Since the eradication of poverty and underdevelopment has not proved to date of overriding concern to the industrialized countries, they are not likely to hesitate if they see, individually or collectively, their economic or geopolitical interest in acceding to certain Third World demands. The United States, for example, may well have noticed that European countries and Japan would bear most of the financial burden of a Common Fund since they import over five times as many commodities from the Third World as does the United States.6 But since these same Third World countries are also important customers for Europe, the latter should encourage higher revenues for commodities, revenues which can be pumped back into the EEC economies. The same argument applies to America which now sends about 27% of its exports to non-oil producing UDCs. If the latter are to continue to pay for these goods, they must have incomes from their own exports.
There must be a two-way street in trade not only to enable the Third World to remain a paying customer for the industrialized countries' goods, but also to ensure that it can pay off its debts to Western banks. (On the question of Third World debt and how it fits into the New (and the Old) Economic Order see Howard M. Wachtel; The New Gnomes: Multinational Banks in the Third World, Institute for Policy Studies, 1977) This debt is current over $253 billion (owed to both public and private sources). Most of the incremental income from higher commodity prices would come right back to the industrialized world in the form of orders or interest.
The Northern hemisphere has still other reasons for moving in a more conciliatory direction. Let us note that while serious negotiations have taken place on the ten core commodities, these have been limited to discussions of stockpiles of goods to be released in conjunction with market fluctuations, in order to maintain agreed floor and ceiling prices, and to the creation of a Common Fund to pay for the cost of handling such stocks.
UNCTAD had previously recommended that eight "other" commodities be included in the talks, but these seem now to have been lost in the shuffle and there is no calendar for putting them on the agenda. The "other" commodities are bananas, meat, vegetable oils, tropical timber, bauxite, iron ore, manganese and phosphates. Bananas and meat present special stockpiling problems; iron ore and phosphates are important only to a handful of developing countries (e.g. Liberia, Morocco). Their absence from the negotiating calendar can thus perhaps be justified for these reasons. But bauxite, tropical timber and vegetable oils—the last two especially important to a number of poor African countries—seem to have been somewhat arbitrarily abandoned. The immediate costs to the North of an NIEO would therefore very likely be limited to those relating only to the ten core commodities.
Even more serious for the UDCs, but reassuring for the rich nations, is the fact that there is at present no provision whatsoever made for discussing price indexing. This means that the "fairer and more stable prices" the UDCs might receive for their primary products are not linked in any way to those they will be expected to pay for imported industrial goods—which as everyone who has experienced Western inflation knows, are constantly on the increase.
The basic foodgrains, wheat and rice, also used to appear on UNCTAD's "shopping list" but are now omitted as well; in the crucial area of food which concerns us here, there is no indexing of, say, Egypt's cotton nor of Brazil's coffee to their massive wheat imports from the USA; no linking of Indonesia's rubber nor of Bangladesh's jute exports to the huge amounts of rice they must pay for in hard currency. It is, of course, the United States and to a lesser extent Canada, France, Australia and Argentina, that will profit from wheat purchases. More surprising to many people is the fact that the US outdistances both China and Thailand as the world's top exporter of rice. The lack of an index linking exported cash crops to imported food crops will constitute a continued threat to the economies of nations like Brazil, Peru, India, Egypt, Pakistan (heavy wheat importers) or Bangladesh, Sri Lanka, Malaysia, Senegal and Indonesia (dependent on imported rice). But it can only be of benefit to those industrialized countries which have special clout in the food trade.
In their bargaining stance, the "77" countries may be relying on stable prices for the major food grains they cannot do without and are not producing for themselves. If so, they are very much mistaken. In the context of its heavy balance of payments deficits, the United States has an immediate interest in higher grain prices. Agricultural exports are indeed vital if the US is to avoid international bankruptcy.7 As soon as wheat stocks in the US again approached glut levels and prices fell back from the 1973-74 highs, President Carter announced a 20% cutback in wheat acreage in order to reduce reserves and raise prices. Even more ominous noises come from a "Confidential Report to Executives" prepared by the Chase Economic Consulting Service, which examines the long term outlook (up to 1986) for the major American agricultural commodities.8 It argues that standards of living in the developed countries will cause a continuing demand for more grain-fed meat and animal protein; that Russia should continue its policy of raising the dietary standards of its population and hence will continue to import cereals; and that population pressures in the UDCs will generate further demand. Not much can be done about raising price substantially between now and 1980, according to our friends at Chase, but from that date until 1986, prices should rise steadily until they again reach the record levels of 1973-74—i.e. about $4.50 a bushel for wheat.(*) (See endnote 8)
Chase does not discuss the forecasted prices for rice, but the US Department of Agriculture (USDA) has been steadily pursuing its market development programs for this grain, successfully competing with traditional suppliers like Burma, China and Thailand. Mid- Eastern and OPEC markets are growing especially fast. In early 1978, the USDA expected "continued strength" for rice prices and can be counted on to attempt to raise, or, at worst, to maintain them at present levels.9