Initiative for Policy Dialogue and the South Centre Working Paper, March 2013

This paper: (i) examines the latest IMF government spending projections for 181 countries by comparing the four distinct periods of 2005-07 (pre-crisis), 2008-09 (crisis phase I: fiscal expansion), 2010-12 (crisis phase II: onset of fiscal contraction) and 2013-15 (crisis phase III: intensification of fiscal contraction); (ii) reviews 314 IMF country reports in 174 countries to identify the main adjustment measures considered in high-income and developing countries; (iv) discusses the threats of austerity to development goals and social progress; and (v) calls for urgent action by governments to adopt alternative and equitable policies for socio-economic recovery.

Reprint Series 1

In recent years financial policies in both industrial and developing countries have put increased emphasis on the market mechanism. Liberalization was partly a response to developments in the financial markets themselves: as these markets innovated to get round the restrictions placed on them, governments chose to throw in the towel. More important, however, governments embraced liberalization as a doctrine.

Le scandale montant du Libor est le plus récent et le plus grand coup porté à la crédibilité des grandes banques et de leurs organismes de réglementation.

Il ne pouvait pas éclater à un moment plus mal choisi pour le secteur bancaire, déjà aux prises avec de nombreuses graves crises. Il ne fait qu'empirer la perte de confiance dans les comportements des banquiers et la perte de crédibilité du système bancaire, déjà sérieusement entachées ces dernières années.

Research Paper 44, March 2012

This paper argues that the unprecedented acceleration of growth in the developing world in the new millennium in comparison with advanced economies is due not so much to improvements in underlying fundamentals as to exceptionally favourable global economic conditions, shaped mainly by unsustainable policies in advanced economies. The only developing economy which has had a major impact on global conditions, notably on commodity prices, is China. However, growth in China has been driven first by a rapid expansion of exports to advanced economies and more recently, after the global crisis, by an investment boom, neither of which is replicable or sustainable over the longer term. To maintain a rapid growth, export-led Asian economies need to reduce their dependence on foreign markets. For Latin American and African commodity exporters, gaining greater autonomy and achieving rapid and stable growth depend on their success in reducing reliance on capital flows and commodity earnings – the two key determinants of their growth which are largely beyond national control.

Document de recherche (résumé) - mai 2010

La crise économique mondiale est un signal d’alarme montrant que les PMA doivent revoir leurs stratégies d’industrialisation et de développement à long terme. Il n’y a pas une seule et même stratégie pour tous. Cependant, quelques lignes directrices communes devraient s’appliquer à tous.

Une étude réalisée conjointement par le Centre Sud et ActionAid International) - avril 2008

Résumé

Une corrélation positive a été trouvée entre la dépendance à l'égard de produits agricoles de base et la pauvreté, telle que mesurée par l’indice du développement humain (IDH). Ce lien a pour origine trois caractéristiques principales du marché des produits de base : la volatilité des prix, la baisse sur le long terme des prix et la concentration du marché.

La fluctuation des prix de produits de base est une plaie pour le développement économique des pays en développement qui les exportent, car elle entraîne des fluctuations des recettes d’exportation. Ces dernières entraînent à leur tour des fluctuations du revenu intérieur, de l’épargne et des recettes publiques (souvent largement tributaires des taxes collectées dans le secteur des exportations) et, par conséquent, une incertitude dans tous ces domaines. Cette situation a également un effet néfaste sur l’investissement intérieur dans les actifs productifs. Ainsi, la volatilité des prix de produits de base entraîne une instabilité macroéconomique, qui nuit au développement économique. Les problèmes sont généralement plus grands pour les pays qui ont de la difficulté à emprunter à l’étranger pour atténuer ces volatilités à court terme. Malgré la faiblesse et les limites des organisations internationales travaillant dans le domaine des produits de base et des offices de commercialisation de ces produits, qui servaient dans le passé d’outil de stabilisation, l’élimination de leurs instruments d’intervention a exacerbé la volatilité de ces marchés. L’abolition en particulier des activités commerciales de ces offices de commercialisation a éliminé les fonctions auxiliaires de ces dernières, telles que les services de vulgarisation.

