The Ottawa Journal from Ottawa, Ontario, Canada • Page 17

commodities Some fears The recent slump in demand and prices has deterred plans to expand production capacity, so that surplus could quickly become shortage. And there are fears that some of the Third World material-producing countries might try to disrupt the recovery by withholding supplies, raising prices, nationalizing foreign-owned mines, and imposing punitive export taxes, unless they are bought off beforehand. But negotiating even the vaguest semblance of the "new international economic order" the Third World wants in raw materials would be an expensive and lengthy business. Some people, like Dr. Kissinger and his energy adviser Thomas Enders.

are believed to favor a major showdown with the Third World soon, so as to be able to build Western economic recovery on the ruins of confrontation. They are particularly keen to discredit Algeria -which as chairman of the 76 Non-Aligned Group and arch-champion of "producer power" has given Third World countries ideas above their station. Other U.S. advisers are more conciliatory. But at least the U.S with most of its raw materials imports coming from Australia, Canada and South Africa, cfcn think of getting tough with the developing world.

Europe and Japan would much rather not Canada in good spot Australia and Canada are in a profitable middle position. They will back Third World demands (hat Would improve their own raw materials trade, but they can defeat any attempts to squeeze supplies of key products like copper, iron ore and bauxite, and would join in threatening to reduce supplies of food, fertilisers, technology and aid if the Third World became too aggressive The developing countries are aware of their-vulnerability to such threats, but plan to maximise their nuisance value with oil as the main to force the industrial world to clinch a new deal on oil, food and raw materials at a world conference year. Hence their rc'usal to separate energy from raw materials which resulted in the breakdown last month of the Paris energy talks. Wilson's proposal for a general agreement on commodities falls short of their aim, as Guyana premier Forbes Burnham made scathingly clear. But it does at least recognise that in their own self-interest the industrial countries must think seriously about a fairer distribution of wealth.

And it might deed prove a discreet departure from the official western strategy of trying to split OPEC, cut it off from the non oil-producing countries, and exploit differences between exporters of competing products. Even US representatives seem to have doubts about the wisdom of driving wedges through the Third. World when splits might happen without outside help. It remains to be whether, at the ministerial meeting of the International Energy on May 27, Dr. Kissinger wi'l continue to support the plans of the chairman, Vicrmte Avignon to open a dialogue with OPEC Which would not of course include the non-oil developing countries.

A plan Ministers from OECD countries will meet the following day doubtless to consider Wilson's, 'proposals together with a far more limited "mini-progrsmme" drawn up with heavy United States inspiration. This plan would provide for a $4 000m stockpile of six key raw materials (rumoured to be iron ore, bauxite," copper, rubber, tungsten and wool). The stock-piling would aim both at underpinning next year's recovery and at holding prices up now, in exchange for promising to keep them down later. It would also involve supply and purchpsc commitments by both sides and possibly help producers to expand capacity. The US-OECD approach will certainly prove too aggressive and divisive for Europe and Japan, iince it excludes agricultural and tropical prodx-ts important to many Third World countries.

If OKCD ministers can agree on anything, it will be only to "keep talking Moreover, industrial countries have already committed themselves to discussing an 18-prodnct "integrated programme for commodities" proposed by the UN Conference on trade and development secretariat at February's UNCTAD commodities committee. Non-stop talks FEBRUARY Dakar Third world raw materials Geneva Unctad commodities committee Rome 46 Mates sign Europe poet MARCH Geneva UN law of mo APRIL Geneva- Iron-ore agreement Geneva Mercury agreement Paris Energy talks break down MAY Kingston, Commonwealth summit Kuala lumpur Rubber London Sugar Vienna OPEC oU summit Rome World feed security talk Rome -1 FAO fute group Paris OECD summit JUNE London Cocoa Rome UN world hod aundl London Coffee JULY Geneva Unctad commodities Geneva Unctad tungsten AUGUST London Cocoa Geneva Unctad trade and development Lima Neutral countries summit SEPTEMBER New York UN spedal session Washington International Monetary Fund Rome UNTAO world feed Geneva UN cocoa New York UN general assembly OCTOBER Kuala lumpur Rubber NOVEMBER Rome FAO coundl Rome FAO conference lima Copper summit DECEMBER Geneva Unctad commodities war UN: United Nations; FAO: Food and Agriculture Organization; Unctad: UN conference on trade and development; OECD: Organization for Economic Co-operation and Development; OPEC Organization of Petroleum Exporting Countries. The UNCTAD product list covers all the key mineral, tropical and temperate products but not oil. In addition to the traditional type of commodity arrangement the negotiations would include the setting up of international buffer stocks, and managed ly a common fund, indexation of prices -and supply and purchase commitments. Major trade concessions to improve access to markets for Third World exports and compensation for shortfalls in export earnings.

