.

For example a draft text of the Group B statement had conceded that "the overall economic context had not changed for the better in 'many' developing countries".

As delivered by Michael Schmunk of Germany, who spoke for the Group B countries, the "many" was changed to "certain".

Also, in efforts to hoe to the line that the Uruguay Round negotiations would be the panacea for all commodity trade problems and lest the secretariat or the G77 come back at next year's conference with the cry that the Round had solved no problem, the Group B statement deleted a sentence from the draft which, in the form of a question, had suggested that UNCTAD secretariat should undertake an analysis of barriers to market access for commodities following the completion of the Uruguay Round.

The Group B statement, as of other individual members of the group, also repeated the now familiar refrain that the primary responsibility for development, and thus for the commodity sector, lay with the countries concerned, and their attracting foreign capital for technology and diversification through "market-oriented" domestic policies.

In his statement, Rifaah noted that fourteen years after the adoption of the IPC, and despite all efforts to fulfil its objectives, the terms of trade for commodities continued to deteriorate and the dependency of Third World countries on the commodity sector for their export earnings remained basically unchanged.

In 1988, a year of economic expansion in the North, the aggregate export earnings of the South from all commodities, except fuel, had reached $120 billion - the highest ever attained in nominal terms. But in real terms and in relation to the values of manufactured exports of the North, the commodity export earnings of the Third World were "the second lowest over the last ten years".

Africa, in 1988, earned only $18 billion from its non-oil commodity exports 26% less than in 1980 and 35% less than in 1970 and this did not even pay for the debt service of $17 billion and food imports of $13 billion.

On the various developments within UNCTAD framework to promote producer/consumer cooperation on the commodity issue, Rifaah said the efforts had been 'tremendous, but the results were "modest".

Efforts by UNCTAD could not substitute for active participation and willingness on part of producers and consumers nor could such efforts correct the structural market imbalances.

The G77 believed that producer/consumer dialogue and cooperation should be enhanced through more active participation and better use of producer/consumer fora.

Referring to questions of environment and sustainable development, the G77 said that the concept of sustainable development should not become a new conditionality limiting the already limited chances of the Third World countries.

Third World countries could not be expected to pay the price of the pollution created by the ICs who bore the historical responsibility for most of the pollution and owed an "ecological debt" to the countries of the Third World.

Speaking for the Group B countries, Michael Schmunk of Germany saw "signs of hope and possibilities" for national and joint international efforts to improve the economic situation of Third World countries including in actions on commodities in the committee.

In addition to the harsh impact of low prices for some commodities of special interest to some Third World countries and the pressure of servicing debt, the lower dollar and negative impacts of the Gulf crisis had recently contributed to making the situation more difficult for many.

But Schmunk saw signs of hope for improvement in the commodity field, in the overall outlook for performance of some important commodity consuming economies and growing consciousness among consumers in favour of environmentally-friendly processes and natural products, and "the growing convergence of views among all UNCTAD members that the task and opportunities for tackling development, including commodity dependency, are primarily the responsibility of the developing countries themselves", but this did not exclude his group's "acknowledgement of the need for solidarity and partnership among developed and developing countries".

Schmunk also argued that solutions to the serious commodity problems, particularly of low-income highly dependent least developed countries could not be found only within the commodity field since, within the latter, the instruments to tackle problems were strictly limited, as was illustrated by the "less developments" since the previous meeting in the area of commodity agreements with economic provisions.

Though the EEC is steadfastly defending in the Uruguay Round its right to buck the "long-term market trends" in agriculture through its Common agricultural policy to support "industrial production" of agriculture and its subsidised exports, both the German delegate and later Italian delegate speaking for the EEC, underscored the need for commodity agreements to remain consistent with long-term market trends.

Li Zhimin of China noted that increase in commodity export volumes by the Third World countries had not been matched by an increase in export earnings and for many of the countries there were no signs of a fundamental change for better in the commodity situation facing them in the 1990’s.

The objectives of the IPC, he asserted, were valid. The problem was that measures to achieve the objectives had not been implemented vigorously and it was "not fair" to take an "over-simplified and arbitrary negative attitude" towards all international commodity agreements. The reasons for success of some and failure of others should be carefully analysed. While efforts to effectively solve individual problems in the light of specific commodities and specific country needs were welcome, "a new and comprehensive solution was needed to the common problems of commodities which was closely related to the problems in other areas such as trade and development resources".

The debate also heard references to the Common Fund for commodities and the prospects of its beginning actual operations and its capacity to help diversification in the commodity sector.

The Managing Director of the Common Fund for Commodities, Budi Hartantyo told the Committee that the Fund would be able to approve its first projects for financing in the second half of 1991.

At the last meeting of the Board in October, Hartantyo said, the Board had agreed to provide International Commodity Body (ICB) status to nine international commodity organisations and bodies who had applied. The products covered by these bodies, whose projects would be eligible for financing out of the second account of the Common Fund, were cocoa, cotton, jute, lead and zinc, olive oil, natural rubber, sugar and tropical timber.

Hartantyo however noted that the capital subscriptions stipulated in the agreement and the pledges of voluntary contributions to the second account, made ten years ago when the agreement was adopted, had now decreased in real value. During the same period the problems affecting commodity markets had generally increased.

Rifaah called upon the member-States of the Fund to contribute to make both accounts of the Fund fully operational as soon as possible. He also reaffirmed the need for making the financing of the second account more accessible to the commodities of Third World countries, which might not be covered by ICBs.

Austria said that the Common fund should be given a chance. "But if in dud time it does not prove to be of direct use to the urgent needs of the developing nations, we should not hesitate to draw the right conclusions. Modern commodity policies cannot afford costly tabus".