FAO COMMITTEE ON COMMODITY PROBLEMS SIXTY-FIFTH

UNCLAS ROME 001888

SIPDIS


FROM THE U.S. MISSION TO THE UN AGENCIES IN ROME

USDA FAS FOR U/S PENN, JBUTLER, MCHAMBLISS, LREICH
STATE FOR IO/EDA, OES/O, E, EB;
AID FOR EGAT, DCHA/OFDA, DCHA/FFP

E.O. 12958: N/A
TAGS: EAGR ETRD EAID AORC FAO
SUBJECT: FAO COMMITTEE ON COMMODITY PROBLEMS SIXTY-FIFTH
SESSION


1. Summary. The Sixty-Fifth Session of the UN Food and
Agriculture Organization (FAO) Committee on Commodity
Problems (CCP) met in Rome April 11-13, 2005. The
Committee reviewed FAO reports on the state of world
commodity markets and its projections of supply, demand,
trade and prices. Member countries discussed policy
developments affecting agricultural commodity markets and
trade, and their impact on global food security. They
heard proposals from the Secretariat to improve
notification, consultation and reporting procedures on
food aid transactions monitored by the Consultative
Committee on Surplus Disposal (CCSD),but a large
majority of delegations (the USG excepted) deemed it
premature to consider reforming the CCSD's role before
the conclusion of current WTO agriculture negotiations.
Among the CCP side events was a High-Level Round Table on
Agricultural Trade and Food Security featuring WTO
Director General Supachai as keynote speaker. There was
a general consensus among participants that trade
liberalization generally enhances food security by
fostering economic growth, but many developing countries
argued for continued support and protection of their own
agricultural sectors even as they criticized high levels
of support and protection in the developed world. End
summary.


2. The FAO Deputy Director-General, David Harcharik,
opened the session, highlighting that CCP is the only
truly global platform for the discussion of problems
facing agricultural commodity producers, exporters and
importers, and for identifying appropriate solutions to
these problems. In his remarks he identified several key
themes for the session: the impact of low commodity
prices on the import bills of food-importing developing
countries and on remuneration for food exporting regions;
recent market trends and the factors responsible for
them; the implications of recent trade policy
developments; FAO's expanding work in trade-related
capacity building programs; and the work of the CSSD in
tracking global food aid and its potential impact on
trade.


3. The U.S. delegation was headed by Mary Chambliss,
Deputy Administrator, Export Credits, USDA Foreign
Agricultural Service. David Hegwood, US Mission
Agricultural Minister-Counselor, served as alternate
head. Other members were Lauren Landis, USAID Food for
Peace Director, and Food for Peace staff members, Anne
Marie del Castillo and Dale Skoric; Richard Hughes, FAO
Liaison Officer, USDA Foreign Agricultural Service, and
Willem Brakel, Alternate Permanent Representative to FAO,
US Mission Rome. The United States represented the North
America Region on the drafting committee.

State of World Agricultural Commodity Markets
--------------


4. Alexander Sarris, Director, Commodities and Trade
Division, introduced the new flagship publication, State
of World Agricultural Commodity Markets. Most
delegations, including the United States, applauded FAO
for this effort. The statements of many developing
countries reflected the impact of the long-term decline
in commodity prices. Despite this concern, the committee
concluded that the problem should not be addressed by the
introduction of new policies that would be likely to
create market distortions. The U.S. statement called
attention to the important role of markets in generating
sustainable economic growth and encouraged FAO to provide
policy advice to developing countries that recognizes the
emerging consensus in favor of market liberalization.
Brazil's statement criticized FAO for releasing a working
paper on the impact of domestic and trade policies on the
world cotton market in April 2004, while Brazil's WTO
dispute settlement case on cotton was being litigated.
Brazil said it disagreed with the conclusions in the
paper and called for a review of FAO's policies on
disseminating studies when they involve diverging views
among members. The EU statement provided a laundry list
of initiatives being undertaken for the benefit of
developing countries.

Policy Developments Affecting Agricultural Commodity
Markets and Trade
-------------- --------------



5. Under this agenda item FAO presented two new work
programs. The first is COSIMO, an econometric model of
commodity market issues, which is being developed in
collaboration with the OECD and its AGLINK model. To
demonstrate the potential uses of the COSIMO model, FAO
presented the results of an assessment of the
implications of decoupling domestic payments for world
commodity prices and trade. The second new work program,
the Ag Policy Indicators initiative, is a collaborative
effort among FAO, OECD, IFPRI, and the World Bank. The
API will eventually include policy indicators for a large
number of developing countries and will be used to
analyze how agricultural and economy-wide policies affect
food security, poverty reduction, agricultural growth,
and rural development. Most delegations, including the
United States, welcomed both of these initiatives and
encouraged closer cooperation with institutions, such as
the OECD, while also cautioning FAO to avoid duplication
of efforts.


6. The second discussion point under this agenda item
was trade policy reform and food security. The FAO
presented a document analyzing the results of economic
and trade policy reforms in selected developing
countries. The analysis showed mixed results in the case
studies, but the most significant factors influencing the
success of reforms were found to be infrastructure and
institutional contexts, sequencing of reforms, and
consistency of implementation of reforms. The
interventions of many delegations naturally focused on
the reforms being considered in the WTO agriculture
negotiations. Somewhat surprisingly, a number of
countries acknowledged that WTO-mandated trade policy
reforms are not a panacea; other measures are needed to
address food security, such as infrastructure development
and simplification of regulatory regimes. The report
adopted by the committee calls for further case studies
covering integration of trade and development policies,
impacts of tariff escalation and non-tariff barriers,
trade facilitation by private sector entities,
incorporation of structural, institutional and
legislative features into trade reform analysis, and
analysis of the impact of competition and investment
issues on trade policy reform.