 

(Étude réalisée conjointement par le Centre Sud et Traidcraft) - avril 2008

Résumé

Le pouvoir des acheteurs des entreprises de détail et de transformation, qui sont de plus en plus concentrées dans la chaîne d’approvisionnement agricole, leur permet d’exercer des pressions sur leurs fournisseurs immédiats, qui, à leur tour, exercent des pressions en amont de la chaîne de valeurs sur les producteurs de produits de base vulnérables et leurs travailleurs. Traidcraft et le Centre Sud sont préoccupés par les répercussions de cette situation sur les producteurs les plus vulnérables du monde, surtout que leur capacité à s’organiser et à réagir de façon collective est de plus en plus limitée. L’évaluation de la possibilité pour les politiques de la concurrence de servir de frein à l’exercice de ce pouvoir nous permet, dans cette étude, de déceler des éléments qui permettraient d’empêcher le cumul de pouvoir, un des éléments à l’origine de ce problème. Cependant, si l’on veut que la politique de la concurrence soit effective, il existe des limites claires (à la fois conceptuelles et pratiques) auxquelles il faut trouver une solution : les éléments de la politique qui portent sur le consommateur ; l’absence d’instruments au sein de cette politique qui servent exclusivement à évaluer et à réduire le pouvoir d’achat (à l’avantage du pouvoir de vente) ; et la peur associée au pouvoir d’achat, les contraintes en matière de ressources et, plus essentiellement, le besoin de reconnaître la dimension internationale des échanges soit en étendant la portée des lois nationales, ou en établissant un accord lié à la concurrence internationale ou une autorité en la matière.

 

Research Papers 12

EXECUTIVE SUMMARY

Horticultural trade, especially fresh fruits and vegetables from Sub-Saharan African to European market, has received a great deal of attention over the past decade due to the rapid and sustained growth of its exports to Europe. This impressive growth has undoubtedly contributed to increased national incomes and has reduced rural poverty in Sub-Saharan Africa. Good examples in this respect are Kenya, South Africa and, to some extent, Zimbabwe. Despite this growth, the inclusion and proportion of the rent obtained from this lucrative business for smallholder farmers, who in the past used to be the major players, have been worsening over the span of the horticultural trade. One of the major contributing factors is the recent changes and dynamism of the global governance of fresh fruits and vegetables value chain. The changes of governance of global value chains for FFV from the market based coordination to the explicit vertically integrated coordination, coupled with other factors such as stringent phytosanitary measures, private standards like EurepGAP, and the increased consumers’ demand and choices, have led to the exclusion of smallholder farmers in the value chain because of their failure to comply with different requirements and standards. This poses a potential threat to the efforts of addressing chronic poverty and well being of the rural poor in the region.

Thus, the purpose and scope of this paper were: to investigate, compile and analyze concrete evidence regarding the nature of changes in the governance of fresh fruits and vegetables value chain and their causes; to identify the opportunities and challenges stemming from these changes and what determine success and failure in the new future governance and architecture; to see how the competitive advantage of FFV producers is affected by the changes in the governance of FFV value chains; to discuss the implication of the changes for the aspirations of economic diversification of commodity dependent developing countries. Finally, the paper provides recommendations on copping mechanisms, private sector strategies, and public policy responses that would enable developing countries’ producers, taking into account ownership and equity considerations, to appropriate a fair share of the rents in the FFV value chains.

 

Research Papers 10

EXECUTIVE SUMMARY  (excerpt)

There has been widespread concern for many years over the very abstract nature of orthodox economic theory, especially that of the neo-classical school which has dominated the profession since the late 19th century. Such disquiet is frequently felt among non-economists, but a great many dissident economists have also expressed their disquiet over the years. A large part of the difficulty centres on the concept of “perfect competition”, not least the explicit removal from the basic theory of economics of the notion of market power.

