UN General Assembly: Study of the Problems of Raw Materials and Development: Note by the Secretary General
UN Conference on Trade and Development: Problems of Raw Materials and Development: Note by the Secretary General of UNCTAD
“We are all feeling depressed,” the German foreign minister, Mr. Scheel, declared last month at the United Nations. “Things cannot go on like this. No one with a clear head and a feeling heart should still be able to sleep calmly…. We are stumbling in the dark.”
At the April Special Session of the UN General Assembly, called to discuss problems of raw materials and development, speakers from all countries agreed that the oil crisis is part of a larger world crisis of trade and inflation; that inflation is exported, like a sickness, or like petroleum, in the pipelines and grain tankers of world trade. This recognition of interdependence was useful, but vague. Both Secretary Kissinger and Sheik Yamani warned, for example, that in a “global inflation” all countries would lose—a warning that ignored the extent to which the richest developed countries, as well as the oil-exporting countries, are winners, at least so far, in the world inflation.
Certain documents presented at the UN Special Session give a clear and shocking view of the course of the economic crisis, and specifically of the crisis in food and fertilizers. A study by the UN Conference on Trade and Development (UNCTAD) warned that the consequences of the inflation are particularly grave for the “largest and poorest” developing countries, and could bring a “serious deterioration in levels of food consumption.” For the developed countries, “the prospective trade deficit on oil account, large though it is, represents only a very small percentage of the total GNP”—no more than 2 percent of GNP for the United States, even without considering the increased profits of US oil corporations. The costs of inflation in imports are borne to a disproportionate extent by the poorest countries; the benefits of inflation in exports are gathered by a few developing countries, and by the developed world generally.
“In view of the accelerated pace of the increase of primary and manufactures prices during 1973,” the UNCTAD report states, “it is important to keep the full two-year perspective in mind, particularly when analyzing the impact of the sharp rise in petroleum prices.” So far, in the world inflation of 1972-1974, the developing countries have suffered more from increases in the price of food, fertilizers, and manufactured goods, which they import largely from developed countries, than from increases in the price of oil.
According to the report, the cost of the food and fertilizer imports to the developing countries increased by $5 billion in 1973, and is expected to increase by another $5 billion in 1974. The “corresponding increase” in the cost of oil imports to these countries was $1.2 billion in 1973, and will be about $7 billion in 1974. This projection does not allow for an increase in the volume of oil imports, or of food imports, made necessary by poor harvests now feared in India in 1974. The fertilizer price rise “began in 1972, before the recent increase” in the price of oil, which is needed in fertilizer production. With the increased price of oil, fertilizer prices rose even more drastically in 1974.
The crisis of food imports may seem like the daily deadening injustice of a world where Secretary Kissinger finds a “surplus of despair,” and where, as President Boumédienne of Algeria declared at the UN, “to speak only of the drought that is killing human beings by the thousands in the African Sahelian regions, one might recall that in order to meet their wheat needs these regions would have managed with one twentieth the amount of wheat that the [developed] countries use each year to feed their cattle.” Yet the politics of food, like the politics of oil, is a game with winners as well as losers.
President Nixon’s International Economic Report, published in February, finds “two severe shocks,” “two new problems: food and petroleum.” “Today’s agricultural problems,” it says, “stem from adverse natural conditions and the world-wide economic boom…. In contrast, the petroleum crisis is wrought by man.” The food crisis of 1973 was “wrought” by famine and drought and crop failure, and by increased consumer demand in Japan and Europe and the Soviet Union. It wrought, in turn, the profits and power of the American farm export boom.
The US paid for its oil imports, in 1973, with increased food exports: it spent $14.1 billion on all imported minerals and fuels, and earned $17.7 billion from selling agricultural products. Seven billion dollars of this came from food sales to developing countries, as did $3.4 billion of the increase in US export earnings, although “because of higher prices, this represents less than a 25 percent increase in volume.” The price of US food exports increased by 55 percent, while the price of America’s food imports increased only 22 percent, with much of the benefits of this increase going to other developed countries which sell meat to the US. American farmers made $5 billion more in profit in 1973 than in 1972; their challenge in the years ahead, as Agriculture Secretary Earl Butz has proclaimed around the world, is to “pay for a lot of the imports…that we have come to depend on to maintain our standard of living.”
The 1973 commodity boom, according to the UNCTAD report, “resulted in much greater benefits to developed than to developing countries,” and the expansion in export of raw materials other than petroleum earned an extra $29 billion for developed countries, compared to an extra $11 billion for developing countries. Another report to the Special Session, by the UN Secretary General, studied 64 basic commodities, their prices, and their importance in world trade: it concluded that “on the whole, the prices of commodities that are exported mainly by the developing countries apparently rose less than those of primary commodities [exported mainly by] developed countries. This is especially striking in the case of foodstuffs….”1
The inflation in these 64 commodities shows very clearly the profits of the raw materials boom. Of the 20 commodities whose prices increased most between 1970 and the end of 1973, in 8 the US was in 1970 the leading world exporter. Canada was the leading exporter of another 3, and other developed countries of 5 more. Of the 4 remaining commodities, where developing countries were the leading exporters, one product, crude petroleum, was worth more than twelve times as much as the other 3 products—cocoa, sisal, and copra—taken together. The poorest, largest countries were well represented at the “bottom” of the list of commodities, with tea and jute, staple exports of India and Bangladesh, among the commodities whose prices fell most significantly; the US was the leading exporter of 8 commodities out of the “top” 20, 4 out of the next 20, and only 1 out of the 24 commodities with the lowest rate of inflation.
