U.N. commodity fund boycotted by poor

Press, 7 January 1983, Page 10

U.N. commodity fund boycotted by poor

From

JOHN MADELEY,

in London

A new international fund designed to steady world commodity prices is in danger of collapsing, largely because rich countries drove such a hard bargain in negotiations that many poor countries have lost interest. The Common Fund for Commodities is “unfinished business” from the 1944 Bretton Woods conference which set up the International Monetary Fund and the World Bank. The economist J. M. Keynes argued then for an international trade authority that could help steady commodity prices. Not until 1977 did rich and poor countries begin to negotiate the fund. That was at U.N.C.T.A.D. - the United Nations Conference on Trade and Development — where it was proposed that the fund should have a capital of $6OOO million. During three years of negotiations, the rich countries whittled this amount down to a mere $750 million.

Compared with the I.M.F. (assets around $70,000 million) and the World Bank (assets $45,000 million) many developing countries believe that $750 million to steady the prices of up to 20 of the world’s largest trading commodities is derisory.

One African Minister said the tiger they hoped for had been turned into a mouse. Developing countries have taken the unusual step of striking back with a virtual boycott. The fund can begin only when 90 countries have ratified the agreement reached in 1980. By this week only 37 had done so, including Britain, France, Japan, and seven other Western countries. Out of more than 120 developing countries only 27 had ratified.

Jan Pronk, U.N.C.T.A.D. deputy secretary-general, said many developing countries were “frustrated by the outcome of negotiations and don’t now think the fund is very worth while.” It has been estimated that measures to steady the price of just one commodity, copper, would cost around $2OOO million, almost three times the new fund’s capital. Many developing countries appear to have decided that it is not worth paying the $1 million entrance fee to join. Ten of the 27 developing countries that have ratified are in the “least developed” category and are having their entrance fee paid for them by the Organisation of Petroleum Exporting Countries.

So acute is the lack of support for the fund that U.N.C.T.A.D. has given serious thought to abandoning the whole idea “and going for something different or new,” said Mr Pronk.

U.N.C.T.A.D. originally hoped that the fund could start in April, last year. It has now set September, 1983, as the deadline for ratification. Mr Pronk said bureaucratic procedures were responsible for delays in some countries and also pointed out that the United States had made it clear it was not very interested and “does not believe in making the fund operational.”

For the world economy, collapse of the fund could be serious. Steadier commodity prices are generally regarded as helpful to the economies of both North and South — the latter to give them a better guarantee of foreign exchange earnings.

The wildly fluctuating commodity prices of recent years are considered by many economists to have been responsible for at least some of the rising prices in Western Europe and North America. Copyright, London Observer Service.