This is of importance for development today for two reasons. Firstly, the pressure placed on developing countries since the 1980s has been to liberalise, deregulate and open up markets in all areas of their economies; that pressure continues in spite of extensively reported evidence of its damaging effects. Secondly, there is specific concern in areas of trade which are vitally important to developing countries, and the poorest countries in particular - agrarian in economic structure and commoditydependent in international trade as they are. In recent years, many people who have investigated the crisis of commodity prices have linked it closely with declining market power among agricultural producers, combined with excessive power at the buyers’ end of international supply chains.

This paper argues that the bias of conventional economics needs to be replaced with a more realistic theoretical basis, which will hold market power at its core. It can be divided into three parts. First of all the paper discusses the challenges to the basis of economic theory that have been posed over a long period, and especially challenges to the fundamental concepts of perfect competition and general equilibrium. Along the way, it notes the astonishing number and variety of leading economists who have themselves commented on their discipline’s failure to explain adequately how markets work and how prices are formed, although one might have thought that those were at the very heart of its subject matter.

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Research Papers 5

INTRODUCTION

“There is on the question of commodities a sort of conspiracy of silence. The solutions are not simple… But nothing justifies the present indifference.” President Jacques Chirac of France, in his address to the Twenty-Second Summit of the Heads of State of Africa and France, 20 February 2003(As quoted in UNCTAD, 2003a)

Although the structure of International Trade has changed significantly in favour of manufactures, primary commodities remain extremely important for several developing as well as Least Developed Countries. A large number are still dependent on a limited basket of primary commodities for their exports. For example, Nigeria is predominantly dependent on petroleum and cocoa; whereas 95%of Ugandan exports consist of coffee and 95% of Zambian exports consist of copper and zinc. Due to their inherent peculiarities, primary commodities face extreme price volatility in the short run and secular decline in the long run. This adversely affects primary commodity growers directly, and severely hampers the ability of the Governments of these countries to improve the welfare of their impoverished populace. More than a billion people are still dependent on the production and export of primary commodities in these countries, especially in the Highly Indebted Poor Countries (HIPC), African, Caribbean and Pacific (ACP) countries and the Sub-Saharan African countries (SSA). Even today a major portion of these populations earns less than USD 1 a day. Therefore no strategy aimed at attaining the ‘Millennium Development Goals’1, especially that of halving the number of extremely poor people by 2015, will succeed without a conscious effort to address the issues of primary commodities2.

Several attempts have been made in the past towards ensuring commodity price stabilization commencing with the Havana Charter. They include, among others, International Commodity Agreements, Marketing Boards and International Compensatory Financing Mechanisms. Unfortunately, none of them proved to be satisfactory and primary commodities remain an area of concern.

Commodities, today, are plagued by several issues, and just a few are quoted here: a) market access, b) value chain, c) subsidies, d) price volatility and e) a long-term secular decline in prices.

This paper is an endeavour to explore the Export Earning Instability experienced by the Commodity Dependent Developing Countries (CDDCs) originating from price volatility and its associated issues which “...constrain the ability of many developing countries to attain a path of stable and sustained growth and employment creation that could benefit all segments of their population and allow them to reach the [Millennium Development Goals] MDGs” (UNCTAD, 2005). It also attempts to suggest better policy options keeping in mind the lessons learnt from past efforts.