The plan will be reviewed in July and December, so that hopefully the fourth UNCTAD conference in Nairobi in May 1976, can launch the negotiations. proposal Buffer stock financing will also be discussed by the International Monetary Fund's ministerial meeting in Paris in mid-June with a view, to giving direct assistance to a buffer stock manager rather than merely to countries whose contributions to buffer stocks cause them balance of payments difficulties. Later this year, the UNCTAD secretariat will present its own plan for a central multi commodity fund or bank, outside the IMF. The Impact of all these various discussions will be seen at. a scries of meetings over the next four months including the negotiations for a new internatbnal tin agreement, discussions in UNCTAD for a minimum price scheme for tungsten, and exploratory talks on the possibility of new agreements on sugar, wlieat and coffee.

The first meeting in two months time of the World Food Council set up by the World Food Conference last November will show whether wealthy nations are really ready to flesh out commitments to set up an agricultural development fund, and to ensure world food security, by a network of co-ordinated national grain stockpiles and attain an annual food aid target of 10m tons of grain a year. The betting is that the Commonwealth will not break the Third World ranks to make a plug for Britain, but will stand firm with Its Third World brothers in calling for a new international economic order. But WiUon's olive branch might be seen in retrospect as the turning point which made some kind of commodities success at Nairobi feasible. Comeback in Italy The Ottawa Journal Friday, May 16, '17 Orthodox economics turn nightmare into miracle Srfii -net Assessing me wqs on By VANYA WALKER LEIGH The Sunday Times The Commonwealth countries gave a cool reception to the long-awaited commodities proposals that Harold Wilson offered 'them in Kingston, Jamaica. But both sides know that these are only the first shots in a long and hopeful exchange of The whole question of the prices and terms on which countries exchange raw materials, whether fuels, foods or minerals, has clearly emerged as the dominant theme of world economics this year just as the price of oil was in 1573 and the recycling of money in 1974.

With its unique mixture of countries in every stage of development, of suppliers and producers of most leading commodities, the Commonwealth is fit for a leading role in discussions of this kind. What happened to oil frightened many people, and industrial countries are beginning to suspect that the gloomy forebodings of the Club of Rome and the widespread warnings of famine in the 1980s might contain a grain of truth. More immediately the West is worried that next year's hoped-for economic recovery might be choked by shortages of materials and resulting price increases. By KEVIN DOYLE After nearly two years of tottering on the edge of economic disaster, Italy has suddenly begun to stage a remarkable financial recovery. Less than 12 months ago, economists and commentators were writing off the Italian situation as Most believed it would take at least a decade to make any correction in the country's mam-' moth balance-of-payments deficit, its collapsing industrial base and its crippling inflation.

It seemed only a matter of time until the International Monetary Fund tIMF) would have to take control of the economy away from the poli- ians in Rome so -that it could be administered by an outside bodyof experts. But the lasKtew "months have seen a shar-and dra ma i improvement taking After running the biggest payments deficit in the indus trial world last year, the country now is surging towards a modest surplus this year. In March, 1974, for example, the defbit was a nightmarish 666 billion lire $164 billion. In the same month this year, there was a healthy surplus of S3 billion lire even after repayment of 63 billion lire in international loans. Ahead of schedn'e So far this year Italy has repaid nearly $850 million to international banks and insti-tutions which loaned the country" huge sums in 1974 and the repayments have been well ahead of schedule.

