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Commodity consultations in 1993
International Commodity Agreements
Negotiations for the extension of the 1983 International Coffee Agreement (ICA) until 30 September 1994 were concluded successfully on 30 September 1993. The purpose was to preserve the International Coffee Organization (ICO) as a forum for cooperating on international coffee matters and to allow time for the negotiation of a new ICA. The United States of America informed the International Coffee Council that it cannot accept the further extension since there was insufficient support in the United States to remain in the Organization.
A new International Cocoa Agreement (ICCA) was adopted by the International Cocoa Council to replace the 1986 ICCA which expired on 30 September 1993. The new ICCA is based on balanced development through production management and consumption expansion activities. Exporting members undertake to abide by production-management programmes designed to achieve equilibrium between production and consumption in the medium and long term. To encourage the expansion of cocoa consumption in their own countries members are to endeavour to take all practical and necessary measures and, in particular, to remove or substantially reduce obstacles to increased consumption and to identify and develop new uses for cocoa. in addition members are to have regulations to prohibit materials of non-cocoa origin from being used in place of cocoa. No buffer stock scheme influencing market prices is to be utilized and the 230 000 tonnes of cocoa in the buffer stock of the ICCO to be sold over a maximum of four and a half years in monthly instalments, to minimize the risk of depressing market prices, starting with 51 000 tonnes in 1993/94.
The International Sugar Agreement negotiated in 1992 entered into force in January 1993. As of December 1993, 28 countries and the EC had lodged instruments of ratification, acceptance or approval or had given notice of provisional application of the new Agreement. However, the United States announced that it would not be joining. Under the new Agreement, the International Sugar Organisation (ISO) continues to provide a forum to discuss developments in the world sugar market and to provide comprehensive data on production, consumption and trade. The ISO, designated by the Common Fund for Commodities (CFC) as an International Commodity Body (ICB) for the purpose of developing projects for possible CFC funding, initiated work to devise an appropriate commodity development strategy based, amongst other things, on productivity improvement, vertical diversification, increased efficiency in the use of raw materials and byproducts of sugar production, and improvements in conditions of market access.
The International Wheat Agreement, 1986, consisting of the International Wheat Trade Convention and the Food Aid Convention (FAC), came into force on 1 July 1986. The initial duration of the Wheat Trade Convention was five years while the FAC was initially to last three years but was extended for two more years in 1989. In 1993, both Conventions were further extended by another two years until 30 June 1995. The Agreement does not contain any economic provisions. The International Wheat Council continued functioning as an international forum for exchange of information on wheat and coarse grains and for administration of the FAC.
The proceedings of the United Nations Conference on Olive Oil and Table Olives held in March 1993 resulted in the adoption of a protocol extending the International Agreement on Olive Oil and Table Olives by five years from 1 January 1994. This Agreement, to which Algeria, Cyprus, the EC, Egypt, Israel, Morocco, Tunisia, Turkey and the former Yugoslavia are signatories, contains general objectives with respect to international cooperation and concerted action for the integrated development of the world economy for olive products. Under the new protocol, the resources earmarked for technical cooperation in olive cultivation, olive oil extraction and table olive processing have been doubled.
The International Jute Organisation (IJO) continued to implement research and development projects in the fields of agriculture, industry and market promotion. At the end of 1993 the Organization was carrying out seven project activities with financial assistance from members of IJO and international financing agencies.
The International Consultation on Jute and the Environment in The Hague from 26-29 October 1993 was organized by the FAO Secretariat following the recommendation of the Intergovernmental Group on Jute, Kenaf and Allied Fibres at its Twenty-eighth Session in October 1992. It was supported by the Commission of the European Communities and the Rockefeller Foundation of the United States of America. The Consultation was attended by representatives from all the major producing and consuming countries of jute, kenaf and allied fibres in addition to scientists, technologists, academics, representatives from industry and trade, environmental and research agencies and intergovernmental organizations, including IJO, ITC, UNCTAD and UNDP. The Consultation had detailed and wide-ranging discussions of many issues of concern to the world jute community, and identified numerous areas for follow-up activities to improve jute and kenaf's environmental attributes and strengthen the market position of these natural fibres. In the context of newly emerging technologies for the processing of jute fibre in its diverse applications, the Consultation recommended the setting up of an International Task Force on Diverse Jute Applications, to be initially convened under the auspices of FAO. The Consultation pointed out that the sound development of the jute and kenaf economy depended not only on the resolution of technical problems affecting their products but also on the ability for all those involved in agricultural, processing, and trade activities associated with these commodities to obtain adequate financial returns.
