US embassy cable - 05ROME1888

UNCLAS  ROME 001888 
 
SIPDIS 
 
 
FROM THE U.S. MISSION TO THE UN AGENCIES IN ROME 
 
USDA FAS FOR U/S PENN, JBUTLER, MCHAMBLISS, LREICH 
STATE FOR IO/EDA, OES/O, E, EB; 
AID FOR EGAT, DCHA/OFDA, DCHA/FFP 
 
E.O. 12958: N/A 
TAGS: EAGR, ETRD, EAID, AORC, FAO 
SUBJECT: FAO COMMITTEE ON COMMODITY PROBLEMS SIXTY-FIFTH 
SESSION 
 
1.  Summary. The Sixty-Fifth Session of the UN Food and 
Agriculture Organization (FAO) Committee on Commodity 
Problems (CCP) met in Rome April 11-13, 2005.  The 
Committee reviewed FAO reports on the state of world 
commodity markets and its projections of supply, demand, 
trade and prices.  Member countries discussed policy 
developments affecting agricultural commodity markets and 
trade, and their impact on global food security.  They 
heard proposals from the Secretariat to improve 
notification, consultation and reporting procedures on 
food aid transactions monitored by the Consultative 
Committee on Surplus Disposal (CCSD), but a large 
majority of delegations (the USG excepted) deemed it 
premature to consider reforming the CCSD's role before 
the conclusion of current WTO agriculture negotiations. 
Among the CCP side events was a High-Level Round Table on 
Agricultural Trade and Food Security featuring WTO 
Director General Supachai as keynote speaker.  There was 
a general consensus among participants that trade 
liberalization generally enhances food security by 
fostering economic growth, but many developing countries 
argued for continued support and protection of their own 
agricultural sectors even as they criticized high levels 
of support and protection in the developed world.  End 
summary. 
 
2.  The FAO Deputy Director-General, David Harcharik, 
opened the session, highlighting that CCP is the only 
truly global platform for the discussion of problems 
facing agricultural commodity producers, exporters and 
importers, and for identifying appropriate solutions to 
these problems.  In his remarks he identified several key 
themes for the session: the impact of low commodity 
prices on the import bills of food-importing developing 
countries and on remuneration for food exporting regions; 
recent market trends and the factors responsible for 
them; the implications of recent trade policy 
developments; FAO's expanding work in trade-related 
capacity building programs; and the work of the CSSD in 
tracking global food aid and its potential impact on 
trade. 
 
3.  The U.S. delegation was headed by Mary Chambliss, 
Deputy Administrator, Export Credits, USDA Foreign 
Agricultural Service.  David Hegwood, US Mission 
Agricultural Minister-Counselor, served as alternate 
head.  Other members were Lauren Landis, USAID Food for 
Peace Director, and Food for Peace staff members, Anne 
Marie del Castillo and Dale Skoric; Richard Hughes, FAO 
Liaison Officer, USDA Foreign Agricultural Service, and 
Willem Brakel, Alternate Permanent Representative to FAO, 
US Mission Rome. The United States represented the North 
America Region on the drafting committee. 
 
State of World Agricultural Commodity Markets 
--------------------------------------------- 
 
4.  Alexander Sarris, Director, Commodities and Trade 
Division, introduced the new flagship publication, State 
of World Agricultural Commodity Markets.  Most 
delegations, including the United States, applauded FAO 
for this effort.  The statements of many developing 
countries reflected the impact of the long-term decline 
in commodity prices.  Despite this concern, the committee 
concluded that the problem should not be addressed by the 
introduction of new policies that would be likely to 
create market distortions.  The U.S. statement called 
attention to the important role of markets in generating 
sustainable economic growth and encouraged FAO to provide 
policy advice to developing countries that recognizes the 
emerging consensus in favor of market liberalization. 
Brazil's statement criticized FAO for releasing a working 
paper on the impact of domestic and trade policies on the 
world cotton market in April 2004, while Brazil's WTO 
dispute settlement case on cotton was being litigated. 
Brazil said it disagreed with the conclusions in the 
paper and called for a review of FAO's policies on 
disseminating studies when they involve diverging views 
among members.  The EU statement provided a laundry list 
of initiatives being undertaken for the benefit of 
developing countries. 
 