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Research Papers 2

EXECUTIVE SUMMARY

The past few decades have seen a huge surge in international trade that has affected developing countries as well as the world’s largest economies. However, while some countries have seen an associated increase in wealth, others seem to have been left behind. One of the key reasons for this seems to be that least developed countries have specialized in those parts of the production chain that do not generate large profits. Resource constraints have prevented developing country producers from participating in activities that require a large amount of investment. In commodity markets, these activities (such as processing and marketing) tend to be undertaken by large multinational companies based in developed countries. Due to their size, such companies have considerable market power as buyers, and can ensure that input prices remain low. This, coupled with the low responsiveness of demand to changes in income and price, has led to a long-term decline in the price of primary commodities. Hence, concerted measures must be taken to improve the welfare of rural farmers in the poorest countries in the world.

Policy measures may help to improve this situation by: (a) attempting to address the asymmetry in bargaining power between producers and their large vertically-integrated customers; and (b) assisting developing countries in diversifying into sectors where larger profits may be made.

At the national level, solutions might include: (a) implementing competition law according to the needs of developing countries (i.e. the protection of all powerless groups, including producers in commodity markets) so that claims related to buyer power can be addressed; (b) redesigning and improving the operation of producer groups (perhaps involving a role for State Trading Enterprises) in order to organize production and ensure compliance with quality and safety standards; (c) developing a comprehensive strategy such that the competition component in each type of government policy (industrial, trade, macroeconomic, etc) is focused towards overcoming the problems arising from concentration.

At the multilateral level, there are further possibilities: (a) any discussion of competition law at the international level should be framed according to the needs of developing countries and the development agenda and not in terms of market access; (b) international commodity agreements could be an alternative to the problem of asymmetry. However, it would be necessary to restructure their design and operation such that some of the shortcomings observed in the past are overcome; (c) there is an urgent need to keep pressing for a fair trade of the use of subsidies and tariff escalation in agricultural markets; (d) developing countries may find important support at the multilateral level to help them overcome problems of scarce resources and expertise.

At the regional level, suggestions include: (a) coordination of competition policy among smaller groups of countries; (b) cooperation to allow synergies which could contribute to solving the problem of the lack of resources faced by certain countries; (c) developing a regional competition law in order to increase developing countries’ leverage in negotiating cooperation agreements with antitrust authorities from large countries.

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Documents analytiques - novembre 2005

SYNOPSIS

Ce document (i) présente les problèmes relatifs aux produits de base et leurs répercussions sur les pays en développement qui en sont tributaires ; (ii) détermine les causes profondes de ces problèmes et (iii) examine certaines des principales politiques appliquées par le passé pour y faire face, leurs avantages et leurs limites. L’objectif de cette analyse est de donner un aperçu des problèmes et des conséquences d’une forte dépendance vis-à-vis des produits de base. Ainsi, les diverses questions qui doivent être abordées lors du Séminaire du Centre Sud sur les produits de base et le développement y sont présentées dans leur contexte.  cliquer ici pour télécharger

Document de recherche n° 3

INTRODUCTION

Au cours de cette année, nous avons eu la preuve que les gouvernements et les personnes peuvent déployer beaucoup d’énergie et faire preuve d’une très grande générosité afin de venir en aide aux victimes de catastrophes naturelles. La crise qui prévaut sur le marché des produits agricoles tropicaux, qui est provoquée par les êtres humains, n’a pas la même ampleur que toutes les autres catastrophes. Cependant, non seulement peu d’efforts sont consentis pour y remédier, mais seule une poignée de personnes en est vraiment consciente.

Ce document étudie le rapport entre les conditions de production et de commercialisation de trois produits destinées à la fabrication de boissons, à savoir le café, le cacao et le thé et le bien-être des hommes et femmes qui les produisent. L’étude de cette question révèle cependant de nombreuses interprétations erronées des concepts de développement qui touchent non seulement le secteur des produits destinés à la production de boissons, mais à bien d’autres domaines encore. Un tel constat peut également permettre d’envisager les types de mesures qu’il faudrait prendre afin d’améliorer les perspectives économiques de centaines de millions de personnes qui vivent de l’agriculture dans les pays en développement.

