UNCTAD-VII: SOVIETS COMMON FUND DECISION ECHOES AND RE-ECHOES.

Jul 21, 1987

UNCTAD-VII: SOVIETS COMMON FUND DECISION ECHOES AND RE-ECHOES.

GENEVA, JULY 18 (IFDA) – As the seventh session of the UN conference on Trade and Development entered its second week, the echoes and re-echoes of the Soviet signature of the common fund agreement, and is promise of ratification "in a very short time", is reverberating in the committees, as well as in corridors outside.

Meanwhile, the four sectoral Committees have been at work, discussing the various ideas and proposals of the G77. But while the G77 have been trying to draw the Group B into a dialogue on a more specific level, the Group B responses have been very general.

The coming week will see whether there can be any change in this situation, or it would all end in mere talk.

But the soviet move on the fund has injected a new reality into the Conference (in terms of more active Soviet participation in international economic negotiations, and perhaps closer Soviet and G77 ties) and some of its issues, since it made the fund’s operationally a near certainty soon.

While its political importance outweighed any immediate economic benefits, in the medium-term it puts new life into the integrated programme for commodities (IPC), and could act as a catalyst for negotiation or renegotiations of international commodity agreements (ICAS) for commodities not now having economic provisions.

The Soviet action was followed by Cote D’Ivoire, with 0.36 percent of the DCC, which signed and announced it would be ratifying it soon, in a spirit of solidarity, despite its doubts whether the fund could meet the immense demands that would be made on it.

EEC Commissioner, Claude Cheysson, had told the plenary that EEC member Portugal (0.32 percent DCC), which had signed in 1981 but had not ratified, would now do so (as it had to after joining the EEC).

Some of the Group B countries, inside Committees and outside, have been trying to cast doubts on the fund, in an effort to minimise the political effects and significance of the Soviet decision.

They question the talk of the common fund now putting new life into the IPC, and act as a catalyst for negotiation or renegotiations of ICAS with economic provision, or making existing ones function more effectively.

In the Committee on Commodities, for example, where the G77 had made this point, Denmark for the EEC said "we have heard the statement of the USSR and we shall study it".

Later the Group B spokesman, Switzerland, cast further doubts and said "as regards the common fund let us see".

But not all Group B members reacted this way.

The Norwegian Minister for Development Cooperation, Ms. Vesla Vetlesen, took the opportunity of her intervention in the Committee on LDCS to say "we welcome the announcement by the Soviet Union and Ivory Coast to the join common fund. Thus, the likelihood has greatly increased that the agreement can enter into force in the course of the next few weeks, and consequently the second account can start operating".

Earlier, she had stressed the importance of the commodity sector for the LDCS, and validity of the IPC, and said: "we see a role both for price stabilisation agreements and for measures to address structural problems in commodity dependent developing countries".

Outside the Conference, at an informal press briefing by the Canadian Foreign Minister, officials who had come with her from Ottawa, had told newsmen they welcomed Soviet signature and would be interested to see "an ultimate ratification". But the officials argued that the fund had been negotiated in a different situation, and "it is time to review its implementation", in the light of new circumstances.

UNCTAD-VII, they suggested, could review the entire IPC in the light of current realities.

They however backed away when they were asked whether they were not in effect asking for abandonment of IPC and the first account of the fund, and how they could review and revise, excepting through the amendment procedures of the agreement.

Canadian officials later explained the newsmen that it had not been their intention to either seek a review of the agreement, or imply its operationality should be blocked before an overall review. But their explanations did not fully clear up the misunderstanding.

Other reports in the Conference corridors said that the U.K. and the FRG were also very unhappy with the prospect of the agreement being ratified, and the fund becoming operational now.

There has even been some talk of some of these countries withdrawing from the agreement, but the U.K. delegation quickly denied it was doing so, however adding the need for an overall review before implementation because of the changed circumstances.

This common refrain suggested to the G77 that at least some of these countries are now trying to counteract the Soviet action, and block the fund becoming operational.

Some western sources said that the western countries would not like to see the first account of the fund becoming operational or activated.

The first account is to be used to finance buffer stock operations of ICAS that would be associated with it.

While this could not be prevented if ICAS do join, the western tactic at the moment seems to be to block new ICAS with economic provisions, and block moves in the two existing ICAS (for cocoa and natural rubber) from making use of the common fund first account.