Policy Developments Affecting Agricultural Commodity 
Markets and Trade 
--------------------------------------------- -------- 
 
 
5.  Under this agenda item FAO presented two new work 
programs.  The first is COSIMO, an econometric model of 
commodity market issues, which is being developed in 
collaboration with the OECD and its AGLINK model.  To 
demonstrate the potential uses of the COSIMO model, FAO 
presented the results of an assessment of the 
implications of decoupling domestic payments for world 
commodity prices and trade.  The second new work program, 
the Ag Policy Indicators initiative, is a collaborative 
effort among FAO, OECD, IFPRI, and the World Bank.  The 
API will eventually include policy indicators for a large 
number of developing countries and will be used to 
analyze how agricultural and economy-wide policies affect 
food security, poverty reduction, agricultural growth, 
and rural development.  Most delegations, including the 
United States, welcomed both of these initiatives and 
encouraged closer cooperation with institutions, such as 
the OECD, while also cautioning FAO to avoid duplication 
of efforts. 
 
6.  The second discussion point under this agenda item 
was trade policy reform and food security.  The FAO 
presented a document analyzing the results of economic 
and trade policy reforms in selected developing 
countries.  The analysis showed mixed results in the case 
studies, but the most significant factors influencing the 
success of reforms were found to be infrastructure and 
institutional contexts, sequencing of reforms, and 
consistency of implementation of reforms.  The 
interventions of many delegations naturally focused on 
the reforms being considered in the WTO agriculture 
negotiations.  Somewhat surprisingly, a number of 
countries acknowledged that WTO-mandated trade policy 
reforms are not a panacea; other measures are needed to 
address food security, such as infrastructure development 
and simplification of regulatory regimes.  The report 
adopted by the committee calls for further case studies 
covering integration of trade and development policies, 
impacts of tariff escalation and non-tariff barriers, 
trade facilitation by private sector entities, 
incorporation of structural, institutional and 
legislative features into trade reform analysis, and 
analysis of the impact of competition and investment 
issues on trade policy reform. 
 
National and International Commodity Risk Management 
--------------------------------------------- ------- 
 
7.  This discussion centered on risk management tools for 
developing countries that are highly dependent on 
commodity exports.  A number of delegations pointed out 
that available risk management mechanisms, such as the 
use of futures markets for hedging, are not suitable for 
developing countries lacking the necessary financial and 
technological infrastructure.  The U.S. comments focused 
on importer financing mechanisms and raised a number of 
questions about the feasibility of such tools.  The 
Committee recommended FAO continue its work on risk 
management. 
 
International Negotiations Concerning Food Aid 
--------------------------------------------- - 
 
8.  FAO introduced this agenda item by summarizing 
document CCP 05/14 and highlighting its recommendations 
for reforms to the Consultative Subcommittee on Surplus 
Disposal.  The Secretariat then proposed establishing a 
working group to review the reform recommendations. 
However, the United States was virtually alone in 
supporting this proposal.  A large majority of 
delegations commented that it would be premature to 
review the future nature and role of the CSSD in advance 
of the conclusion of the current WTO agriculture 
negotiations.  The committee did agree that FAO should 
send a signal to WTO members with respect to the role of 
the CSSD in monitoring international food aid flows and 
indicating that it could be at the service of WTO if 
appropriate and required.  Despite heavy lobbying by the 
U.S. delegation and an unusually aggressive effort by the 
FAO Secretariat, most countries were unwilling to agree 
to an FAO work program of any kind on food aid issues. 
Nevertheless, a number of countries, including Tanzania, 
Norway, Switzerland, and Algeria, supported in principle 
the need for FAO to look at assessment procedures. 
 
 
Presumably, if WTO were to request FAO to undertake work 
in this area, countries would be less concerned. 
[Comment.  This outcome was disappointing, but not 
surprising.  Ironically, this is one of the few instances 
in which countries have been willing to abandon their 
professed support for the independence of international 
institutions and forthrightly proclaim that the WTO 
should trump the role of another institution.  End 
Comment.] 
 
