§ Lord Juddasked Her Majesty's Government: What studies they are undertaking into the issues surrounding the decline in prices for Africa's key commodities; what necessary remedial action has so far been identified; and what consequential policy is being implemented.[HL4933]
§ Baroness Amos:Currently, about half of the countries in sub-Saharan Africa rely upon "traditional" agricultural commodities (in particular cocoa, coffee, tea and cotton) for over 50 per cent of their exports. These commodities also underpin the livelihoods of millions of some of the poorest people in the region, even in countries where agriculture's relative importance, as measured by macro-economic indicators, is less significant.
The long-term decline in commodity prices, and the associated negative shift in the producers' terms of trade, has been well documented since at least the 1950s. The current fall in prices is, however, particularly severe. By 2002, the IMF estimated that world cotton prices had fallen to a 17–year low and coffee prices has reached a 30–year low. This trend is the consequence of several factors including:
(a) Increased supply from the expansion of production in developing countries—including, but not exclusively, relatively new exporting countries such as Vietnam in the case of coffee;
25WA(b)The relatively slower rate of growth of demand for commodities in their developed country markets; and
(c)The impact on certain, but not all, commodities of trade distorting policies of many developed countries.
Given the general level of understanding of the problem, we are not and do not intend to carry out further studies to review the causes of declining commodity price other than to analyse in greater detail the impact of developed country policies and the realistic implications for developed countries of their removal. This is in order to inform the development of the UK's position in continuing trade and CAP reform negotiations and to help steer our own development assistance.
Declining commodity prices have serious consequences for developing countries and poor people. But this impact primarily stems from their dependence upon a narrow range of commodities rather than the movement in price itself. The key to tackling this problem therefore lies in economic diversification. Diversification is however a long term objective. In the interim, the UK. Government, through their bilateral and multilateral development programme, are supporting a range of innovative approaches to assist commodity-dependent exporting countries (and poor people in those countries) reduce their vulnerability to volatile commodity prices.
The UK's policy on commodities will be set out in the forthcoming UK Government and industry report Assisting Commodity Producers. This report will consider how UK industry and government can work together to address the negative impact of commodity dependence. Furthermore, the Government are working to secure a more development-friendly reform of international agriculture trade rules and to reduce the impact of trade distorting policies; for example, reform of the common agricultural policy.