UNITED NATIONS
ECONOMIC
SOCIAL COUNCIL AND
Distr.
LIMITED
OAU/tRAD/22
/4/5 August 1969
Original : ENGLISH
C
ECONOMIC COMMISSION FOR AFRICA
Fourth Joint Meeting of the ECA Working Party on Intra-African Trade and the OAU Expert Committee on Trade and Development
Geneva, 18-23 August 1969
COMMODITY PROBLEMS AND POLICIES Consultations among producing countries
M69-2136
E/CN.14/HP.1/23
OAU/TRAD/22!• The developing countries members of the Group of 77 in the Programme of Action contained in the Charter of Algiers have stressed the need for producing developing countries to consult and co-operate among themselves
"in orde^to defend and improve their terms of trade by effective co ordination of their sales policies." l/
2. However, they failed to get endorsement from the Second United Nations Conference on Trade and Development for a proposal that "producing countries should, wherever necessary, consult and co-operate among themselves in order to defend and improve their real export earnings by effective co-ordination of their policies in the commodity field." 2/ The proposal has been on the agenda of the third and the fourth sessions of the UNCTAD Committee on Commodities.
No agreement has beea reached and the consideration of the item has been defer red- to the fifth session of the Committee, in July 1970.
3. ■ This lack of support from developed countries should obviously not inhibit African countries from continuing their efforts to conoert their marketing policies among themselves and with other developing countries, as they already do in respect of some commodities. The Third Joint Meeting of the ECA Working Party on Intra-African Trade and the OAU Expert Committee on Trade and Develop ment therefore recommended that "African countries with the co-operation of the ECA take more active part in the establishment of associations and groupings of producing countries with the aim of ensuring eventually that producing coun tries are in a position to take self-reliant action in defence of their interests in the commodity markets." The ninth session of the ECA, in resolution 199(lX), endorsed the recommendations of the third Joint ECA/OAU meeting, and drew the conclusion that "the inherent contradictions between rich and poor could not be resolved until the bargaining power of the poor countries was strengthened." 3 4. The following note briefly reviews the institutional and economic aspects
of the question.
5« Before the Second World War action was by and large taken by the producers themselves, for a start more in the nature of producers' cartels, but subse quently with official involvement by the Governments of.the exporting countries- By means of restrictions on production and a dividing up of the market they sought to control prices. But only in cases in which production or ownership was particularly concentrated could effective control be established- Thus, in ternational regulation of the tea market, which first was attempted in 1933 4/, was facilitated by a high degree of concentration. The great depression of tha 1930's further saw the introduction of a tin restriction scheme by all the prin
cipal producers, 5/ Producers1 arrangements existed also for sugar and rubber.
P UNCTAD Second Session, Vol.I, p.433.
2/ Ibid,, p.397.
2/ Annual Report of the ECA to ECOSOC (E/4651), paragraph 307,
4/ These arrangements, in which no African producer participated, came to an end in 1965. However, tea producing countries, including African producers,
were meeting while this note was being prepared, to consider possible in terim arrangements among themselves pending a possible future negotiation of a formal international agreement.
5/ Two of which were Belgian Congo and Nigeria.
OAU/TRAD/22 /4/
Page 2
6. The Second World War altered the commodity situation so .completely that none of the arrangements from the inter-war period continued. Some of the producers' todies that had teen set up continued to operate, but
mainly as administrators of rationing sysxems,,7. International commodity agreements got international recognition by the Havanna Conference in 1947. Perhaps the most significant among the requirements of the Havanna Charter was that consumers should participate on equal terms with producers in shaping the provisions of an international agreement. This condition, which imply that an agreement is negotiable only wnen there is an identity of. interests of both parties, goes some way to account for the small number of agreements actually consummated since the Seoond World War. The new emphasis brought about by the first. UNCTAD did not alter this requirement. On the contrary, by relating the need to improve
tne long-term rate of growth of the commodity export earnings of the developing countries to inter-governmental co-operation, taking into account the
interests of the consumers, it rather strengthened the change, l/8* With the exception of coffee, the commodities for which international
agreements have been concluded after the Second World War have been those- in which the industrial countries are major producers or investors. The coffee agreement- represents the first international agreement in whioh the industrial countries are exclusively consumers. However, the ground had been prepared through action among the producers. The Latin American countries ■ introduced m 1957 a quota system, for controlling the movement of coffee to the world market. The arrangement was renewed annually, from 1959 in co operation with the major African producers, until in 1962 it was broadened
into a conventional control agreement.
