8:42 AM Nov 6, 1995

COMMITTEE FOR CONTINUED UNCTAD ROLE

Geneva 5 Nov (Chakravarthi Raghavan) -- An increased demand for a wide range of commodities -- as a result of sustained, rapid economic growth in dynamic developing economies and, over the longer-term, by the implementation of the Uruguay Round agreements -- is likely to be accompanied by persisting traditional problems like depressed prices, and some newly emerging problems of the international commodity economy, the UNCTAD Standing Committee on Commodities agreed here.

The week-long meeting, attended by government representatives of 52 countries, ended Friday with an agreement that UNCTAD had an important role to play in the commodity area and should concentrate its future work on issues where it has expertise and competence in promoting sound, compatible and consistent policies to achieve improved functioning of the international commodity economy and an enhanced role of developing countries in the economy.

In its agreed conclusions, the Standing Committee said that sustained rapid economic growth in dynamic developing economies is expected to generate increasing demand for a wide range of foodstuffs, agricultural raw materials and mineral ores and metals. Opportunities and niches for commodity production and trade on account of such growth as well as economic expansion from other sources seem likely, on balance, to be enhanced in the longer-term as Uruguay Round agreements are implemented.

"But such expected growth in world commodity demand in the foreseeable future," the Committee's conclusions added, "is however likely to be accompanied by persisting traditional and newly emerging problems of the international commodity economy. These problems, including depressed prices, face commodity exporters, but especially developing countries and in particular the LDCs among them which are heavily dependent on commodities for their export earnings, domestic employment and food production."

Export diversification -- whether horizontal, diagonal or vertical -- is well recognized as a key prerequisite if commodity-dependent developing economies are to succeed in moving towards sustainable development with higher growth and standards of living. However, there is a general consensus that expanded market access for exports of developing countries is one important, but not sufficient, condition for durable expansion in their export earnings and gains in market shares.

Domestic policy reform, economic and technical cooperation from the international community, and among developing countries as well, are crucial if developing countries are to take full advantage of available opportunities and niches in commodity production and trade. In this regard, the Committee emphasized the needs of assistance to developing countries, and in particular LDCs. The Committee also stressed the need for implementation of the Marrakesh Ministerial decisions on LDCs and net food-importing countries.

To achieve sustainable development, it is important to take into account all relevant costs and benefits of economic activity, including environmental costs and benefits. Their relative significance in decision-making process would change from one country to another, depending on a variety of parameters, including social consideration and economic growth priorities.

The Committee also emphasized the need to eliminate existing distortions in the price system, in particular those caused by subsidies in commodity production, as a pre-requisite for internalizing externalities.

"Moreover," the Committee added, "there is a need to clarify, for benefit of policy-makers, the concept of internalization and its significance for sustainable development. This would contribute both to implementation at the national level and advancing international dialogue."

Producer-consumer cooperation is an important element of commodity policy and this needs to be pursued where feasible and taking into account the particular needs of developing countries and the characteristics of individual commodities. Such cooperation could be enhanced by taking market forces more fully into account; by involving both the private sector and industry experts as fully as possible; by enhancing research and development, especially on more efficient production technologies and new or improved varieties or products; and by promoting consideration of environmental issues and sustainable development, including promotion of measures which would enhance the environmental particularities of natural products.

UNCTAD, the Standing Committee agreed, has an important role to play in the commodity area and it should concentrate its future work on issues where it has expertise and competence in promoting sound, compatible and consistent policies with a view to achieving the improved functioning of the international commodity economy and an enhanced role of developing countries in that economy. Special attention has to be given to highly-commodity dependent low-income countries and other weaker economies such as those in Africa, and in particular LDCs, with a view to preventing their potential marginalization and enabling these countries to benefit fully from the capacities, and maximize the developmental impact of their commodity sector.

While in its four sessions, the Standing Committee has served a useful forum to deal with various commodity-related aspects of international trade and development, its own work would have benefited significantly from enhanced participation of experts from capitals and inclusion in delegations of industry experts and other representatives of civil society, the agreed conclusions said.

UNCTAD, it added, provides an appropriate forum for international discussions on reflection of environmental costs and benefits in prices of products and on other modalities for internalization, including new approaches to international cooperation in this area. But work of a technical nature could be carried out more fruitfully at expert level.

Intergovernmental discussion and investigation of commodity issues to promote sound, compatible and consistent policies in the commodity field is both necessary and valuable, especially as these commodity issues affect the situation of particular commodities which dominate the economies of the LDCs.

The commodity sector experiences a broad range of market conditions. Most of the commodities in developing countries, particularly the LDCs among them, faced depressed prices. Other concerns include oversupply, market access difficulties for value-added products, absence of appropriate technology, lack of capital resources, and lack of a coordinated strategy to address these problems.

The Standing Committee agreed that UNCTAD should continue to address commodity issues after the Ninth conference, and the commodity problem conceptualized in terms of four dimensions:

* Macroeconomic dimension: Commodity sector development and diversification and market stability are the foundation for durable economic growth and structural diversification; such development and diversification has to be sustainable.

* Sectoral dimension: The task of initiating and effectively managing diversification to take full advantage of international opportunities and to meet challenges, and of promoting private enterprise participation in the process.

* Microeconomic dimension: Commodity risk management mechanisms, dissemination of market information and technologies for enhanced productivity, the generation of evolving entrepreneurship at all levels of the economy and efficient functioning of commodity markets with a view to enhancing price stability and transparency.

* International dimension: Challenges - the integration of developing economies, increased global competition, resource constraints and market access; Opportunities -- the implementation of the Uruguay Round, increased commodity demands from developed, developing and transitional economies, cooperation between donor and ODA recipient countries and between producers and consumers, and effective functioning of all international cooperation agreements on commodities.

A three-pronged approach is needed to effectively meet these challenges, the Standing Committee said. These were: research and analysis, policy dialogue, and technical and economic cooperation.

Any future work by UNCTAD must address more effectively the problems faced by the commodity sectors. To this end, the Committee recommended, development of a work programme within the intergovernmental machinery which addresses commodity issues and proceeds only with the active support and participation of relevant government ministries and enterprises of member countries and other concerned organizations.