Poor countries were also well represented as importers of newly expensive food products among the “top” 20 inflated commodities. Developing countries imported 38 percent of all wheat traded, 55 percent of all soybean oil, 50 percent of all cottonseed oil, and 74 percent of all rice. In each of these commodities, the US is the dominant world exporter.
The UN’s studies should reassure those US alarmists who see an imminent threat from the Third World, in the form of raw materials cartels and commodity inflation. Secretary Kissinger invoked this menace in his speech to the Special Session, warning repeatedly against cartels and the “politics of pressure and threats.” Yet of the commodities, other than petroleum, most often mentioned by US alarmists, bauxite, coffee, and iron ore were among the few raw materials whose prices fell between 1970 and 1973; the only metal among the “top” 20 inflated commodities was zinc, a material of which Canada is the predominant exporter, with some modest competition from Belgium.
America’s own “producer power” might seem equally comforting to local pessimists, with the US the leading world exporter of corn and lumber, oilseed cake and cotton (and now even the main supplier of raw cotton to China). A diplomat from Pakistan said to me during the Special Session that his country had done well, in 1973, with its traditional exports of cotton and rice. But he had no confidence that prices would remain high. As for cartels, he said, in the case of cotton and rice Pakistan would have to get together with the leading exporter, but Secretary Butz has shown little interest in such an association.
The scales of agricultural dependency, not surprisingly, weigh the trivial and the replaceable, which the rich buy from the poor, against the needs of life, which the poor buy from the rich; sisal and rubber and palm oil against food for the unfed. This dependence is not new, or a consequence of the present economic crisis. President Nixon’s International Economic Report notes that food production per capita has increased three times as fast in developed countries, since the middle 1950s, as it has in developing countries.
In much of Africa, food production per capita has actually declined. In Zaire, one of the metal-exporting countries most favored in the recent commodity inflation, and most feared by US mineral alarmists, agricultural production fell steadily after independence; the country is now dependent on food imports from all over Africa, including South Africa and Rhodesia. Such impoverishment in food production is a major failure of development efforts—the consequence, in part, of a preference by local politicians and foreign corporations for investment in manufacturing and mining.
For the Nixon Administration, the dominance of American agriculture is wrought by nature and by the prodigious “strides” of national technology. But the profits of the recent farm boom were made possible, also, by decades of political effort. Self-sufficiency in essential food was a political priority twenty years before Project Independence. As in the European Common Market, and Japan, the US government encouraged domestic agricultural production with export incentives to American farmers and by offering concessional terms to foreign buyers. It supported the domestic production of soybean oil, for example, over the import of East Asian vegetable oil; it protected farmers from the competing products of tropical agriculture (such as vegetable oils, or the Colombian carnations which the Treasury is now vigilantly investigating). Secretary Butz, a noted proponent of free trade in food exports; has assured the Senate that if the trade bill passes, “we will not give anything away” in agricultural import restrictions.
In the last few months of economic crisis, the issue of world dependence on US agriculture has become increasingly contentious. Secretary Butz’s grand strategy for farm export earnings anticipates greater US domination, even beyond the desperate years immediately ahead: the Department of Agriculture “projects” expanded wheat and soybean exports, and “heavy dependence by the developing countries on the US as a supplier of food.”2 President Nixon’s International Economic Report observes a gratifying increase in “US exports as a share of foreign consumption” of certain foods: the political implications of this dependence have been studied, apparently, by the National Security Council.
Just as the profits and costs of world inflation may be obscured by the “global” economic warnings of statesmen, so agricultural expansion seems, to many US politicians, a matter entirely separate from life and nutrition in foreign lands. Aid has little to do with trade, and moral generosity little to do with business as usual in the foreign operations of the Department of Agriculture.
Yet privation in India and Africa has some relation to the profits, and perhaps to the responsibilities, of US soybean producers and fertilizer corporations—of the US farmers whose annual profits would pay easily for the oil imports of the entire developing world. Secretary Kissinger, at the UN, hoped to increase US food aid, and assistance to tropical agriculture. He also threatened poor countries with the harsh isolationist emotions of America’s “domestic base”—emotions which are only encouraged by the Nixon Administration’s economic rhetoric, by its advocacy of Project Independence, by its double standard of trade and charity.
Many of the people I talked with at the UN Special Session saw the next few months as a time of momentous possibility for economic development—the time, roughly, between last month’s discussion of trade and the World Food Conference that the UN will sponsor in November. An Asian diplomat, from one of the “largest and poorest” countries, observed that among the statesmen addressing the General Assembly, none was as theatrically pessimistic as the leaders of the richest nations, with their agricultural profits, and their double morality. Developing countries, he said, are used to “scarcity”—so the chaotic changes of the present crisis may seem a cause for hope. These changes, and the questions that were raised about them at the United Nations, may hold out at least some chance for improvement in the dismal situation of world food.
The Secretary General's report considers the evolution of the prices of important basic commodities from 1950 to the end of 1973. Price changes cited here are calculated in West German marks. An addendum to the report shows the significance of the commodities in world trade, based on information compiled in 1970.↩
Lyle Schertz, Foreign Affairs, April, 1974.↩
The Secretary General’s report considers the evolution of the prices of important basic commodities from 1950 to the end of 1973. Price changes cited here are calculated in West German marks. An addendum to the report shows the significance of the commodities in world trade, based on information compiled in 1970.↩
Lyle Schertz, Foreign Affairs, April, 1974.↩