The Second International Natural Rubber Agreement (INRA II), due to expire in December 1993, was extended for one year by the International Natural Rubber Council at its meeting in late November 1993. Rubber producing and consuming countries agreed to initiate negotiations on a new price-stabilizing accord to succeed the 1987 Agreement. Importing countries agreed to renegotiate the agreement following an understanding reached with producing countries concerning a downward revision in the reference price used to guide current market intervention operations by the buffer stock manager. However, producing countries announced their intention to press for a higher price range in any new agreement. A decision to end the pact would have meant the liquidation of the INRO's buffer stocks totalling nearly 200 000 tonnes and would have exerted further downward pressure on prices which had fallen from February 1993 under the influence of weak demand and prospects of the collapse of the Agreement.
The Council of the International Tropical Timber Organization (ITTO) met twice during the year, in May and November. ITTO's Target 2000, with the aim that all exports of tropical timber would come from sustainably managed forest resources by the year 2000, continued to be a focus of attention. Progress towards this target was discussed, as well as how the developing countries could be assisted in their efforts to achieve the target. In addition, a number of developed countries reported progress towards similar targets but with shorter time frames, a fact that is creating considerable disagreement as well as some confusion among ITTO producer members. Producers continued to emphasize that projects such as Target 2000 are discriminatory unless they apply to timber from temperate and boreal forests in addition to tropical forests.
Trade policies received increased attention. At the May meeting the annual market discussions took as a special topic the linkages between trade and sustainable development. The report prepared for this discussion highlighted the fact that trade has little direct effect on forest management, but that trade measures can be seen as part of an overall package for encouraging sustainable forest management. It was decided to consider the subject again at the following ITTO meeting to endeavour to achieve more consensus in this complex matter. However, at the subsequent meeting, no general agreement on the issue of trade and sustainable forest management was achieved. The issue of certification and labelling of timber as a means of encouraging sustainable forest management was highlighted, and will be pursued at the next ITTO meeting.
Projects with a total cost of $23 million were approved by ITTO during the year but only $17 million was committed to fund these and previously approved projects. Of those funded 70 percent were in the area of forest management, 13 percent in that of forest industry and 20 percent in market information. Donors continued to stress that projects should be closely linked to achieving the ITTO Target 2000.
A major activity during the year was the process of negotiating a successor to the International Tropical Timber Agreement, 1983 (ITTA), the agreement which established ITTO. This agreement expires on 31 March 1994. Three formal negotiating sessions were held in Geneva, and in addition a number of informal discussions also took place. However, agreement on a new ITTA had not been reached by the end of 1993. The main point of disagreement between producer and consumer member countries was the scope of the ITTO. Producers insisted that the Agreement be expanded to cover all timber, while consumer members sought to retain the Organization's focus on tropical timber. Further negotiations to produce an Agreement were arranged for early in 1994.
GATT commodity councils
The International Meat Council (IMC) continued to review the Arrangement Regarding Bovine Meat. The Council and its market analysis group have dealt with policy matters of special concern to participants and are dealing increasingly with the markets for other meats. However, no progress has yet been made with regard to other objectives of the Arrangement such as the expansion and liberalization of trade.
The International Dairy Products Council and its three committees continued to review the functioning of the International Dairy Arrangement and to assess the world dairy situation. The minimum export prices set by the Council, per tonne f.o.b., remained as follows: whole milk powder $1 250; skim milk powder $1 200; certain cheeses $1 500; butter $1 350 and anhydrous milk fat (butter oil) $1 625.
FAO commodity bodies
In June 1993, the Intergovernmental Group on Rice met to discuss the short-term outlook on the world rice situation, as well as its medium and longer term prospects based on results from the projections to the year 2000. In addition, the Group reviewed: (i) measures taken by countries as an annual follow up to the Guidelines for National and International Action on Rice, and (ii) the rice policies of Cameroon and Pakistan.
