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The Future Role and Mandate of the Common Fund for Commodities

Commodities have seen the spotlights turned on them again. Some thirty years after the enormous price rises in the 1970s, commodity prices soared again. In that era, these rises, and the volatility of the prices, led the global community to strive toward a ‘New International Order’ in which the fluctuations would be dampened by interventions of commodity organizations. CFC emerged from this initiative.

Now that prices show a similar pattern, a dampening of the fluctuations, notably that of food prices is sought after. Direct interventions, which have been tried for some commodities in the years sine the 1970s, are no longer considered a viable option. Alternatives are not to mitigate the fluctuations, but to reduce the impact they have on the lives of poor producers and consumers.

Against this background, the Members of the CFC are consulting on the future role and mandate of the Fund.

An important reason in the 1970s for focusing on commodities was their relevance for poor countries. Almost all developing countries were ‘commodity dependent’ and (non-food) commodity policy was tantamount to export policy of many countries. In this context, the Integrated Programme for Commodities (IPC) was adopted, which served as foundation for the establishment of the CFC.

Commodities in the 1970s were typically exported from developing countries to developed countries. While this is still the case for some commodities, the major part of the nonfuel primary commodities that are exported from developing countries is not destined to developed countries. In particular, China emerged as an important destination. Hence, trade policy of OECD countries now matters less for these commodities than it did at that time.

While the ‘New world Order’ of the 1970s had much to say about the role of the states, and a few things on the role of private enterprise, there is now much more focus on the role of the latter party. They have become much better organised, and have been able to organize the international commodity chains much better. A part in the chain that remains rather unorganized is the part from producers to export. They are also under increasing pressure by civil society groups to be more accountable for the outcomes of their activities for the producers. And in the financial world, private investment funds are held responsible for part of the fluctuations of commodity prices.

At the same time, overall economic growth in developing countries is encouraging. Macroeconomic conditions are much better than they were 30 years ago. These are good times to make a transition from commodity dependence to a more diversified export pattern.

The spotlight on commodities also calls into question what the international community does in this field. Major organisations, such as FAO, UNCTAD and the International Commodity Bodies, have been recently evaluated. CFC is also under review. The discussions on the mandate and the future role of the CFC and the corresponding need for reform are now taking place in the Open Ended Reform Committee of the CFC Member Countries.