Global Trade Mailing List Archive

["Peter Robbins" <<address removed>>]

Thanks Duncan for your thoughtful summary and your identification of the 
commodities issue as being central to links between poverty and development.

 

On supply management (SM) the famous maxim of Sherlock Holmes comes to mind - 
'When you have eliminated the impossible, whatever is left, however unlikely, 
must be the truth.' 

 

If we, in consuming countries, want and need the range of  wonderful 
agricultural products that can only be grown in tropical regions of the world, 
we should pay enough for them to grant the producers a decent income. The 
requirement included in structural adjustment programmes, that all producing 
countries should boost exports, was wrong and has led to overproduction and 
collapsing prices. SM will be difficult but there is no equivalent alternative.

 

Of all commodities markets, gem diamonds, must be the most difficult to control 
- a million dollars worth could be smuggled in a matchbox - yet De Beers has 
controlled the market for a hundred years. OPEC successfully regulates oil 
supplies and perhaps we shouldn't talk too much about the Common Agricultural 
Policy - the biggest agricultural supply management scheme in the world. There 
are many other successful examples past and present - including for tropical 
commodities.

 

For detailed views on my approach to a new generation of International 
Commodity Agreements you will have to read my book but here are a few important 
points. Firstly, we need an urgent audit of all internationally financed and 
executed agricultural development programmes and cut any of them which have the 
effect of contributing to oversupply of cash crops - there are very many of 
them and the money should be diverted to vertical diversification programmes to 
process raw agricultural products.

 

Buffer stock designs for SM are inherently weak and so are systems linked only 
to export reductions but not supply reductions. Supply must be curtailed, 
backed up by agreed export quotas. This model would reduce smuggling 
significantly. Initially, export taxes might be used as an option to raise 
finance for the scheme. Civil society - farmers' unions, export associations, 
etc. must participate in the design and executions of SM plans. Farmers' 
interests are not always identical to those of government and SM systems in the 
past were vulnerable to corrupt practices. Farmers trust each other not 
governments. Marketing boards would assist with the process and they should be 
re-established for important export crops. 

 

The system must be dynamic allowing SM managers to play the market - squeezing 
short positions when applicable. I am a bit old for it now but any trader who 
has experienced the sheer joy of manipulating markets, as I have in the past, 
would look at the potential power of producing countries in these markets in 
the same way that Michelangelo would gaze at a block of flawless Carrera 
marble. The market is highly influenced by sentiment. Any SM programme must be 
seen to mean business - some spine needs to be put back into these markets. 
Once this is understood 'just-in-time' consumer inventories will switch to long 
stocks - traders and speculators will immediately get out of short positions. 
This could happen very quickly and boost prices significantly. 

 

In the long term agricultural dependency, I'm afraid, is a mug's game. The 
short to medium-term gains from SM must be reinvested in the processing of 
agricultural goods. Mechanisms need to be installed to encourage this at the 
farm, village and national level. The international community has shown that it 
will not finance such developments - farmers and local enterprises must do it 
for themselves and the billions of dollars that could come out of SM is the 
only likely source of investment.

 

All SM systems have suffered free riders. Diplomats will have to use all their 
skills to demonstrate to all exporters of the same product that squabbling over 
tiny differences in quotas is sheer stupidity faced with the oceans of poverty 
that they now suffer.

 

The important thing to remember, as Kate says, is that past systems to manage 
supplies may not have been perfect, but they benefited millions of some of the 
poorest people on earth.

 

Follow what's happening at the WTO and UNCTAD XI - the debate will be very 
exciting.

 

On other areas - I designed a localised market information service in Uganda 
using FM radio stations broadcasting in the vernacular which greatly 
strengthens the bargaining position of small-scale isolated farmers. I'm also 
working on a trainers' manual to encourage the formation of marketing 
associations of small-scale farmers which is designed to improve economies of 
scale - not properly funded, but extremely useful - nothing like as useful as 
SM will be however. 

 

Regards - Peter Robbins