Second Hearing With Civil Society And The Private Sector In Preparation For UNCTAD XI
23 February 2003
Contribution from the Institute for Agriculture and Trade Policy (IATP)
For more information, contact Alexandra Strickner, Trade Information Project (IATP), in Geneva on (022) 789 0724 or
The Institute for Agriculture and Trade Policy (IATP), in its testimony to the first Hearing on 16 January, stated its hopes that the “Pre-Conference Negotiating Text” for the eleventh meeting of the United Nations Conference on Trade and Development (UNCTAD) would provide a clear intergovernmental mandate for a robust Plan of Action, particularly to address the commodities price crisis. Our hopes were based on the 6 August 2003 “Overview by the Secretary-General of UNCTAD” and the 6 August version of the “Pre-Conference Text”. Furthermore, given the “catastrophic price falls for some commodities” noted in the Secretary General’s September 2002 report to the General Assembly[1] and the recent report of the Panel of Eminent Persons on Commodities Issues[2], IATP felt certain that discussion of the commodities crisis would be at the heart of the UNCTAD XI pre-conference text and Plan of Action. The Eminent Persons’ report stated that UNCTAD was the competent international agency best placed to carry out several of the very practical and achievable short and medium term recommendations in the report. These recommendations were supported by IATP’s President Mark Ritchie in his testimony to the General Assembly at their hearing on the Eminent Persons’ report of 25 October 2003.[3]
IATP was then very disappointed to receive the 17 December version of the Pre-Conference text just before the 16 January hearing. In that version, the discussion of the commodities crisis is reduced to just four paragraphs (5, 17, 108, 109). Indeed, there is just the barest mention of the crisis at all: “the secular decline and instability of world commodity prices and resulting terms-of-trade losses have reduced the import capacity of many developing countries” (paragraph 5). The discussion of multilateral trade negotiations pertaining to agriculture (paragraphs 81-82) does not reflect on the crisis in commodities prices nor on UNCTAD’s history of initiatives for short, medium and long-term solutions to that crisis. The scarce mention of the commodities crisis in the 17 December text is alarming.
It is alarming for at least three reasons. First, it suggests UNCTAD Member States wish to reduce UNCTAD’s capacity to analyze the consistently grim commodities data that appear in such signal publications as the UNCTAD Handbook of Statistics. The kind of robust analysis and pragmatic proposals for solutions to the commodities crisis, such as Alfred Maizel’s “Economic Dependence on Commodities”, presented at UNCTAD X,[4] may well no longer be possible under a reduced analytic mandate and further cuts to the Commodities Branch budget.
Second, the downgrading of commodities as a priority for UNCTAD XI is accompanied by a proposed shift in attention to manufacturing and services: “Experience from developing countries that have been more successful in integrating into the world economy than others shows that rapid and sustained growth in developing countries requires a dramatic shift in economic structure from the primary sector to manufacturing and services, associated with a progressive rise in productivity” (paragraph 13). The report acknowledges this “dramatic shift” requires “sustained capital accumulation” that “cannot be achieved by relying on market forces alone” (paragraph 13). A High-Level Dialogue on Financing for Development suggested that the modest increase in Official Development Assistance in 2002, after years of decline, “had been more than offset by the largest ever net resource transfer from the developing to the developed world over the past year, amounting to an astounding $200 billion”.[5] If neither private investors nor ODA will suffice to finance a “dramatic shift” away from commodities, and if countries that do not wish to take on further debt, improved commodity prices remain the most likely source of capital accumulation for development for most developing countries. Yet the 17 December text provides a weak mandate to propose policies to improve and stabilize those prices.
A third source of concern about the reduced role of the commodities discussion in the 17 December text is its coincidence with proposals, including from European Union Trade Commission Pascal Lamy, that the WTO be given a staff and mandate commensurate with independent analysis.[6] Would such proposals suggest that the WTO become a center for work on commodity trade? Not only would such an expanded WTO Secretariat mandate run counter to the very focused mandate governments insisted upon at the establishment of the WTO, but it begs the question of what, then, UNCTAD would do. Why would Member States reinvent the commodities analysis wheel, after a decade of reform intent on avoiding duplication in the multilateral system? UNCTAD has a proud history of commodities work, and this, of all areas, is the last that should be downgraded at a time when commodity issues have returned—with burning urgency—to the top of the development agenda.
