THE POLITICS OF THE UNCTAD COMMODITY CONSULTATIONS: IMPACT ON NORTH-SOUTH RELATIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00889A000800130001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 16, 2016
• Document Release Date: December 16, 2004
• Sequence Number: 1
• Publication Date: September 1, 1976
• Content Type: REPORT

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CENTRAL INTELLIGENCE AGENCY
OFFICE OF POLITICAL RESEARCH
STAFF NOTE NO. 7
THE POLITICS OF THE UNCTAD CONWDITY CONSULTATIONS:
IMPACT ON NORTH-SOUTH RELATIONS
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Staff Notes are occasional papers,
undertaken at the initiative of the in-
dividual analyst and reviewed by interested
colleagues within the Office. They do not
receive formal Office review. Questions
and comments should be addressed directly
to the author
State Department review
completed
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This fall, the first inter-governmental "commodity consulta-
tions" will begin on UNCTAD's (UN Conference on Trade and Develop-
ment) "integrated program" (IP). The IP is designed to improve
substantially the terms of trade for LDCs on basic commodities
that account for 60 percent of their exports. This note reviews
the significance of the IP issue to US interests in a North-South
dialogue, identifies the major differences that are surfacing
among the LDCs as they prepare for the negotiations ahead, and
discusses the impact such differences could have on the course of
North-South relations.
Background: The IP and US Interests
The resolution on commodities adopted at UNCTAD IV (Nairobi,
5-31 May 1976) calls on that organization's Secretary General to
convene by the end of 1978 a negotiating conference on implementing
the Integrated Program. The IP, an idea developed by the UNCTAD
secretariat during the 1960s and formally called for in the UN
General Assembly resolution on the "New International Economic
Order" (NIEO) at its Sixth Special Session in 1974,* involves six
* The resolution was declared "adopted" and no actual vote was
taken. Some 200 reservations, however, were read into the record
by spokesmen from the US and other industrialized countries.
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basic measures designed to improve substantially the terms of trade
-- the negotiation of a comprehensive agreement covering
at least 10 (and possibly as many as 18) commodities,
with stockpiling arrangements where appropriate, to help
stabilize prices and supplies;
-- the establishment of a common fund to finance the
purchase of any buffer stocks that might be needed to
support agreed on price ranges;*
-- the establishment of multilateral, or coordinated
bilateral, government purchase and supply commitments
for commodities;
-- the establishment of a system of compensatory pay-
ments to LDC exporters that would make up for any export
short falls or slack demand;
-- the expansion of processing and diversification of
production in commodity-exporting LDCs;
-- the creation of an indexation mechanism to guarantee
LDCs purchasing power from commodity exports that would
automatically adjust commodity prices upward as the
costs of imports required for development purposes rose.
The specifics of the IP are to be hammered out in a series of
preparatory meetings called "commodity consultations." The first
one is scheduled for 27 September on copper.
The US (along with Germany and Japan) opposes the IP. The
central argument against the concept is that government inter-
ference with international market forces should be kept at a
* The UNCTAD IV commodities resolution calls for a negotiating
conference on the Common Fund to be held in March 1977.
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minimum. Assistant Secretary of State for Economic and Business
Affairs, Joseph A. Greenwald, in testimony before the Senate Foreign
Relations Committee (27 July 1976), outlined the basic objectives
of US commodity policy in the following terms:
1. To insure adequate investment in resource
development to meet market demand in the decades
ahead;
2. To improve the functioning of individual
commodity markets through case-by-case consideration
of specific problems and the adoption of appropriate
arrangements;
3. To improve market access for the processed
goods of developing countries;
4. To assure security of supply for consumers;
5. To promote stable growth for the commodity
export earnings of the developing countries.
In addition and in responding to LDC claims about the virtues
of the IP, US spokesmen have argued that existing commodity nego-
tiation mechanisms are adequate, that a comprehensive international
commodity program would adversely affect some LDCs, and that the
financing of buffer stocks should be negotiated on a case-by-case
basis only. US proposals have been designed, consequently, to
"defend" the price (i.e., establish floors and ceilings and mechanisms
to sustain them) of only those commodities (e.g., coffee and tin,
but not cocoa) for which fluctuations in price are not symptomatic
of chronic supply and demand problems.
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In the case of those commodities for which price fluctuations are
caused by systemic problems (e.g., too much of it is consistently
produced), the US approach has been to promote investment, expand
markets, or encourage diversification into alternative production
for the countries affected.