La principale caractéristique de ces trois produits agricoles de base a été la chute vertigineuse de leurs cours sur les marchés internationaux durant les 25 dernières années et le fait que les producteurs que sont les petits exploitants et les ouvriers agricoles reçoivent une part de plus en plus petite du prix au détail de leurs produits.

En ce qui concerne le café et le cacao, les cours mondiaux ont chuté de plus de 25 % depuis 1980 et celui du thé de plus de 50 % durant cette même période. L’indice mensuel de la Banque Mondiale des prix des produits destinés à la production de boissons (la moyenne combinée de ceux du café, du cacao et du thé) a baissé de 71% entre 1997 et 2001. Bien que les prix, libellés en dollars, aient connu une légère augmentation depuis lors, le dollar a quant à lui perdu près du tiers de sa valeur face aux plus grandes monnaies durant cette période.

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Document de recherche n° 4

RÉSUMÉ

L’économie de la plupart des pays en développement est largement tributaire des produits de base. Or, il existe des liens étroits entre la pauvreté et la dépendance à l’égard de ces produits, qui constituent la principale source de revenus des populations pauvres vivant dans les zones rurales. Sur 141 pays en développement, 95 sont tributaires à plus de 50% de l’exportation de produits de base et plus de la moitié des revenus à l’exportation de 46 pays dépendent de 3 produits de base ou moins. Cette dépendance à l’égard des produits de base n’est pas sans poser de nombreuses difficultés. La baisse chronique des prix, la volatilité des marchés, l’octroi de subventions ayant des effets de distorsion sur les échanges, la mise en place d’obstacles aux commerce et la forte concentration du marché sont autant de facteurs de vulnérabilité économique qui favorisent la dépendance des pays en développement à l’égard des produits de base.

L’histoire nous montre que la fabrication et le commerce des produits de base ont été profondément marqués par les avancées scientifiques et techniques. En effet, les progrès réalisés dans ce domaine peuvent être à l’origine d’importants dérèglements et provoquer ce que certains économistes dénomment « une destruction créatrice ». Les nouvelles technologies ne font pas exception à la règle, entraînant une évolution rapide et soudaine du secteur de la production primaire et de la demande en matières premières. De manière générale, l’industrie des nouvelles technologies est mieux préparée à faire face à l’évolution de l’offre et de la demande que le secteur des produits de base qui n’est pas conscient des changements à venir et semble moins à même de procéder rapidement aux ajustements nécessaires. Les historiens des sciences et les économistes comparent souvent les avancées technologiques à des vagues dont il est possible de prévoir les phases ascendantes et descendantes.

Avec l’apparition des nanosciences et des nanotechnologies, les pays en développement tributaires des produits de base sont aujourd’hui confrontés à de nouveaux défis. Les nanotechnologies désignent les activités dans lesquelles la matière est manipulée à l’échelle atomique et moléculaire, laquelle se mesure en milliardième de mètres. Ses effets potentiels sur l’économie mondiale sont prodigieux. De par son ampleur et sa portée exceptionnelle, l’avènement des nanotechnologies est décrit – non pas comme une vague – mais comme un véritable raz-de-marée qui progresse rapidement sans se faire remarquer et qui provoquera, à terme des changements rapides, gigantesques, irrémédiables dont les effets seront potentiellement dévastateurs. Les nanotechnologies constituent une plate-forme technologique susceptible de modifier ou de transformer en profondeur l’état actuel de l’art dans les principaux secteurs industriels (notamment la médecine, l’alimentation, l’agriculture, l’électronique, l’informatique, les matériaux et la fabrication. Elles permettront, dans les années à venir, de révolutionner la manière de concevoir et de fabriquer de nouveaux matériaux dans tous les secteurs industriels. Un rapport d’analyse publié en 2004 par Lux Research, Inc. souligne la capacité des nanotechnologies de « modifier les parts de marché, de déplacer les chaînes de production et la main d’oeuvre dans presque tous les secteurs. »