9. Co-operative action among producing countries after the war has usually been prompted by a desire to mitigate the adverse effects on prices of excess supply ^as m the case of cocoa and sugar) or.to safeguard the long-term competitive position of a oonuaxlilj, ty controlling selling prices'(as in the
case of copper). Particularly in respect of commodities in surplus, the attempts have not been very successful.10. Thus in 1966 the majority of sugar.exporting countries attempted for m0 ^ maintain £ minimuni Price, hai had eventually to abandon the
1/ However, although the inclusion of all the major consumers in the
negotiation of a commodity agreement has complicated the task of
arriving at a corcensus, it obviously provides some more certaintythat the agreement will in fact be translated into action and com
plied with. .
2/ Review of International^Tr.a^.e and Development. 1967 (TD/5/Rev.l
paragraph 72) 0 ~*^ ■
E/CW.14/WP.1/23 OAU/TRAD/22
Page 3
11. Following the adjournment in October 1963 of the United Nations Cocoa Conference without an agreement having been concluded, the members of the Cocoa Producers' Alliance l/ (Brazil, Cameroon, Ghana, Ivory Coast, Nigeria
and Togo), together accounting for four-fifths of world production, initiated
a producers' arrangement to regulate the market through export quotas. This did not prove possible, and sales were resumed with a subsequent fair in
prices.
\2? 'The .members of the Organization of Petroleum Exporting Countries 2/
lAbu Dhabi, Indonesia, Iran, Iraq, Kuwait, Libya, Quatar, Saudi Arabia and V^ejue^a) have on the other hand reached settlements wiih the oil companies for the expansion of royalties and have also instituted production programming.
The measures recommended by OPEC have generally been-supported by non-member
exporting countries.
13- A-meeting; of four copper exporting countries (Chile, Congo (Dem. Rep. of),
Peru and Zambia), which together account for about 9£> per cent by value of all exports of copper from developing countries, have set up an Inter-governmental Council of Copper.Exporting Countries (CIPEC). The Council will "co-ordinate and propose individual and joint measures on the international copper markets production processes and any other measures designed to obtain legitimate Increased revenues from copper exports of member countries-" y
14; Since the 1963/1964 season Australia, Greece and Turkey, accounting for about two-thirds of world exports of raisins, have agreed and applied minimum export prices for raisins within the context of an International Sultana Agreement. The United States, which is the world's fourth largest exporter, is not a member of the Agreement, but its raisin industry informally supports its price provisions. Prices have shown greater stability at a level sub stantially .higher than before the agreement, but stocks have increased con siderably. The members of the Agreement are therefore undertaking market research and promotion, particularly in new markets.
15. The African Groundnut Council 4/, which now comprises seven countries
(Congo (Dem. Rep. of), Gambia, Mali, Niger, Nigeria, Senegal and Sudan),
accounts for more than 90 per cent of world groundnut exports. The Council is having an information bureau and is holding regular meetings of marketing directors to exchange information on selling operations.
1/ Established in 1962.
g/ Established in I960.
Foreign Trade Newsletter (E/CN.14/STC/FTN/18-19), p. 193.
Formally established in 19.64, but consultations had been instituted among the two main producers, Nigeria and Senegal, already in 1962.
Page 4
16. The Inter-African Coffee Or^a^ig^tior, (l^COV j/ K_th..17 coffee, pro
ducing countries in Africa as members, is working on marketing problems within
the framework of the International Coffee Agreement;- •' 9?he"International' Insti tute for Cotton 2/, comprising" eight exporting countries (in Africa:/ Sudan, Tanzania, Uganda.and UAr); undertakes market research and sales promotion.
The International Tea Gommi'ctoe a comprising nino exporting countries (in Africa:
Kenya, Malawi, Mozambique, Tansania and Uganda), maintains an information
centre and collects and publishes statistics. The Commonwealth Sugar Exporters
comprises eight e^ortiftg;"J>artn'ers:;~(in"Africar last Africa, Mauritius and
.Swaziland), /to the Commonwealth Sugar Agreement*. Finally,, ,t$e Zinc,Development
Association, comprising zinc mining and melting companies, in seven countries
(in developing Africas Zambia/ provides advice and information, to consumers.