The Group concluded that the volume of world rice trade in 1993 would decline and that the tendency for international prices to fall below levels in corresponding months of 1992 would be reversed late in the year reflecting growth in demand for imports. The Group considered the major issues that were likely to arise in the medium and longer term and suggested measures to expand production which included proposals for the strengthening of national and regional networks for disseminating technology. It agreed on the developing countries' need to acquire new technologies for packaging and to develop new rice products to maximise opportunities for trade with North America and Europe. Partly reflecting these views, the Group, in its capacity as an International Commodity Body of the Common Fund for Commodities, approved the submission of two project proposals to the Fund for possible financing. These focused on small scale milling and the processing of by-products. The Group's concern over the impact that structural adjustment programmes have had on Cameroon's rice economy and on Pakistan's production and exports of rice, resulted in agreement to return to the assessment of the implications of these programmes on rice producing countries in future sessions. The Group reviewed policy measures that had adverse implications on the world market under the Guidelines for National and International Action on Rice. It regretted, in particular, the expanded use of export aids by some developed country rice exporters and recommended greater technical and financial assistance to enable developing countries to increase production and improve their storage capacity.
In May 1993, the Intergovernmental Group on Grains held its Twenty Fifth Session to discuss: the current and future situation for the international grain market; developments in the Uruguay Round of Multinational Trade Negotiations; national cereal stock policies and the implications for stock levels following trade liberalization under the Draft Final Act of the Uruguay Round; the potential implications of rapid restructuring of marketing parastatals in sub-Saharan Africa; and to decide on whether or not to request the status of an International Commodity Body (ICB) from the Common Fund for Commodities (CFC). With respect to the latter, the Group requested the Director General of FAO to ask the CFC to grant ICB status to the Group and requested the secretariat to ascertain the readiness of the CFC to finance projects for crops covered by the Group.
Concerning projections for grain to the year 2000, the Group noted that production was projected to expand slightly faster than during the 1980s. The Group was further informed that growth in consumption of grains was projected to slow down in the 1990s. As regards trade, the projections showed the developed countries' imports in the year 2000 to be lower than in the late 1980s, while grain imports into the developing countries were projected to increase by one-third over the same period.
The Intergovernmental Group on Oilseeds, Oils and Fats, meeting in mid-April 1993, reviewed the short and medium-term market situation and outlook and examined policy developments. With regard to the medium-term outlook for supply, demand and trade of oils and oilmeals the Group noted that during the 1990s production growth was expected to come increasingly from improved productivity and therefore highlighted the importance of sustained research and extension efforts. On demand, the Group discussed the implications of substituting petroleum-based products with more environment-friendly oleochemicals. Regarding trade, it noted that global export earnings were anticipated to expand less rapidly than in the past, thus affecting the capacity of developing exporting countries to finance their development efforts. In view of increased competition between developing and developed exporters, the Group felt that exporting developing countries needed to strengthen their market research and development efforts. Furthermore, it stressed that regional trade arrangements did not replace the need for an improved global trade agreement. Regarding policy developments, the Group considered that the limited progress made in 1992 towards achieving the overall objectives of the Guidelines for International Cooperation in the Oilseeds, Oils and Oilmeals Sector had been overshadowed by a growing tendency for competition in the world markets to be distorted by export aids. On trade policies, little progress had been made towards the reduction of protectionism pending the outcome of the Uruguay Round. It therefore urged countries to reach an early and balanced global trade agreement and to ensure that the impairment of the competitive position of many exporting countries arising from subsidization by other exporters was reduced.
In December 1993, the Intergovernmental Group on Jute, Kenaf and Allied Fibres assessed the market situation and prospects for jute, kenaf and allied fibres including competition with synthetics. It concluded that world production of jute, kenaf and allied fibres would fall in 1993/94. However, global supplies would remain adequate as a result of relatively large carryovers from the previous season as well as weak demand due to depressed economic conditions. Over-capacity in the polypropylene manufacturing industry would continue to pose a serious threat to the use of jute products despite growing awareness of the environmental advantages of natural fibres. Following a discussion of the principles and practices of informal price arrangements, reflecting the varying views of producing and consuming countries, the Group recommended that the indicative prices for jute and kenaf for 1993/94 season remain at the levels of the previous season, that is: jute at $400 ± $30; and kenaf at $350 ± $20. The Group also considered the report of the International Consultation on Jute and the Environment which FAO organized in The Hague in October 1993, and supported the recommended follow-up activities including the setting up of an International Task Force on Diverse Jute Applications. In reviewing developments in environmental protection legislation of selected jute consuming countries, the Group recommended that FAO should continue to monitor developments in this field and act as a focal point on this subject.