At UNCTAD IV, the US delegation decided not to oppose the
commodities resolution (which declared that the delegates were
"convinced" of the need for the IP), and permitted it to be adopted
by consensus "because we wanted to contribute to the spirit of
harmony in the closing sessions of the conference and because the
resolution contained a number of elements of our own comprehensive
approach...."* However, the US delegation read objections into
the record to the effect that commodity consultations would be
held only "to determine, without commitment [to the IP principle],
the measures which might be appropriate" to each commodity, that
these meetings would be convened largely through existing bodies,
and that US participation in the preparatory meetings on buffer
stocks would only be to determine if a commitment to such a
mechanism should, in principle, be made.
The LDCs nevertheless appear to believe that they can build
up enough momentum through the consultations that, like it or not,
* Joint statement by Secretaries Kissinger and Simon, 1 June 1976.
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the US will be faced with some difficult choices in 1978. That
is, as one of the prime advocates of a North-South dialogue, the
US will be faced with having to oppose the results of months of
effort, and in so doing run the risk of precipitating a return
to the spirit of confrontation that pervaded North South relations
in 1973 and 1974. There is also the belief in some quarters that
the forthcoming negotiations will further divide the developed
countries, and that those who are the most dependent on raw
materials supplied by LDCs will side with the advocates of the IP
N and further isolate the US
The significance of e negoriarrom, head, then, lies in
their impact on the course of North-South relations. At issue is
not only whether there can be a dialogue despite fundamental
differences over the basic principles underlying it, but also
whether the LDCs can, through their solidarity, build a momentum
into these negotiations that, through its impact on trilateral
relations (i.e., the US, Western Europe, Japan), will change
the US position on the IP and other NIEO demands.
LDC Differences Over the IP: Impact on Southern Solidarity
The 113 countries, who today belong to the LDC bloc in the
UN (called the Group of 77, referring to its size when originally
established) have thus far achieved substantial consensus over
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LDCs to make any choices.
the need to present their demands in a united front. Solidarity
has been maintained because, on the one hand, G-77 leaders* have
been extremely careful to avoid debates on contentious issues (e.g.,
which commodities should be excluded from the IP; whether exclusive
trade preferences achieved by groups of LDCs through negotiations
with former colonial powers should be extended to all, what actual
priority debt moratoria should have) and, on the other hand, be-
cause the developed countries -- in considerable disarray over
what to do about LDC demands generally -- have not required the
* The G-77 has a core of influential statesmen who have been
consistently called on to manage its affairs. The core group
includes experienced negotiators, with established reputations
as technocrats or international civil servants, as well as
politicians with impressive "anti-imperialist" credentials and
solid power bases in their own countries. The latter have con-
tributed slogans and other devices to preserve LDC solidarity
despite regional and economic differences, while the former have
largely been in char e of G- 77 ""foreiL-n relations"
trial countries.
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The commodity consultations threaten this solidarity.
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the impact of automatic anti-
colonialism and of political Third World 'causes' tends to fade
in the face of parochial economic interests." And no set of
issues threatens to give vent to these parochial interests more
than those likely to be raised in the commodity consultations
becaus the
developed powers."
commodity issue invokes "almost as many conflicting parochial in-
terests...on the part of the...G-77 as between that group and the
The basic concern of G-77 leaders is that the forthcoming
consultations will rapidly erode the harmony that has made LDC
solidarity possible. Ironically, one way it could do this is to
begin to succeed. The fear here, in some G-77 circles is that
as the consultations proceed, those LDCs which are the poorest
and most import-dependent members will feel either that their
problems are being overlooked or that the price for concessions
Another set of fears stems from concern about the impact
of the consultations on relations between commodity producers.
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Producer associations or international commodity agreements al-
ready exist for eleven of the eighteen commodities mentioned as
candidates for the IP. The signatory states to these agreements
disagree about whether the advantages achieved by such association
would be protected by an IP. These disagreements usually follow
regional lines, with the Africans often vigorously supporting the
IP and the Latins and the Southeast Asians frequently expressing,
V in private, considerable reservations about its practicability. j
In the case of coffee, which is the largest agricultural
export of the developing world,* the International Coffee Agreement
already includes provisions for export quotas and a price stabiliza-
tion mechanism. Brazil and Colombia (who supply about 45 percent
of the world market) believe the existing agreement should not be
abrogated in favor of the IP. Uganda, Angola, and the Ivory Coast
(who supply about 15 percent of the world market) do. In the case
of copper, the most important non-fuel mineral traded in inter-
national commodity markets ($6 billion in 1974), it is the same
story. The Intergovernmental Council of Copper Exporting Countries
(CIPEC) includes Chile and Peru, whose support for radical demands
to restructure the international economic system (i.e., NIEO) has
* The value of coffee exports is estimated to exceed $7 billion
in 1976.
