VZCZCXRO3475
RR RUEHAG RUEHBZ RUEHDF RUEHGI RUEHIK RUEHLZ RUEHMR RUEHPA RUEHPB
RUEHPOD RUEHROV RUEHSR
DE RUEHGV #0236/01 0780718
ZNR UUUUU ZZH
R 190718Z MAR 09
FM USMISSION GENEVA
TO RUEHC/SECSTATE WASHDC 8158
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE
RUCNDT/USMISSION USUN NEW YORK 2988
RUEHBS/USEU BRUSSELS
RUEHRN/USMISSION UN ROME
RUEHAB/AMEMBASSY ABIDJAN 0310
RUEHCV/AMEMBASSY CARACAS 0368
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 GENEVA 000236 
 
SIPDIS 
 
STATE FOR EB AND IO/EDA FOR AHAVILAND AND RWEBBER 
EU EMBASSIES FOR ECON OFFICERS 
DEPT OF AGRICULTURE/FAS FOR WENDELL DENNIS 
DEPT OF COMMERCE FOR DCAMMAROTA AND SBHABHRAWALA 
STATE PASS USTR FOR DAVID BROOKS 
 
E.O. 12958: N/A 
TAGS: UNCTAD ECON ETRD AGR
SUBJECT:  UNCTAD COMMODITIES EXPERTS MEETING, APRIL 6-8, GENEVA - 
REQUEST FOR GUIDANCE 
 
GENEVA 00000236  001.2 OF 002 
 
 
¶1.  This is an action request. See para 11. 
 
¶2.  SUMMARY: After rescheduling twice, UNCTAD finalized dates for 
the first meeting of its multi-year expert group on commodities and 
development.  The group will meet April 6 and 7 in Geneva, 
back-to-back with a multi-stakeholders meeting on coffee on April 8. 
 The expert group will discuss best practices in transparency and 
accountability in the commodities sectors, and mechanisms to help 
developing countries cope with price volatility.  The latter topic 
could touch on controversial approaches such as producer and 
consumer price range agreements, although UNCTAD has no plans to 
advocate such approaches.  Instead, UNCTAD's top priority will be 
helping commodity producers diversify their economic base and move 
up the global value chain.  The meeting is strongly promoted by the 
Africa Group.  END SUMMARY. 
 
¶3.  Harmon Thomas, Head of UNCTAD's autonomous commodities unit, 
briefed Mission officers on the upcoming first meeting of UNCTAD's 
multi-year experts group on commodities and development, April 6 and 
¶7.  The Commodities experts group will meet three more times over 
the next three years.  It has well-defined terms of reference for 
each meeting, based on paragraphs 50, 51,77,78,79, and particularly 
paragraphs 91, 92, 93 and 183 of the Accra Accord, the ministerial 
document that provides UNCTAD's mandate for the next four years. 
 
¶4. The first meeting of the commodities multi-year expert group will 
have three parts.  First, the meeting will examine the current 
situation and outlook in the commodities market, including examining 
the impact of the financial crisis on commodities markets.  Second, 
experts will examine success stories and consider ways of: a) 
integrating commodities policies into national, regional and 
international development and poverty reduction strategies, and b) 
improving transparency and accountability at all levels for all 
participants in the commodities sector.  Third, experts will review 
and identify measures and support needed by: a) commodity-dependent 
developing countries to utilize effectively the opportunities 
offered by current higher commodity prices to initiate a process of 
sustained economic growth; and b) commodity-importing developing 
countries, particularly least developed countries, to cope with the 
detrimental effects of commodities price swings. 
 