Third world delegations have been both amused by such rumours and talks, and also angered by what is seen as deliberate efforts by some western groups against UNCTAD and accepted policies.

Some of them said that the western delegations who were attempting all this should not take third world countries and diplomats to be so unsophisticated as not to understand things.

Some western countries have however privately been deploring this kind of talk by some of their colleagues.

They note that the agreement has a life of its own, and once it becomes effective, no amount of withdrawals would collapse it, and withdrawal from the agreement requires a year’s notice, by which time the agreement would become effective in any case.

Any tactics to block the operation of the fund, or block its effective implementation, would also call into question the credibility of the Group B countries, and the resulting confrontation with the G77 would have repercussions far beyond UNCTAD, these sources feel.

They agree with some of the G77 assessment that those countries who thought the fund would never come into being after the U.S. refusal to ratify, and for ideological reasons had hoped the IPC would collapse, are now, angry and embarrassed. But this is not a sound basis for policy-making.

Before the Soviet announcement, 94 countries accounting for 59.06 percent of the directly contributed capital of 470 million dollars, had ratified. The Soviet ratification, with its 5.78 percent of the DCC, would bring the total to 64.84 percent.

For the agreement to enter into force, there must be ratifications by at least 90 countries (already met) accounting for two-thirds of the DCC.

To meet the second requirement, ratifications by countries accounting for 1.83 percent would still be needed, after the Soviets deposit their instruments or ratification, acceptance or approval.

Immediately after the Soviet announcement in the plenary, the president of the conference had said the Soviet decision would bring ratifications to 65.2 percent of the DCC, and only 1.4 percent more would be needed. But this was an error, on the assumption that Soviet action automatically meant also action by Byelorussian and Ukranian SSRS, both of whom are independent members of UN and UNCTAD.

The Soviet decision announced Monday, was itself taken in Moscow over the weekend, and thus other socialist countries have not had time to consider or take their own decisions. It is not clear what they will do.

Both the UNCTAD secretariat, and leading members of the Group of 77, are now focussing their attention on some potential G77 countries who could ratify the agreement, and with the ratification by the Soviets, bring the agreement into force, if possible before the conference ends.

The G77 efforts are now concentrated on a few key G77 countries who have not yet ratified. Leading G77 members have been assigned to job of taking up the issue bilaterally at political levels in the capitals concerned.

One focus of attention is the four LDCS for whom the OPEC has offered to pay the minimum subscription – Laos (0.21 percent), Maldives (0.21 percent), Burma (0.23 percent), and Mauritania (0.24 percent).

In case of first two, no financial commitments are involved for the countries concerned, while for Burma and Mauritania, the governments have to pay the extra part of their capital contributions above the minimum one million dollars.

There are also five countries for whom Norway has offered to pay the minimum capital: Costa Rica (0.27 percent), El Salvador (0.27), Honduras (0.27), Madagascar (0.23), Mozambique (0.23) and Swaziland (0.23).

Over and above these, there are some other G77 countries who are now the focus of lobbying from their colleagues: Peru (0.33 percent), Thailand (0.33 percent), Cuba (0.48 percent), Uruguay (0.24 percent), and Romania (0.34 percent).

Of these Peru has announced here that it is taking measures to hasten up its ratification, and some of the countries of Asia are making representations to the Thai government.

The G77 is looking to ratifications from a combination of these 14 potential ratifies, besides Cote D'Ivoire, to quickly achieve the balance of 1.83 percent of DCC needed to make the agreement effective with Soviet ratification.

UNCTAD calculations show that when the fund becomes effective with Soviet participation, but without the U.S., the allocation of shares and their voting strengths would be such that there would be more or less the same balance amongst member-countries of the Group B, socialists, group 77, and China as when the agreement was negotiated on the basis of every country, including the U.S., joining.

Soon after the agreement was concluded, an interim Committee was set up to frame draft rules and regulations that could be adopted by the governors of the common fund when it became operational.

The Committee itself set up three working groups, and one of the working groups had its last meeting in 1982, and the interim committee itself earlier.

The UNCTAD secretariat and others are now re-assessing the situation and how to move further.

There are some G77 who think that the best way to move forward would be for the interim Committee to meet and windup, after making a report of its work so far, including any drafts before it, and leave it all to the fund’s board of governors when they come into being.

This, some of them feel, would avoid the awkwardness of the interim Committee with its membership open to all, including the U.S. which has refused to ratify and is hostile to the idea now, drawing up the rules for others.