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waned over the past year, and Zaire and Zambia who very much favor
the IP for political and ideological reasons. The International Tin
Agreement includes Malaysia, Thailand and Indonesia who have reser-
vations about the IP concept and Zaire and Nigeria, with the 11
showing signs of becoming one of its most ardent supporters.*
Discord over which commodities are to be included in th
IP are thus expected. Such differences made it impossible fo
the G-77 to arrive at a common list of commodities to be covered
by the IP in the Manila meeting, and led to acrimony behind the
scenes at Nairobi between African and Latin American LDCs on the
IP and other development issues. At the regional level, moreover,
attempts to reach agreement on common commodity policies have
proved extremely difficult.
observed of the ASEAN effort to develop a common policy on rubber:
"After eight months, five.states can't even agree on a single
commodity." Such experiences are increasingly being mentioned by
* In addition to the IP issue, the fact that many of the Latin
American states and most of those in Southeast Asia are more
economically developed than their African counterparts generates
tension over the priority given to LDC demands in general. The
more advanced states tend to soft pedal in public and oppose in
private such demands as LDC debt moratoria, codes of conduct for
multinational enterprises, and rules governing the transfer of
technology that are likely to antagonize the industrialized coun-
tries with whom they trade and from whom they receive their
investment capital.
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G-77 leaders as an ominous indication of the problems that UNCTAD
will encounter as it seeks to design a common program for q-, mn
as 18 commodities
Finally, there are indications that some I.DCs have begun to
have second thoughts about the IP concept itself. Such doubts
have been expressed recently by LDCs who participate in existing
and satisfactory international commodity agreements (e.g., OPEC,
the tin and coffee agreements), those who have won exclusive trade
preferences from developed countries that they would like to pre-
serve (e.g., the African signatories to the Lome convention), and
possible.
those which import large amounts of primary commodities (e.g.,
India, Mexico, Pakistan) and want to do so at the lowest price
Impact on Prospects for aNorth-South Dialogue
Recent statements by G-77 leaders reveal a growing concern
that LDC actions to protect their particular commodity or
advantage in the IP negotiations will undermine the legitimacy
of the various LDC institutions created to manage North-South
relation
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flie sharpening of differences on commodity issues threatens
to undercut the influence of moderates in LDC fora. While such
states (who were crucial to undercutting the radicals** and
** While LDC positions are always subject to considerable flux and
states that are moderate on one issue support radical stands on
others, over the past several years there has emerged a core group
of states who consider themselves radical and who have consistently
sought to direct and dominate G-77 and NIEO-related international
conferences. The radicals include Algeria, Cuba, Mexico, Pakistan,
Mozambique, Tanzania, Guinea, Benin, Sierra Leone, Mali, and Guyana.
Other states that show signs of embracing a radical, confrontation-
oriented approach are Nigeria. the Philippines and Indonesia. II
The moderates include most of Latin America,
Malaysia, Thailand, Ivory Coast, Zambia, Kenya, Liberia,
Senegal. Zaire and Peru, hitherto associated with the radical posi-
tion, have shown signs of shifting to a more moderate position along
with India, Sri Lanka, and Yugoslavia. Finally, the major oil
producers -- Saudi Arabia, Kuwait, UAE -- have consistently adopted
a low profile in all North-South gatherings, neither encouraging
the radical members of OPEC nor wanting to invite pressure for
greater support to LDC causes that would require extensive financial
contributions to Third World development projects and funds. This
latter objective has led to growing LDC criticism of OPEC's lack of
support for the IP and what has been branded "obstructionism" in
efforts to establish a IN special fund for Agricultural Development.
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promoting a dialogue between North and South) say in private that
they now realize that each commodity must be negotiated separately,
they also say in private that they have supported the IP in order to
retain credibility in LDC gatherings. This ploy worked as long as
there was no need to make choices. Now that the moderates are
involved in commodity consultations, national interests may over-
ride both the desire for solidarity and influence. And, as individual
commodity exporters make their deals (as it were), the G-77 could
well return to being a rhetorical platform for rad'
poor LDCs rather than a serious negotiating body
In sum, the differences that have long been beneath the
surface in the G-77 will likely rise rapidly once the commodity
consultations are underway. Such differences will probably con-
tribute to some outcomes consistent with US objectives (e.g., at
least tacit acceptance of the case-by-case approach). But these
differences would also lead to the further polarization among the
LDCs vis-a-vis the developed countries such that the moderates will
no longer be able to influence G-77 strategy and tactics. The
positions and tactics of the radicals could thus become more
extreme and some states that have hitherto not supported confrontation
may be more inclined to do so. These developments would make it
increasingly difficult to conduct US-LDC relations in an atmosphere
free from confrontation and to manage and sustain a North-South
dialogue.
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