Third World gains on Common Fund

Press, 21 December 1978, Page 16

Third World gains on Common Fund

By JOHN MADELEY in Geneva

The secretariat of the United Nations’ Conference on Trade and Development (UNCTAD) had just one thing in mind when, in 1975, it suggested that a new fund be set up to stabilise commodity prices. The fund was to finance buffer stocks of up to 18 of the world’s largest traded raw commodities. These stocks were to help to even out price fluctuations on world markets and give producer countries a more stable return for their commodities. Steadier commodity prices were to help industrial countries too.

But someone was inconsiderate enough to point out that not all raw commodities were suitable far buffer stocking —

bananas for example. It soon became clear that the producers of perishable commodities, who rank among the world’s poorest countries, would benefit little from a fund that financed only buffer stocks.

So these countries asked that the new fund should have a “second window.” This would finance other measures to steady prices. It would help poor countries to diversify away from over dependence on a cash crop and help with research and development into new uses for the crops.

Industrial countries, who did not like the idea of a Common Fund anyway, made it clear that as far as they were concerned the "second window” was a non-startar. Finance for these “other measures” was available from existing agencies, they said. Poor

countries replied by saying that if cash was available, they were not seeing much of it.

Over the last three years, developing countries have come to view this “second window” as fundamental to the Common Fund. And by mid-1978, the rich nations had yielded. Yes, they agreed ’ there should be a “second window,” but on one condition. It could only be voluntary. There could be no question, they said, of Governments making obligatory contributions. Third World countries thought this a ludicrous idea, but the Western nations were not budging any more. Last month, at the start of the latest rich-poor country negotiating conference on the Common Fund, they were insistent — voluntary contributions only.

They maintained that position rij’t up to the final hours of the conference, although on the “first window” of the fund, they showed flexibility and a broad consensus was reached on the basic elements.

Rich and poor agreed that all countries should pay a flat-rate entry fee to join the fund. Rich countries want the fee to be around $250,000; poor countries want it to be $500,000. They agreed, too, that Governments should make direct contributions to the new fund based on their volume of world trade. They disagreed on the amounts of these contributions — the poor want them to be $5OO

million, the rich no more than $350 million. They will meet again in February, 1979, to try to finalise the figures. On the “second window,” compromise proved more difficult. The Third World insisted that voluntary contributions were not good enough. “To us, the second window’ is too important to be left to chance,” pleaded a Zambian delegate, Mr E. J. Chanda.

Japan then came up with an ingenious proposal. Let countries have the option of earmarking their entry fee for the first or second “window.” The likely yield for the “second window” — $4O million. Then set a target of $3OO million for the “second window.” Rich countries would pledge themselves to meet that target. The proposal came too late in the proceedings for the negotiators to agree to it there and then. But the idea was widely accepted and it should form the basis of the “second window” when the fund eventually takes off. This could be towards the end of 1979. It was left to an Irish delegate to explain (privately): “I suppose it’s no use having a ‘second window’ unless you put some putty around it and double-glaze it to keep out the cold.”

So the “window,” which was not part of the original proposals for a Common Fund, should now have a little putty and some doubleglazing. All of which proves to the Third World that if you have a good idea, it is worth pursuing it to the end. — O.F.N.S. Copyright.