17- In a special category comes the.* "re- f;.:v.^ac:,- Sugar Agreement which was signed 27 June 1966 Within the framework of the Afro-Malagasy Common Organiza
tion (OGAM)*' The two exporting countries of the Organization (Congo (Brazsa- vll^eji.an^.. Madagascar) supply sugar to the importing members at fixed prices
-up-to'a certain export quota, while the latter,-have .(jojmdtt.ted tjiems.e.j.'vie.s to buy at least 70 per cent of their imports of sugar "from:these two countries*An equalization tax is levied on imports from non-snember countries-^/ •
18, One conclusion which may be drawn from the above review is that the scope for producers' arrangements among developing countries appear to be limited so far as .ihe types of schemes which depend basically on regulating the flow of supplies on th'e world market are concerned* . .
19» If the aim of African producers is to improve their export earnings through producers V arrangements among.developing countries it therefore becomes necessary to distinguish between different categories of products by restating briefly a by-now convF.ntiona! classification of markets:
(a) Commodities produced exclusively or yerjr largely in developing countries without near substitutes-in-consUraptron. The main
commodities of interest to Africa" in this group are the tropical beverages coffee, tea and cocoa, manganese, and to some .extent tin;
(b) Commodities with industrial substitutes. The main commodities
of interest to Africa in this group would appear to be diamonds and rubber;
1/ Established in I960.
2/ Established in 1966.
The OCAM members have now started preparatory work on a similar agreement relating to meat.
Page 5
?=ss:
sEL
srr
for many tropical agricultural Jjjor Sporting wxST^
There mast therefore
?
The price elasticities -e the tropical beverages, in a certain price range, l/off, they cannot-:
ing countries. This would cbvio^l
attics of these oo^tries The
agreement is likely to ^/
country has as an C
independent policy it
Also, any ez^rt^&
preclude the aewer, and
An asree.ent should
among different develop^
o°? *»*?***** "^""^ and ^ ^ Afrloan country to any
^- °+f P-do.ina^e wh^ the
commodity and whether, by an
°^simil- —" for ifjll?
PerfBn"»<«e and might
°?
or a combination of themr following forms,
(b) Marketin
g arrangements; andof trade among developing countries.
account possible differences
E/CH.14/VP.1/23 OAO/TRiD/22 Page 6
Afrloa., Mafor Export Commodltiea. 1960 - 1<)67
■■ C oamod.lty
1. Petroleun, erude 2. Copper, not al 3. Coffee, raw 4. Cotton, raw 5. Cocoa, beans
6. Iron or* and concentrates 7. Vood and timber
8. Groundnuta 9. Diamonds 10. Tobaooo, raw
11. PhoBphatea (excluding fertilizer) 12, Sugar, r«w
13- Vina 14. Citrus fruits 15- Groundnut oil 16. Rioe
17. Hides and skin 18. Rubber 19. Tea
20. Manganese ore 21. Sieal 22. Tin, metal
23. Palm kernels and nuts 24. Palm oil -
. 25. Banana* . -. ' 26. Aluminium 27. Sesame seed 28. Kaiee 29. Zino, metal
30. Tin ore and concentrates 31. Pain kernel oil 32. Olive oil 33. Veneer and plywood 34. Lead ore and concentrates 35. Copra
36. Cotton ee«d 37. Castor seed 38. Cotton seed oil 39. Linseed 40. Coconut oil
Total listed products
Total exports (inol. rs-exporte)*"
i960
200
■ 517 357 640 393 98 149 158 139 113 109 93 269 68 6>
■ 35 65 108 40 44 78 - 8 107 78 36 18 22 t5 18 29 16 17 12 22 13 12 6 3 4 1
4,173
5,300
1961
388 508 371 559 383 94 166 202 120 129 110 114 243 94 65 28 56 85 43 47 70 2 83 76 43 20 21 22 16 27 12 24 12 16 14 17 5 4 2 2
4,293
5,430
1962
574 493 393 451 382 86 149 203 107 120 116 116 202 92 . 63 28 52 83 44 44 ' 81 23 74 59 40 22 27 27 19 20 9 34 17 12 11 19 6 3 4 2
4,307
5,540
1963
860 510 434 574 394 121 174 210 164 134 126 150 157 106 61 52 50 86 45 44 122 29 87 60 45 22 23 21 20 28 10 34 18 16 13.
