Expert On Exports
Posted 10th January 2001

Adapted from an article by Peter Robbins* from Spore. Though Peter refers to developing countries, New Zealand is the most extreme example in the world of a country that has adopted the economic liberalisation agenda put out by advocates of the corporatised and privatised global economy. By the start of the millennium, most developing countries had liberalised their economies, following the advice of multilateral development agencies. They have undergone structural adjustment programmes and, in becoming members of the World Trade Organisation (WTO), most have committed themselves to reduce barriers to international trade. But exporting at any cost has a high price. In liberalising their economies, many economists have argued, countries can achieve sustainable growth by attracting foreign investment and using low labour costs and natural resources to compete effectively in world markets. This recipe for prosperity is linked directly to increasing exports ‹ in reality, of primary products: the only sector where they have a chance of achieving a competitive advantage over industrialised economies. Some developing countries have valuable commodities like diamonds and oil beneath their soil. Others can exploit their natural beauty to attract tourists.

Most, however, have only agricultural products to sell to the outside world. And even in this sector they cannot grow many crops as efficiently as industrialised countries which can, in addition, offer their farmers lavish subsidies. There have been some success stories with cut flowers, prawns and fresh vegetables but, frankly, the range of significant export options is very narrow. Unfortunately many countries are competing with each other in trying to export the same range of agricultural products ‹ rubber, coffee, tea, cocoa, vegetable oils, spices and some tropical fruits and nuts. As each country has been encouraged to increase production, competition gets fiercer and prices fall. The table below shows, that although retail prices of processed agricultural products have risen enormously over the last twenty years, the prices of primary products from which they are made have crashed. If export orientation continues to be sought after, this can only worsen. Old supply controls no longer relevant. Over-production has long been a systemic problem for tropical cash crops.

The attempts in the early 1970s to control surpluses ‹ and prices ‹ of such goods as coffee and cocoa through international commodity agreements operated by UNCTAD are far behind us. By the early 1990s, the effects of an extended period of low demand, widespread circumvention and loss of support from importing countries had eviscerated these agreements. We are now in a free-for-all period, but it cannot last. Orthodox economists refuse any return to artificially managing supplies so that they more nearly match demand, but should we follow them? The WTO agreement to reduce import tariffs will bring no benefit to exporters of tropical products because they are already set at zero. The wholesale commercialisation of farming into agro-industry is not an option for many poor countries. In any event it tends to marginalise small-scale farmers, destroy the social integrity of rural communities and exacerbate urban drift.

Exportable cash crops are produced for an already glutted market at the expense of food crops, thus reducing food security. It is time to revisit the idea of trying to manage supplies of tropical commodities, from a new angle. What group of products can developing countries alone produce that the rest of the world can¹t or won¹t live without? Cocoa cannot yet be made in a test tube and, anyway, rich consumers now rebel against the use of artificial food products. Coffee producing countries made a start in May 2000 in aiming to cut coffee exports by 20% until the world price reaches 110 US cents per pound, a price the consumer is likely to accept. Even this goal may not be achieved if, as in the past, member countries fail to abide by their agreement. Furthermore, stock-retention schemes to control prices often do not work. Decrease cash crop production, earn more. If cash crop production were decreased, export earnings would grow. I therefore call for production capacity to be cut fairly and universally, after full consultation with farmers¹ associations and groups representing civil society. The cuts should be policed by these same groups, with supervision from an international body made up of representatives from producer countries ‹ with a strong element of trust.

The land now used to grow surpluses could be used to grow food and reduce burgeoning food import bills. The increased income could be used to invest in added value products, perhaps for export to niche markets. Agricultural development agencies are doing their best to help countries to become more efficient and competitive producers. Yet unless something drastic is done to begin to match supply to demand they are merely rearranging the chairs on the deck of the Titanic. ....... Peter Robbins was an international commodities trader for over 20 years. In recent years he has worked to develop strategies to improve market information services to small-scale farmers and to analyse the impact of globalisation countries and rural communities. .