National and International Commodity Risk Management
-------------- --------------


7. This discussion centered on risk management tools for
developing countries that are highly dependent on
commodity exports. A number of delegations pointed out
that available risk management mechanisms, such as the
use of futures markets for hedging, are not suitable for
developing countries lacking the necessary financial and
technological infrastructure. The U.S. comments focused
on importer financing mechanisms and raised a number of
questions about the feasibility of such tools. The
Committee recommended FAO continue its work on risk
management.

International Negotiations Concerning Food Aid
-------------- -


8. FAO introduced this agenda item by summarizing
document CCP 05/14 and highlighting its recommendations
for reforms to the Consultative Subcommittee on Surplus
Disposal. The Secretariat then proposed establishing a
working group to review the reform recommendations.
However, the United States was virtually alone in
supporting this proposal. A large majority of
delegations commented that it would be premature to
review the future nature and role of the CSSD in advance
of the conclusion of the current WTO agriculture
negotiations. The committee did agree that FAO should
send a signal to WTO members with respect to the role of
the CSSD in monitoring international food aid flows and
indicating that it could be at the service of WTO if
appropriate and required. Despite heavy lobbying by the
U.S. delegation and an unusually aggressive effort by the
FAO Secretariat, most countries were unwilling to agree
to an FAO work program of any kind on food aid issues.
Nevertheless, a number of countries, including Tanzania,
Norway, Switzerland, and Algeria, supported in principle
the need for FAO to look at assessment procedures.


Presumably, if WTO were to request FAO to undertake work
in this area, countries would be less concerned.
[Comment. This outcome was disappointing, but not
surprising. Ironically, this is one of the few instances
in which countries have been willing to abandon their
professed support for the independence of international
institutions and forthrightly proclaim that the WTO
should trump the role of another institution. End
Comment.]

International Year of Hard Fibers
--------------


9. During the Joint Meeting of the Intergovernmental
Group (IGG) on Hard Fibers and on Jute, Kenaf and Allied
Fibers in December 2004, a proposal was discussed on
raising the profile of all natural fibers by organizing
an International Year of Natural Fibers (IYNF). The
Committee unanimously approved the proposal and requested
that it submitted to the June Council meeting for
approval.

Side Events
--------------


10. Four side events, including the High-Level Round
Table were held in conjunction with the Session. The
others were: Experiences in Regional Programs of Food
Security; the Impacts of OECD Policies on Developing
Countries; and CAP Reform, Trade and Developing
Countries.


11. On April 13, the FAO hosted a meeting billed as a
high-level round table discussion on food security and
trade liberalization. The meeting was organized at the
specific direction of FAO Director General Diouf. WTO
Director-General Supachai gave the keynote address. Not
surprisingly, he advocated support for the Doha
Development Agenda, but he also attempted to pre-empt the
argument that trade liberalization is a risk to food
security by highlighting all of the mechanisms in the DDA
agriculture text that would allow developing countries to
avoid trade liberalization, i.e., special and
differential treatment, sensitive products, special
products, and the special safeguard mechanism. He said
that food self-sufficiency is not equivalent to food
security, and food security is best achieved in an
economically integrated world. Noting that hunger and
malnutrition almost always are the result of poverty, he
defined the WTO's role in food security as raising
incomes through economic growth. Given that since 1945
trade has grown faster than economic output in all but
eight years, he called for an ambitious outcome in the
DDA, which he said would only be possible by achieving a
balance between import sensitivities and export
interests.


12. In his statement, DG Diouf called attention to the
fact that while there is a general consensus that trade
liberalization contributes to economic growth. The
distribution of winners and losers from the process is
determined by the particular circumstances of individuals
and countries. He offered three questions for the
group's consideration: 1) Does agricultural trade
liberalization threaten food security? 2) Under what
circumstances can protection be justified to ensure food
security? And, 3) What are the most appropriate national
policies to ensure food security during the transition
towards freer agricultural trade?


13. During the ensuing discussion period most
participants read prepared statements. While there was a
general consensus that trade liberalization will
generally increase food security by fostering economic
growth, many developing countries advocated for continued
access to some level of support and protection for their
agricultural sectors. Many also made reference to the
high levels of support and protection in the developed
world.


14. Although the meeting did not live up to its billing
as a high-level dialogue, it was nonetheless a useful
discussion of an issue of great interest to the FAO
community in Rome. If FAO is to fulfill its potential as
an opinion leader on global agricultural policy issues,


it should be encouraged to facilitate dialogue among its
members.

Other Matters
--------------


15. The Sixty-Sixth Session will take place in 2007 and
the dates will be set by the FAO.


16. In its opening statement the United States noted
that the experimental shortened format of the CCP this
year and its scheduling contiguous with the Committee on
Agriculture (COAG) appeared to be successful, but that we
would like to revisit the issue after having a chance to
reflect on the meeting.


17. Comment: In a side conversation with Assistant
Director General de Haen, we encouraged him to maintain
an ongoing dialogue with members on the issues raised at
CCP, particularly the issue of trade policy reform and
food security, and not wait for the next CCP meeting to
pick up the discussion. The ADG said he planned to put
several of the issues from CCP on the agenda of FAO
regional group meetings in 2006 for continued discussion.
This seems like a good step, but we would like to see
more focused dialogue between FAO and its members, and
among members, perhaps in the form of seminars, side
events, or other low-cost meeting formats. End comment.
HALL


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2005ROME01888 - Classification: UNCLASSIFIED