In November 1992 the Sub-Group of Sisal and Henequen Producing Countries of the Intergovernmental Group on Hard Fibres, assisted by trade and industry experts from consuming countries, reviewed developments during the 1992/93 sisal season and considered prospects for the 1993/94 season. The Sub-Group expressed its satisfaction at the recovery in sisal prices which had occurred since its previous Session, but it was concerned to note that the improvement in prices was due largely to temporary shortages and that the underlying factors which depressed prices in 1992 still prevailed. The Sub-Group also expressed concern at the further contraction of the market for agricultural twines made from sisal, especially in Western Europe, noting the further decline in prices. It hoped, however, that twine prices might improve in 1993/94. In the light of the recovery in fibre prices and the prospects for improved twine prices, the Sub-Group recommended that the Intergovernmental Group on Hard Fibres increase the indicative prices for Brazilian No 3 fibre to $510 per tonne and for East African UG fibre to $580 per tonne, both grades c.i.f. European ports, while the indicative price for sisal and henequen baler twine be increased to $17 per standard bale c.i.f. major importing countries. The Sub-Group also reviewed the progress of project proposals which had been submitted to the Common Fund for Commodities (CFC) and recommended that two projects on sisal be formulated in place of the original one which had been reviewed by the CFC in 1992.
The Intergovernmental Group on Hard Fibres, in late 1993, reviewed the market situation and short term outlook for sisal, henequen, abaca and coir, including competition from synthetic and other materials. On the basis of this assessment, and considering the views of producing and consuming countries, it adopted the recommendations of the Sub-Group of Sisal and Henequen Producing Countries to increase indicative prices for fibres from Brazil and Africa and for sisal baler twine. The Group retained the indicative price range for abaca fibre although current market prices stood considerably above the ceiling. The Group also reviewed the longer-term prospects for the three major groups of hard fibres, and considered means by which their market prospects might be improved. In particular, proposals aimed at negotiating lower shipping costs were considered. Regarding project proposals submitted to the Common Fund, the Group resolved that, since two projects on coir had been approved for financing, its full support would now be given to the remaining projects on sisal, henequen and abaca, which it decided should be finalized and resubmitted to the Fund as soon as possible.
The Intergovernmental Group on Citrus Fruit, at its Tenth Session held in October 1993, undertook an in-depth review of prospects for production, consumption, trade and prices, and identified measures which might contribute to alleviating possible surplus conditions developing over the longer term, particularly for processed citrus. These measures included the rationalization of production and the strengthening of demand through promotional programmes, particularly in high income countries and in countries where consumption levels were low. The Group continued its close monitoring of production, consumption, trade and prices, and an assessment of the world citrus economy issued as guidance to governments and market operators concerning future developments. It also carried out a comprehensive review of global trade and production policy developments. It encouraged sustained efforts towards liberalization of trade, and initiation of implementation of market-oriented production policies. It evaluated options for generic promotion activities, which might be considered for implementation under its auspices. In the field of technical improvements, it stimulated initiatives for establishing an intercountry collaborative mechanism for the wider Mediterranean region to address issues and constraints related to rationalizing the production base of the citrus sector in line with market potential. It continued to develop projects for possible funding by the Common Fund in its role as an ICB.
The Fourth Session of the Sub-Committee on Fish Trade of the FAO Committee on Fisheries was held in October 1993. Delegates from 66 countries discussed recent developments in the international fish trade and the specific issues to be addressed to enhance the participation of developing countries in this trade. Concern was expressed about the future availability of fish supplies for international trade since current trends indicate that supplies would increase much more slowly than demand. The Sub-Committee stressed the need to promote joint ventures and investment in fisheries as well as in fish trade among developing countries and FAO was encouraged to expand its work in these areas. The importance of the activities undertaken by FAO's Global Network of Market Information and Technical Advisory Services was noted.
Discussion of fish trade impediments and criteria for fair trade in fishery products led the Sub-Committee to recommend that FAO should prepare a chapter on international trade to be included in the International Code of Conduct for Responsible Fisheries being produced by the Organization. Work on a first draft of this chapter should be completed before the end of 1994 for review and revision by the Committee on Fisheries in March 1995.
In the discussion on international trade, environment and sustainable fisheries development, the delegation of Japan proposed to hold an international conference on the theme "Sustainable contribution of fisheries to food security". The conference would discuss, inter alia, the sustainability of resources use, species utilization and international trade, and would analyze resource management methods. Japan is to organize this conference in cooperation with FAO and it is likely to be held there in May or June 1995.