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Research Papers 1

INTRODUCTION

A number of developing countries,1 and especially least developed countries (LDCs), rely on agriculture for their food security, export earnings and rural development. It has been estimated that the agricultural sector accounts for between 30 per cent and 60 per cent of gross domestic product (GDP) for many of these countries, and is the major source of foreign exchange. The Food and Agriculture Organization of the United Nations (FAO) (2002) noted that the economies of many developing countries depend on the exports of one or a few commodity exports, making them particularly vulnerable to price variations on specific commodities. It noted that single commodity-dependence is more pronounced in tropical regions, and notably so for specific tropical products including sugar, coffee, bananas, cotton lint and cocoa beans. The variability and decline of commodity prices is well documented (FAO, 2005). It erodes the competitiveness of commodities exported from non-subsidizing developing countries, discourages investment and expansion of their food exporting sectors and, in the event that developing countries depend heavily on agricultural exports, worsen their terms of trade.

According to the FAO’s State of Agricultural Commodity Markets (2005), the variability and decline in international agricultural commodity prices has serious implications for developing countries that are highly dependent on commodity export earnings, especially from traditional tropical crops. Since tariff escalation in agricultural markets is regarded as one of the major factors hindering the processing of traditional products for export, analysts have explored the potential for exporting non - traditional fresh fruits and vegetables to QUAD countries (Canada, the EU, Japan and the United States). These are valid alternatives because first, tropical fruits and vegetables are not usually cultivated in QUAD countries and therefore, their trade is not distorted by domestic producer support measures. Secondly, consumer tastes in QUAD countries are diversifying into ‘exotic’ tropical fruits and vegetables. The FAO for example, is currently helping market players to develop international trade for organic mangoes and pineapples produced in Sub-Saharan Africa.

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South Centre Analytical Note - August 2005

INTRODUCTION

Many developing countries are rich in natural resources and in particular mineral commodities. While the extraction and processing of mineral commodities through large scale mining can make a major contribution to the economies of developing countries by providing export and fiscal revenues, it can also raise economic, environmental and social issues that pose policy dilemmas from the Government’s perspective.

In that context, the purpose of this paper is to identify the limitations developing countries face to design, implement and enforce laws and policies intended to foster a developmental strategy based on mineral commodities.

This paper is structured in four sections. The first one describes the mining production process, the location of mineral resources and specialization patterns. The second section explains the general characteristics of the large-scale intensive mining industry and the operations of transnational corporations. The final section identifies challenges faced by developing countries to engage in view of this context and presents policy recommendations.

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South Centre Analytical Note - August 2005

EXECUTIVE SUMMARY (excerpt)

A supply management programme can be defined as a policy tool that controls the production and supply of a commodity in order to achieve a desirable price objective in a relevant market. The relevant market could be domestic or international. Many governments in developing countries, NGOs, civil societies, producer organisations and academics have recently voiced their support for the reintroduction of supply management programmes for addressing some aspects of the commodities problem.

The importance of supply management as a mechanism for addressing certain aspects of the problems of tropical cash crop commodities is justified by multiple cases of market failure, particularly structural oversupply of commodities, which market forces cannot fully correct. However, supply management schemes are neither applicable to all commodities nor panaceas to the commodities to which they can be applied.

Supply management programmes can be broadly categorised into domestic (national) and international schemes based on the nature of commodities covered under them and on their objectives. By the nature of commodities covered by the scheme, it means whether the commodities are tradable domestically or internationally. By objective, it means whether the primary target of the scheme is the domestic or international market.

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South Centre Analytical Note - April 2005

INTRODUCTION

Information on non-agricultural commodities is not as widely available as for agricultural commodities. The purpose of this paper is to identify, in contrast to agricultural commodities, what is the extent of dependency of developing countries on non-agricultural commodities, what are the main characteristics of this dependency, which developing countries are most dependent on this type of commodities and what are the challenges they face in the trade arena and from a wider developmental view.

