INTERNATIONAL COCOA AGREEMENT BILL (Hansard, 9 July 1973)

EARL FERRERS
My Lords, I beg to move that this Bill be now read a 618 second time. The purpose of the Bill is to give effect to the International Cocoa Agreement. This Agreement entered into force provisionally on June 30, after all the major exporting countries and every one of the 26 importing countries who signed it had either ratified the Agreement or had undertaken to apply it provisionally. The importing members include all the member States of the E.E.C. as well as the Community collectively. So far as the United Kingdom is concerned, the entry into force of this Agreement is the culmination of many years of effort by successive Governments of both Parties.
Cocoa has long been accepted as a commodity for which the support of an International Commodity Agreement was particularly appropriate. It is a commodity which has been subject to severe price fluctuations yet one on which several developing countries are heavily dependent, particularly Ghana, which is the major producer. Indeed there is a particularly strong Commonwealth interest in the International Cocoa Agreement, since Ghana, Nigeria and other Commonwealth producers together account for nearly half the world's cocoa production.
The purpose of the Agreement is to reduce excessive price fluctuations and to assure suppliers at prices equitable both to producers and consumers. For this purpose, the Agreement relies on a system of adjustable export quotas combined with a buffer stock. Export quotas will be applied when the world cocoa price is below 29 U.S. cents per lb. or about £250 per ton, which is well below the current world price. These quotas are adjusted during the year in accordance with price movements below this level with the aim of preventing the prices from falling below 23 U.S. cents per lb. or about £200 per ton. At the same time, the buffer stock will purchase cocoa at the end of each year in any member country which has a cocoa surplus both to its export quota and its domestic requirements. This cocoa will be stored for resale when the price reaches the maximum envisaged in the Agreement of 32 cents per lb. or £280 per ton. This should help therefore to moderate price rises.
The Agreement was being negotiated a year ago when the supply and demand 619 were more evenly balanced and when prices were within the range envisaged in the Agreement. So volatile are the price movements that they are now not far from double the top of that range. We could not therefore expect the Agreement to achieve in the short term any moderation in the present high price levels since these reflect actual or projected shortfalls in supply which are largely the result of damage caused to crops by drought both in South America and West Africa. The Agreement will inevitably therefore begin with an empty buffer stock so that nothing can be done it both assume obligations.
On the other hand, over the longer term there are two ways in which an agreement of this kind could help to moderate price rises. First, the buffer stock will accumulate supplies of cocoa during periods when prices are low—as they were, for example, in 1971–72. These supplies will then be resold when the cocoa price reaches the maximum of the range envisaged in the Agreement, about £280 per ton. In passing, it is worth noting that the maximum capacity of the stock of 250,000 tons is considerably greater than any deficit which has occurred in any one year since the war. The more important part is the role which the Agreement should play in giving producers confidence to expand production in line with the rising world demand for cocoa and cocoa products. This is particularly important in view of the fairly longterm cycle of cocoa production and the past history of wildly oscillating price movements which is still much in producers' minds. The Agreement, my Lords, is in the long-term interest both of producers and of consumers and under it both assume obligations.
The purpose of the Bill is to provide the powers necessary to enable the United Kingdom to fulfil the obligations assumed by importing Governments. These relate essentially to the control of imports and, in particular, the measures necessary to provide for financing of the buffer stock. This is to be achieved by means of a contribution charged, at least in the first two years of the agreement at the rate of 1 U.S. cent. per pound or about £9 per ton of cocoa or cocoa products when they first enter international trade. Export- 620 ing members of the Agreement have undertaken to ensure that no shipments of cocoa leave their shores without the presentation of a certificate showing that the contribution has been paid or secured. Importing members similarly undertake to ensure that all imports of cocoa are accompanied by such a certificate, whether they come from member countries or from non-member countries. For this reason the Bill provides that cocoa beans and cocoa products shall be imported only under authority of a licence granted by the Secretary of State, which in practice will be the Secretary of State for Trade and Industry. The conditions of the licence may require the presentation of evidence to Customs that any contribution chargeable under the Agreement has been paid or secured.
In order to interfere as little as possible with the normal course of trading, it is proposed that imports of these products from member countries should be authorised under an open general licence. This means that imports from these countries—which provide either directly or indirectly over 98 per cent. of our imports of cocoa and cocoa products—will continue to be imported without quantitative limitation or any other restriction, save only the requirement to submit evidence that the contribution due has been paid or secured. This evidence would be in the form of a prescribed certificate which the exporters will be required to furnish to importers along with the shipping documents. The document will equally serve as evidence that the export was in accordance with any export quotas which were then in effect. Different arrangements will need to apply to imports from non-member countries of cocoa because these would be subject to quotas.
My Lords, the administrative arrangements of this Agreement have been worked out with the advice and cooperation of the cocoa trade and the industry, and the Government deeply appreciate the valuable help which these organisations have so generously given both during the long negotiations for the Agreement and also subsequently in the detailed preparations for giving effect to its provisions. I have no doubt that we can continue to rely on their support in the future to ensure the success and effectiveness of the Agreement.
621 This is the first international agreement for ten years to seek to bring greater stability to another primary commodity by co-operation on an international plane between importing and exporting countries. The United Kingdom took a leading part in its negotiation and we have invited the International Cocoa Council to establish its headquarters in London—an invitation which we hope they will accept. I am confident that this modest Bill will help to secure some measure of stability in cocoa production and in the industries associated with it, and I hope that your Lordships will give it a Second Reading.