¶5. Regarding the first part of the meeting, the context, Thomas 
divided recent commodities price history into two periods.  From the 
1960s until 2002, commodities markets were characterized by price 
volatility and a downward trend in prices.  Since 2002, prices 
continue to be volatile but the long term price trend is upward and 
probably will remain upward for the next twenty-five years.  In the 
short term, lots of companies in the extractive industries are 
decreasing investment, so we will have shortages in the future and 
high price volatility.  Over the longer term, the underlying demand 
for primary products is based on growth in China now and will be 
based on growth in India over the next ten to twenty years.  China 
has about 15 years before its demand for industrial raw materials 
decreases.  This analysis has led Thomas to advise commodity 
producing countries that they need to reinvest their windfall gains 
to diversify because as emerging market economies mature over the 
next ten to twenty years, those Asian markets will demand fewer raw 
materials and commodities prices ultimately will fall.  In the short 
term, along with diversifying their economic base, commodity 
producers should not lose faith and should still invest to increase 
their productive capacity since prices will recover and be high over 
the next twenty-five years. 
 
¶6.  Regarding the second part of the meeting - success stories, 
experts will examine case studies by sector:  Malaysia and Thailand 
for agriculture; Chile and Zambia for mining; and the Gulf States 
for oil, including diversification through sovereign wealth funds 
and diversification into direct productive investments. 
 
¶7.   Part three of the meeting - measures to effectively utilize 
opportunities in the commodities market and to cope with price 
volatility, is the session where controversial issues are most 
likely to arise.  Thomas said UNCTAD does not see how prices can be 
stabilized in the current global situation.  In the 1970s we tried 
limiting price volatility by having producers and consumers agree on 
price ranges and defending those ranges with buffer stocks. 
 
GENEVA 00000236  002.2 OF 002 
 
 
However, these agreements failed, just as fixed exchange rates 
failed.  Nonetheless, Thomas said least developed countries (LDCs) 
may propose establishing funds that would allow them to keep local 
prices stable, as many governments do for oil.  A few countries may 
wish to get together to moderate supply on the market to balance 
demand and reduce price volatility.  Thomas said this approach could 
be beneficial for coffee or cocoa producers, and could allow more 
orderly market price adjustments. 
 
¶8.  The three additional meetings of the commodities experts group 
over the next three years deal with various issues.  Session two 
will address: diversification of the energy matrix while ensuring 
food security; agricultural and non-agricultural trade-related 
issues; and investment and financial resources for developing 
commodities markets, including aid for trade, ODA, and sovereign 
funds.  Session three will cover policy actions to mitigate price 
and income volatility in the commodities sector and to facilitate 
participation of commodities producers in the global value chain, 
and multi-stakeholder partnerships in the commodities sectors. 
Session four will review UNCTAD's work to help commodities producers 
move up the value chain. 
 
¶9.  Meeting papers are available on the UNCTAD website at: 
http://www.unctad.org/Templates/Meeting.asp?i ntItemID 
=1942&lang=1&m=16434&year=2009&month=4 
 
 
Comment 
------- 
 
¶10.  The commodities paragraphs were among the most contentious 
negotiated in Accra.  Commerce, USDA and State all participated in 
the negotiations, where Venezuela and the Ivory Coast represented 
developing country interests.  As part of the final compromise, the 
US and EU agreed that UNCTAD's commodities branch would be recast as 
an autonomous commodities unit under the trade division and report 
directly to the UNCTAD Secretary General to ensure commodities 
issues received greater visibility and attention in UNCTAD.  Upon 
returning to Geneva, the Ivory Coast attempted to renegotiate the 
agreement and instead have the commodities unit established as a 
division, which would allow its head to make staffing decisions 
without approval from the trade division and thereby decrease 
transparency and accountability.  The US opposed this ploy 
vigorously and so far successfully. Throughout 2008 until the 
present, the Ivory Coast has sporadically and unsuccessfully 
repeated its efforts to reconfigure the commodities unit as a 
division. Any US participants in the commodities experts group 
should be informed of this background and oppose efforts to 
restructure the autonomous commodities unit.  End Comment. 
 
¶11. Action request:  Post recommends relevant Washington agencies 
nominate experts to participate in this and future meetings of the 
expert group.  In the absence of attendance by US experts, post 
requests guidance by April 2 on each agenda item, as well as any 
redlines for work by the experts group and suggestions for 
constructive work the experts group might do between sessions.  End 
Action request. 
 
STORELLA #