Many developing countries are highly dependent on non-agricultural commodities. Although declining prices, price fluctuations, commodity export dependence and lack of diversification are similar to agricultural commodities, there are other issues with pose specific challenges to their sustainable development.

This paper is structured in the following manner: we will first define what nonagricultural commodities are, then we will identify which commodities developing countries are most dependent on, we will examine their trade patterns and price tendencies and then we will identify the challenges faced by developing countries dependent on non-agricultural commodities.

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South Centre Analytical Note - November 2004

INTRODUCTION

A large number of developing countries heavily rely on a narrow range of primary commodities for their export earnings. Similarly, millions of people in developing countries depend on the production of primary commodities as a sole means of income for daily life. Therefore, commodity price instabilities and deteriorations have detrimental welfare impacts for commodity dependent developing countries. Empirical evidences vastly documented that commodity prices in general exhibit excessive fluctuations and secular declines. As a result, stabilisation of commodity markets at remunerative price levels through international commodity agreements (ICAs) was envisaged as crucial for fostering macroeconomic stability and growth. For this reason, the establishment of the Integrated Programme for Commodities (IPC) at UNCTAD IV in Nairobi in 1976 under the auspices of the United Nations and the successful completion of negotiations to establish the Common Fund for Commodities (CFC) in 1980 to finance ICAs for the full extent of their requirements for buffer stock operations marked a new era of optimism.

However, the decades that followed the establishment of the IPC programme and the CFC ushered an era of despair and pessimism for primary commodity producing countries. Starting from the collapse of the tin agreement in 1985, market stabilisations through ICAs have been obliterated. The periods followed the demise of the ICAs have been characterised by mistrusts and suspicions of market stabilisation policies; and advocacies for neoliberal commodity markets. Moreover, commodity price risk management instruments have been championed as viable and better alternatives for market stabilisation policies.

The objective of this paper is to cautiously analyse whether leaving commodity markets to operate in unfettered fashion while hedging commodity price risks through the use of commodity risk management instruments is a viable and better alternative than market stabilisation policies. The rest of the paper is organised as follows: section II thoroughly analyses the objectives, instruments, designs, operations and the demises of the ICAs. Section III briefly looks into the characteristics of commodities under neoliberal markets with a particular emphasis to the welfare consequences of commodity market liberalisation. Following that, section IV outlines the benefits and limitations of the commodity risk hedging instruments in the context of their suitability and adaptability to the conditions that producers in developing countries encounter.

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South Perspectives - March 1996

FOREWORD

The aim of the present report is to encourage the developing countries to bring the commodities issue back onto the international agenda, and to suggest some broad directions that an initiative by the South could take, including proposals for specific action by the international community or by the South itself, through the Non-Aligned Movement or the Group of 77. The report has two principal components. The first -- Part 1 -- comprises an overview of commodities issues as they affect developing countries. This part also presents the broad lines of a possible strategy that developing countries could pursue to improve their individual and collective situation in world trade in commodities.

Part 2 presents a more detailed analysis of recent experience with regard to commodities and to international commodity policy. It considers the main trends in world commodity markets over recent decades, and highlights the nature and magnitude of the present problems facing the commodity-dependent developing countries. Then, the inadequacy of past international policy responses is examined, with particular attention to the limitations of a policy of complete reliance on the free play of market forces in dealing adequately with the commodity problems of developing countries. This is followed by detailed consideration of possible policies for dealing effectively with each of the major commodity problems. While collaborative action by the South and North on each issue would be the preferable approach, in cases where Northern governments are unwilling to take action -- for example, because opposed in principle to intervention in the commodity markets -- then it is argued that Southern commodity producers should seriously consider whether they themselves could take appropriate measures in common to safeguard their trade interests.

Finally, all the major suggestions for specific action by the South are brought together.

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