17 7 3 6 2
5,035 6,240 ■
1964
1,140 598 618 525 426 175 219 - 209 182 137
;■ 156 143 "
162 127 -
79 77 47
85 '
46 50 113 40 87 63 42 ..-81 29 12 27 18 12 29 19 14 15 9 5 4
■ 5 2 .
5,767 7,240
Million US doll*
1965
1,423 695
• 540 602 412 200 205 209 178 162 157 122
;16O 87 93 49 52 75 50 60 72 48 102 64
40 20 ,
: *6 17 30 21 14 27 21 25 13 12 3 4 3 2
6,095 7,640
1966
1,811 949 645 612 338 208 199 235 185 170 160 134 126 104 90 .55 66 79 65 68 61 51 85 54 35 : 2i~'■
. 3.0'- ■.'■'
'3
25 ":
25 :
20 36 - ■■ = 18 ..
'5: ■_
11 12 5 4 2 2
6,824 8,220
rr..: . .
1967
2,043 912 606 553 448 216 202 198 190
.170*
160 J31 130
107*
89 78
. 70*
63 62 59 49 42 36 .34 34 -■ 31 26
■ 28
26
23 2?
'17
". '■■ 14r
\12 '.
■:'■ : V12 '■
,18 . 5 3 2 2
6,919 8,410
Sources■■ ECA, Statistics and Research Division 4 Estimated figure
ft/ UN Monthly Bulletin of Statistics, July I969.
069-404
E/CN.14/WP.1/23 OAU/TRAD/22
Page 7
24- The outcome of a commodity negotiation is always determined "by the extent to which sufficient bargaining power has been mobilized to induce the consuming countries to take into consideration the views' and objectives of the producing countries. If the producing developing countries could throw into the balance their combined supplier position (or their combined import potential) they could conceivably secure better consideration of their
export interests. African countries should therefore aim at forging praotical bargaining instruments within the framework of any on-going or anticipated international commodity negotiation.
25. There is need for developing countries to oo-ordinate their marketing efforts iii the widest sense, i.e-, including also appropriate policies in the producing countries designed to improve the quality of the commodity concerned, for instance through the development of new crops with more desir able properties. African countries should continue their efforts to insti tute joint programmes to build up or increase the general preference for a
commodity (as distinct from a particular brand or national source of supply).
Suoh programmes could be financed by a small levy on exports. The programmes for different commodities should be designed so as to ensure that a particular programme is not carried out mainly at the expense of another commodity (for example, coffee versus tea).
26. With the notable exception of petroleum and some base metals and rice, trade in primary commodities among developing countries is currently relatively unimportant. But there is scope for joint action within the framework of
individual commodity sectors. For a number of commodities of interest to Africa, possibly oils, meat, coffee, cocoa and tea, it might be possible for developing countries to work out multilateral arrangements, or at least bilateral long-term contracts, for the exchange of certain products among each other so as to take advantage of the high income elasticities for such products in low- income countries.
27. The possibility of establishing producers' arrangements are, it thus seems, best explored on a detailed commodity-by-coramodity basis. It appears that for most commodities the basic role of suoh arrangements would be to provide instru ments for improved international bargaining and for trade promotion and expansion.
Beyond that they could in some oases and under certain conditions be used for influencing prices with a view to raising export earnings. But, in these latter cases, it would improve the possibilities of success if the arrangement would have at least the benevolent acquiescence of the importing developed countries, l/
1/ As in the case of the informal export quota arrangements for sisal and
henequen operated since 1968 by the exporting countries, with the approval of the importing oountries.E/CN.14/WP«l/23 OUA/TRAD/22
Page 8
28. It has been seen that such arrangements have a long history. It has
also been seen that such arrangements often are an uncertain means of in- % '
creasing the export earnings of a developing country. The main- justifies- ; Jp tion for their continued pursuit is xne fact -chat in a distinctly unfavourable "{,;
international economic environment African and other developing countries must jl
use any course in order to achieve their purpose. !
29. Fundamentally the objective of a producers' arrangement, as of any inter national commodity agreement, should be to proteot and enhance t&e growth prospects of the developing countries participating in it. It is from this point of view that an African country, or gijoup of countries, should assess the various alternatives outlined in this note.
