Jul 24, 1987

UNCTAD-VII: INTERNATIONAL COOPERATION A MUST FOR COMMODITY PROBLEMS.

GENEVA, JULY 23 (IFDA/CHAKRAVARTHI RAGHAVAN) - International cooperation between producers and consumers is an essential and effective instrument to find lasting solutions to the ills of world commodity economy and for short and long-term problems, a paper put forward by the chairman of the commodities Committee, Carlos Perez del Castillo, suggests.

In putting forward conclusions and recommendations in the area of policies and measures, the paper underscores the fact of commodity prices in real terms being at the lowest level for half a century, with no prospects of any short and medium term sustained improvement.

In the area of international commodity agreements or arrangements (ICAS), the paper recognises the need for better functioning of commodity markets, including avoidance of excessive price instability, highlights the long experience with ICAS as a mechanism for stability, and the new dimensions provided to commodity problems through the Nairobi integrated programme for commodities (IPC).

In this light, the paper would have necessary arrangements set in motion for producer-consumer consultations for convening of preparatory meeting on individual commodities on the IPC indicative list, and others that might be agreed upon by producers and consumers.

These preparatory meetings are to take account of individual commodity characteristics, the IPC and the 1986 recommendations of the special committee on commodities (on ICAS), and decide on appropriate international actions.

On the common fund, it welcomes the signature and indications of early acceptance or ratification by the Soviet Union and Cote DíIvoire, and similar actions by some other countries, and urges all countries that have not yet taken action to do so.

Once there are sufficient ratifications, it adds, all efforts should be made by ratifying countries to make the fund operational.

In the area of processing, marketing and distribution (PMD), and diversification, the paper recognises horizontal and vertical diversification as an important long-term objective for most third world countries, and calls for intensification of international cooperation to achieve this.

It also calls for international assistance in this area, taking fully into account each countryís developments objectives and based on considerations of dynamic comparative advantage, and recognises the linkage between diversification and market access conditions.

It notes that the resources of the second account of the common fund would not be sufficient for the PMD and diversification programmes, and these would need sizeable expansion of bilateral and multilateral official resources, as well as private resources including private investment.

On the access to markets issue, the paper welcomes the positive signals towards liberalisation of trade in agricultural products and agricultural adjustment in industrialised countries, emanating from the OECD Ministerial communiques and Venice summit.

The Uruguay round negotiations on agricultural, tropical and natural resource based products should ensure elimination or substantial reduction of all barriers directly or indirectly affecting such trade, including support measures, export subsidies and other trade-distorting measures, while at the same time ensuring special and preferential treatment for third world countries.

It also recognises the growing importance of third world countries as importers of commodities, the continued importance of industrial countries as major markets, and the link between trade liberalisation in commodities and market transparency.

The UNCTAD secretariat, it suggests, should provide technical assistance to third world countries in the Uruguay round negotiations, with such assistance oriented towards improving access conditions in industrial country markets for agricultural, tropical and natural resource-based products.

UNCTAD should also undertake analyses of the issues and periodically monitor the progress in the Uruguay round.

On compensatory financing, the paper recognises commodity related shortfalls in export earnings of third world countries as an important obstacle to their development efforts.

The UNCTAD intergovernmental group of experts on this issue, it would have the Conference decide, in making its recommendations should examine the various international options, bearing in mind the balance-of-payments and commodity-related approaches.

The former is favoured by the U.S. and other western countries, while the latter is suggested by the G77.

The paper takes note of the third world countries stress on strengthening and improving (to facilitate increasing drawings and more appropriate conditionality) in the existing IMF facility, and recognises the value of contractual arrangements in this field as in the EEC/ACP stabbed scheme.

It also highlights the desirability of other industrialised countries introducing such schemes, and welcomes Swiss moves in this direction.

On the synthetics and substitutes issue, the paper recognises the need to deal with the issue in the broader developmental context, and for programmes to focus on improving competitivity of natural products vis-à-vis synthetics and substitutes.

On disposals of non-commercial stocks, it suggests that such disposals should not disrupt commodity markets, and should be done in consultation with producers, and where appropriate commodity organisations.

The paper calls for recognition by the Conference of the unique role and competence of UNCTAD in the area of commodities, and reaffirmed "the negotiating, coordinating, monitoring and technical assistance" aspects of UNCTAD activities.

The strengthening of such activities, and in particular UNCTADís coordinating role as lead UN organisation on commodity issues, was also emphasised.