DEVELOPMENT: Commodities Exporters Need State Support – Experts

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Feb 4 2003 (IPS) - Government support is needed to diversify exports in the developing world, which is highly dependent on commodities trade, say experts convened by the United Nations Conference on Trade and Development (UNCTAD).

”Public intervention is an essential part of any plan to tackle the commodity crisis in producing countries,” said Jeremy Hobbs, executive director of Oxfam International, the UK-based non- governmental organisation dedicated to fighting poverty and injustice worldwide.

The same conclusion can be reached considering Peru as a case study, said the Peruvian representative in Geneva, Jorge Voto- Bernales.

He noted that after a decade of economic liberalisation, his country remains dependent on external sales of its raw materials.

”It seems evident that active public policies are needed to promote the diversification of exports of developing countries,” Voto-Bernales told the UNCTAD gathering.

Commodities trade is the dominant economic activity of the developing South, particularly for the least developed countries (LDCs), stressed Samuel Amehou, delegate from Benin, speaking on behalf of the 49 nations that the UN has designated LDCs.

The figures Amehou cited show that commodities represent 70 percent of the LDCs’ exports, and in some cases surpass 98 percent of total export revenues.

And only an average 7.8 percent of commodities undergo a value- added process prior to export, said the LDC spokesman.

Amehou called on the international community to create solutions to this imbalance through rules, principles and mechanisms that take into account the needs of developing countries and of LDCs in particular.

Germany’s representative in Geneva, Walter Lewalter, took a more cautious stance, warning against the ”artificial distortions” that can arise from government intervention. ”The advantages of the multilateral trading system should be made use of,” he added.

Representatives from UNCTAD, a body with representation from the wealthy countries of the North and of the developing South alike, issued a statement that governments should act at ”critical junctures” to facilitate the conduct of business.

The UNCTAD document, presented during Monday’s sessions of its Commission on Trade in Goods and Services and in Commodities, clarifies that ”diversification of the commodity sector should not be construed as an attempt to produce and export a diversified set of products and services at any cost.”

The goal is to make the commodity sector ”a positive factor in generating a virtuous circle of development,” says UNCTAD.

In the past, countries like the United States, Canada and Australia followed strategies like this, and more recently countries of Southeast Asia and Latin America have taken similar steps, according to the text.

But UNCTAD recognises that ”international trading rules are much less accommodating now than they were earlier for the implementation of supportive policies by governments.”

One of the recurring examples in the debate was the crisis affecting coffee-exporting countries, which have seen global revenues plunge from 13 billion to seven billion dollars in the last three years, despite the increased volume of coffee exports.

Germany’s Lewalter noted that the World Bank likely played a role in the disruption of the international coffee market. The Bank financially stimulated the rapid expansion of the crop in Vietnam, ”which may have contributed to supply-versus-demand imbalances,” he said.

Oxfam director Hobbs agreed, saying, ”The coffee-market failure is also, in part, a result of stunning policy failure by international institutions.”

The International Monetary Fund and World Bank have encouraged developing countries to ”liberalise trade and pursue export-led growth in their areas of ‘comparative advantage’,” he said.

But for many poor countries that advantage can be very slim, said Hobbs, pointing to the flood of coffee and other farm commodities onto global markets.

LDC spokesman Amehou called attention to the fact that commodity prices in general have fallen precipitously during the past three decades, leaving the developing world with grave economic difficulties, and even compromising its balance of payment.

”Efforts must be made to promote export diversification, which would contribute towards reducing the economic vulnerability of commodity-dependent developing countries,” said Krisana Chandraprabha, the Thai representative, who spoke for China and the Group of 77, the UN forum of 133 developing countries.

Most of the speakers at the UNCTAD meeting attributed the difficulties confronting commodity-exporting countries to the market distortions caused by the heavily subsidised agricultural commodities in industrialised countries.

UNCTAD secretary-general Rubens Ricupero commented that state aid for cotton production in Spain reaches 75.9 cents on the dollar per pound (0.453 kg) of that product. In Greece it is 59.4 cents and in the United States 23.5 cents on the dollar per pound of cotton produced.

In contrast, Cote D’Ivoire subsidises its cotton-growers with just 2.2 cents on the dollar per pound, Mali 2.5 cents, and Brazil and Turkey three cents on the dollar per pound of cotton.

According to Oxfam, the solution to the problems confronting commodity exporters lies in requiring ”big subsidisers” like the United States and the European Union to commit to ”a drastic reduction in trade subsidies.”

Hobbs urged the creation of diversification programmes with adequate levels of funding and the adoption of international regulations for the commodities markets.