TRADE: The Long Road to Equitable Exchange

By Gustavo Capdevila Reprint | | Print |

Analysis - Gustavo Capdevila

GENEVA, Nov 29 1999 (IPS) - Developing countries waged hard-fought wars of diplomacy in the 1960-70’s to secure better, more stable terms of trade in basic products – practically their only source of income. Today, however, those raw goods have become bogged down in a period of historically low prices and the majority of developing countries have seen their shares in the world market drastically reduced.

Significantly, while the participation of primary goods exporting countries in the international market was collapsing, the share of the most industrialised, advanced nations was rising or it stayed the same.

For example, the share of African countries in the raw products market declined during that period from 8.6 percent to a mere three percent.

At the same time industrialised nations like the United States – which, in many cases previously were net importers of primary goods – became leading exporters of those same goods.

The phenomenon is related to a new climate of world trade liberalisation, in which giant transnational companies in the West are merging or creating strategic alliances to seize international markets, says the South Centre, a research institute headquartered in Geneva that is supported by countries in development.

Rubens Ricupero, secretary-general of the United Nations Conference on Trade and Development (UNCTAD), recently expressed concern over this trend and invited more research into the consequences of the increasingly tight grip of industrialised nations on the raw goods market.

Ricupero points out that the 68 countries of Africa, the Caribbean and the Pacific (ACP) region also experienced reductions, from 8.4 to 3.1 percent, in their participation in the primary goods market.

The share of the 48 least developed countries fell to 1.2 percent, less than one-fourth of their previous level.

The South Centre observes that many characteristics of the current trade situation mirror the colonial era. Studies on the period from 1870 to 1920 show the profound consequences of liberalisation during that epoch, with huge benefits for the Western powers.

In the 1990s, after two decades of intense efforts to liberalise global commerce, the average trade deficit of developing countries has surpassed three percent of the gross domestic product (GDP), the average registered in the 1970s.

A key period in the economic disempowerment of developing nations was the early years of the 1980s, when they were faced with and sharp and persistent fall in the prices for raw commodities, triggering huge losses in the foreign currency revenues earned from exportation of those products.

Up to that point, the international trade picture for developing states looked promising, especially because there was strong political will to rectify trade imbalances as a consequence of the social changes taking place.

In the more hopeful times of the 1960s and ’70s, international agencies and regional blocs promoted fair trade practices for the developing South, in particular for nations newly liberated from colonialism.

Among such initiatives were the activities of UNCTAD, the Group of 77 – which unites developing countries – and the Movement of Non-Aligned States.

The successful experience of the Organisation of Petroleum Exporting Countries (OPEC), which secured a significant upward revaluation of crude oil during the 1970s, heightened the illusion of a “power of basic products,” reflected in the creation of international accords on commodities like wheat, coffee, tea, cocoa and tin.

Nearly all those efforts came to little and today world trade in raw goods, almost without exception, is controlled by a handful of giant corporations, “veritable oligopolies with vast influence over the laws governing economic competition,” says Ricupero.

But the failure of those accords was not due to their supposed impracticality but rather because “the most powerful nations have stood in the way of their realisation,” he says.

The situation of primary goods has been further complicated by the massive fall-out from the 1997 Asian crisis. For example, the recovery of the petroleum oil sector seen at the end of 1999 does not stem from increased demand, but management of supply.

If producers and consumers do not start to collaborate, there will be persistent instability, with roller-coaster ups and downs in prices, as is happening with oil.

Ricupero is pessimistic about the chances of eliminating monopolistic domination over the primary goods market, at least in the short term. That phenomenon shows, he said, that the structure of the market directly influences the deterioration in the terms of trade for developing countries.

The South Center is not very hopeful on the matter, either, recalling that the World Bank has warned that basic commodities prices for 2000 will be similar to those of 1999, creating a critical situation for developing countries.

For affected nations, as during the 1960s and ’70s, there is still the possibility of joining forces to demand a more just system that assures them greater access to the markets of the richest countries and more flexibility to adopt domestic policies for the improvement of their productive sectors.

“I don’t think that the specific differences in some sectors of trade would be an obstacle to developing countries presenting a united front,” says Ricupero.

Argentina and Brazil, for example, which have strong interests in agriculture, should understand that for a net importer of food like Egypt, a compensatory system must be found.

Similarly, in the case of India, where farming activities generate from 60 to 70 percent of all jobs, the issue of agriculture cannot be subjugated to the laws of the market, he insists. The agricultural problems of Argentina are not with Egypt or India, but rather with France and the European Union.

But Ricupero predicts that the industrialised countries will foment discord among the nations of the South, in particular among the widest group of developing states and the 48 poorest in the United Nations, which have been declared “least developed countries.”