§ LORD HOY
My Lords, we are grateful to the noble Earl for his explantion of this Bill. I would not altogether agree with him when he describes it as a modest Bill. Anyone who has had anything to do with this particular commodity over a fairly long number of years would regard it as more than modest. I can think of two of our noble friends who are in the House to-night—the noble Viscount, Lord Amory, had a fair amount to do with it when he was Minister of Agriculture; my noble friend Lord Champion when he was Parliamentary Secretary had to cope with this particular problem, and certainly in my own experience in the six years I spent at the Ministry we spent a considerable time over cocoa. If we in fact get stability out of arrangements of this kind we shall have taken a big step forward. As I understand it, the Bill does three simple things—simple in the sense that achievement has been reached. First of all, it will prevent the very wide fluctuations which took place in the price of this commodity. This caused endless trouble. As the Minister said, the manufacturers and traders had a most difficult job contending even with retail prices in this country of commodities that were produced from this product. The one thing we were always attempting to do was to give stability to the countries which produced it. One has only to look at the first five in the list, from Ghana to the Cameroons, to see how dependent their economies are on this particular product. 622 Any great fluctuation in price in a downward direction makes, and did makes, economic trouble for them, so that from the producers' point of view this Bill gives them a stability that they have not enjoyed before.
We should not overlook the fact either that of all the countries in the world Britain is the fourth largest importer. Therefore it is important from our own point of view—not only from the manufacturer's but from the consumer's point of view—that we should get stability into the price of this commodity and not allow these wide fluctuations to take place. So I think that from this side of the House we should welcome the Bill as it is.
There is only one thing which gives me a little concern—and I have already told the Minister about it. In Clause 1(7) it says: …and includes any amendment of that agreement (whether made before or after the passing of this Act)… I am sure that this must be common form, but it is a little difficult to understand that this in fact will take precedence whether the agreement is come to by amendment either before or after the passing of the Act. This seems a little difficult to understand. While I welcome the Bill, I should be grateful for an explanation as to what the words mean.

§ Viscount AMORY
My Lords, I should like to echo what the noble Lord has said and the welcome he has given to this, I think he would agree, not modest, but bold and audacious measure put before us. I was surprised to hear that it was the first international commodity agreement for ten years—I think that is what my noble friend said—because 20 or 25 years ago we used to spend a very great deal of time trying to work out international commodity agreements, and the aim of them must be wholly good: to try to even out some of the tremendous fluctuations that can do great damage to the countries involved both from the producers' and from the consumers' end. These are very difficult things to operate, and I am sure we should all wish this Bill every fortune and say how pleased we are to give it a Second Reading.

EARL FERRERS
My Lords, I am very grateful to the noble Lord, Lord Hoy, and to my noble friend Lord Amory for what they have said and the welcome they have given to this Bill. The noble Lord, Lord Hoy, said that he was surprised that I described it as a modest Bill and indeed when he tells me that my noble friend Lord Amory, the noble Lord, Lord Champion, and the noble Lord, Lord Hoy, have been having a go at it and found it difficult to come to any degree of conclusion, I am bound to say that possibly my use of the word "modest" was too modest.

§ LORD HOY
Just to get the Record right—the three noble Lords to whom the noble Earl is referring had no difficulty in coming to conclusions—it was getting agreement on the conclusions.

EARL FERRERS
My Lords, I accept that entirely, and indeed it is a good thing that at last we have been able to come to agreement—and I am bound to say, again in all modesty, that that success was not due to me such as the conclusions were due to the noble Lords to whom the noble Lord, Lord Hoy, referred. Obviously, this will be a very great help to stabilise the price of cocoa from these countries which depend so largely upon it for their economic success. If we have achieved this, we have achieved quite a lot.
The noble Lord, Lord Hoy, was concerned about Clause 1(7) which he said referred to …any amendment of that agreement (whether laid before or after the passing of this Act)… I do not think that there is anything sinister in this; indeed, it has precedents. The words are frequently put into Acts. The reason is that when an agreement is arrived at, such as the document which the noble Lord has before him, it is possible that there may be alterations to it before the Act is passed, or even after. These may be only matters of small note. I would refer the noble Lord to the fact that in order to make these changes there have to be considerable areas of agreement. If he looks at Article 75, he will see that it is quite a process which has to be gone through in order to change the Agreement and the purpose of putting in these words is to ensure that if such 624 agreement is arrived at the Bill should apply to any alteration, too. In the Sugar Act of 1956 these words were mentioned in relation to the Commonwealth Sugar Agreement, in Section 1(9); and also with regard to the International Sugar Agreement, in Section 29(5) of the same Act. So that there are precedents. My Lords, I am grateful to the noble Lords for what they have said. With them, I hope that this will achieve some great degree of success.