There are important gaps in the WTO mandate that require attention from governments at UNCTAD XI. Consider, for example, the issue of agricultural export dumping, the unfair practice of trading products at below their cost of production. IATP has just published an update to its February 2003 report on U.S. agricultural export dumping.[7] While dumping calculation methodology for industrial products is a WTO trade dispute topic for industrial sectors,[8] the WTO Agreement on Agriculture negotiations provide no framework to discipline agricultural export dumping. Nor does the WTO offer an appropriate negotiating forum to consider this problem—legal disputes on the language in existing rules are unlikely to provide the creative thinking needed to solve this persistent source of distortion in world agricultural markets.
IATP plans a seminar at the Civil Society Forum at UNCTAD XI to discuss how supply management schemes might address structural oversupply of commodities and the resulting chronically depressed prices in most years that result in dumping. The 17 December text has nothing to say explicitly about supply management, though it does request UNCTAD to “follow up, as appropriate, on the recommendations addressed to UNCTAD in the report of the Meeting of Eminent Persons on Commodity Issues” (paragraph 108). Those recommendations include “measures for dealing with oversupply”.[9] IATP urges Member States to give this recommendation much greater prominence in the final UNCTAD XI Declaration.
Thanks to the pioneering work of UNCTAD, IATP is painfully aware that supply management as a solution to the commodities crisis is important yet only partial and incomplete. Longer-term solutions include commodities diversification and making natural materials more competitive with synthetic ones.[10] IATP is also aware intergovernmental consensus to support longer-term solutions has been consistently elusive. Indeed, resistance to commodities diversification has vexed analysts for far longer than the 40 years of UNCTAD’s existence.
Consider the complaint of the first U.S. President, George Washington to the third U.S. President Thomas Jefferson: “Neither my overseers nor manager will attend properly to anything but the crops that they have usually cultivated; and in spite of all I can say, if there is the slightest discretionary power allowed them, they will fill the land with corn, although even to themselves there are the most obvious traces of its baneful effects”.[11] Environmentalists and even some agricultural economists still lament the “baneful effects” of over-planting corn in the United States. However, there is little doubt that crop and economic diversification provided the resources for the United States, a developing nation in the eighteenth century, to become free of commodity dependence. We can only hope that governments will give UNCTAD the strong mandate and ample resources to do the work needed to enable its members to diversify their economies and free themselves of the “baneful effects” of dependence on exports of one or two commodities for the revenues needed for development.
[1] “World commodity trends and prospects: Note by the Secretary-General” UNITED NATIONS GENERAL ASSEMBLY (5 September 2002) A/57/381
[2] “Report of the Meeting of Eminent Persons on Commodity Issues, held at the Palais des Nations, Geneva, 22-23 September 2003) (/TD/B/50/11)
[3] Mark Ritchie, “Testimony before the General Assembly of the United Nations”, 25 October 2003 at http://www.tradeobservatory.org
[4] Alfred Maizels, “Economic Dependence on Commodities”, UNCTAD X: High-level Round Table on Trade and Development: Directions for the Twenty-First Century” (Bangkok, 12 February 2000) TD(X)/RT.1/6 (18 November 1999)
[5] “FFD: the Challenge of Translating Dialogue into Change”, NGLS ROUNDUP No. 107 (October 2003), 1.
[6] Pascal Lamy, “The future of WTO”, speech to the Kangaroo Group of the European Parliament, EUROPEAN COMMISSION (Speech 04/42) 27 January 2004.
[7] Mark Ritchie et al, “United States Dumping on World Agricultural Markets: February 2004 Update”, at http://www.tradeobservatory.org
[8] e.g. “European Union To Bring WTO Case Against U.S. ‘Zeroing’ Methodology”, INSIDE U.S. TRADE, 30 January 2004.
[9] “Report of the Meeting of Eminent Persons on Commodity Issues”, Recommendation 7.
[10] Maizels, “Economic Dependence on Commodities’, 8-9.
[11] Cited in J. Janick et al., “Diversifying U.S. Crop Production”, in J. Janick (ed) Progress in New Crops (ASHS Press: Alexandria, Virginia, 1996) 98-109.