International Year of Hard Fibers 
--------------------------------- 
 
9.  During the Joint Meeting of the Intergovernmental 
Group (IGG) on Hard Fibers and on Jute, Kenaf and Allied 
Fibers in December 2004, a proposal was discussed on 
raising the profile of all natural fibers by organizing 
an International Year of Natural Fibers (IYNF).  The 
Committee unanimously approved the proposal and requested 
that it submitted to the June Council meeting for 
approval. 
 
Side Events 
----------- 
 
10. Four side events, including the High-Level Round 
Table were held in conjunction with the Session.  The 
others were: Experiences in Regional Programs of Food 
Security; the Impacts of OECD Policies on Developing 
Countries; and CAP Reform, Trade and Developing 
Countries. 
 
11.  On April 13, the FAO hosted a meeting billed as a 
high-level round table discussion on food security and 
trade liberalization.  The meeting was organized at the 
specific direction of FAO Director General Diouf.  WTO 
Director-General Supachai gave the keynote address.  Not 
surprisingly, he advocated support for the Doha 
Development Agenda, but he also attempted to pre-empt the 
argument that trade liberalization is a risk to food 
security by highlighting all of the mechanisms in the DDA 
agriculture text that would allow developing countries to 
avoid trade liberalization, i.e., special and 
differential treatment, sensitive products, special 
products, and the special safeguard mechanism.  He said 
that food self-sufficiency is not equivalent to food 
security, and food security is best achieved in an 
economically integrated world.  Noting that hunger and 
malnutrition almost always are the result of poverty, he 
defined the WTO's role in food security as raising 
incomes through economic growth.  Given that since 1945 
trade has grown faster than economic output in all but 
eight years, he called for an ambitious outcome in the 
DDA, which he said would only be possible by achieving a 
balance between import sensitivities and export 
interests. 
 
12.  In his statement, DG Diouf called attention to the 
fact that while there is a general consensus that trade 
liberalization contributes to economic growth.  The 
distribution of winners and losers from the process is 
determined by the particular circumstances of individuals 
and countries.  He offered three questions for the 
group's consideration:  1) Does agricultural trade 
liberalization threaten food security?  2) Under what 
circumstances can protection be justified to ensure food 
security?  And, 3) What are the most appropriate national 
policies to ensure food security during the transition 
towards freer agricultural trade? 
 
13.   During the ensuing discussion period most 
participants read prepared statements.  While there was a 
general consensus that trade liberalization will 
generally increase food security by fostering economic 
growth, many developing countries advocated for continued 
access to some level of support and protection for their 
agricultural sectors.  Many also made reference to the 
high levels of support and protection in the developed 
world. 
 
14.   Although the meeting did not live up to its billing 
as a high-level dialogue, it was nonetheless a useful 
discussion of an issue of great interest to the FAO 
community in Rome.  If FAO is to fulfill its potential as 
an opinion leader on global agricultural policy issues, 
 
 
it should be encouraged to facilitate dialogue among its 
members. 
 
Other Matters 
------------- 
 
15. The Sixty-Sixth Session will take place in 2007 and 
the dates will be set by the FAO. 
 
16.  In its opening statement the United States noted 
that the experimental shortened format of the CCP this 
year and its scheduling contiguous with the Committee on 
Agriculture (COAG) appeared to be successful, but that we 
would like to revisit the issue after having a chance to 
reflect on the meeting. 
 
17.  Comment:  In a side conversation with Assistant 
Director General de Haen, we encouraged him to maintain 
an ongoing dialogue with members on the issues raised at 
CCP, particularly the issue of trade policy reform and 
food security, and not wait for the next CCP meeting to 
pick up the discussion.  The ADG said he planned to put 
several of the issues from CCP on the agenda of FAO 
regional group meetings in 2006 for continued discussion. 
This seems like a good step, but we would like to see 
more focused dialogue between FAO and its members, and 
among members, perhaps in the form of seminars, side 
events, or other low-cost meeting formats.  End comment. 
HALL 
 
 
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	2005ROME01888 - Classification: UNCLASSIFIED