Inflation, which last year rocketed above a 30 per cent annual rate has been reduced to 20 per cent and there are strong signs that it will come down more before the end of 1975. The. March figure for price rises' was actually lower than that for West Germany, considered a model in the maintenance of stable The main architect of the Italian recovery has been the governor of the central bank, Dr. Guido Carli, who convinced the Christian Demo-crati: government to follow orthodox anti-inflation policies. This involved massive cuts in government spending, higher taxes and a range of other austerity measures to curb domestic demand and channel more goods into exports.

But the- price which the Italians have been forced to World fish stocks, prices get completely out of band and this seems highly unlikelythe once-troubled Italian Payments deficit improves for 24 PARIS The balance of payments deficit among the 24 countries of the Organization of Economic Co-operation and Development was estimated Thursday at between $20 billion and $24 billion in 1975 about half the amount as last year. "Nearly ail nations are sharing in this improvement and some of them in a very conspicuous the organization said. The projected general improvement is partly due to a big drop in imports of many countries. The huge surpluses of the member countries of the Organization of Petroleum Exporting Countries fell because their oil exports decreased. OECD area exports to these countries, which increased by 73 per Cent last year, were expected to rise significantly again this year, he said.

Recession hooks fishermen By R. V. MAHAFFY Journal Business Editor HALIFAX This is a fish story. It is a fish story about Europe. But, as it was unfolded at the annual feT'i'' die iFsheries Council of Canada here, it hows the laws of demand and supply still operate internationally.

And it goes far to explain the present depressed state of Canada's Atlantic groundfish industry. The story was told at a council sefs'on on marketing fish and seafood in the '70s by L. Birkeland, export Frionor Norwegian Frozen Fish 0lo. The picture Mr. Birkeland i sketched a picture of rising stocks of frozen fish in Europe, but higher prices, reduced fishing ac'ivi- ty, yet increased competition in the S.

market from the traditional suppliers Denmark, the 'Faeroe Islands, Iceland, Norway, and Canada. For example, the cost of producing one-pound bone-in cod blocks in France on a basis if 67.5 cents (U.S.) a pound. Cod blocks in Den-amrk are now at a minimum price, equivalent, of 64 cents a pound, and inside Germany cod blocks still cell on a f.o.b. basis at 65 cents a pound, Mr. Birkeland said.

Yet stocks of frozen fish held by SVG, the selling or-ganization for freezer trawlers in Germany, at present have reached 40,000 tons for all species. Mr. Birkeland said SVG. had been allowing an increase "beyond anything reasonable and probable in the months to comei" i In France, stoclcs of frozen cod fillets reached 10,000 tons pay is rising" unemployment, which may reach 10 per cent or more. Strikes have become rampant and there is a danger that escalating wage awards will begin to fuel inflation once again.

-To pacify the the government now may feel obliged to institute a modest expansionary program and create a new jobs. But unless it allows public spending to 7 SEAJNL MacBRIDE: Pretoria warned Exports reffaraea 'stolen' as TOKYO (Reuter) Sean MacBride, the United Nations commissioner for Namibia (South West Africa), said Thursday that go-ds exported from the territory under agreements with South Africa after May 31 will be regarded as stolen p-operty end may be seized anywhere in the world, Speaking at a news conference, MacBride recalled that the UN has given South Africa until the end of May to declare unequivocally its intention to withdraw from ibia. If it does not do so, "any goods taken from Namibia on the authority of an illegal government are In the same category as stolen property and can be pursued In any part of the world," the former Irish foreign minister and Nobel Peace winner said. MacBride. who is in Tokyo' with the UN council for Namibia, named Japan as one of the main countries now trading in Namibian goods, along with Canada, Britain, West Germany and the United States.

South Africa has administered the mineral-rich former German colony since the First World War under a League of Nations mandate, which the UN General Assembly voted to terminate in ,1966. at the end of April, compared with 6,000 tons at the same point in time in 1974 and 1973. Ard processors and vessels held 4,300 tons, compared with virtually none a year earlier. In the United Kingdom, the stock picture had improved since June, 1974, when stocks peaked at 50,000 tons edible weight of white fish, up 50 per cent over 12 months earlier. In January and February this year, they had dropped to 35,000 tons, about the same level as a year ago, but "still too high to create strong EEC excess For the European Common Market as a whole, the Brussels estimate at the beginning of April was 120,000 tons of frozen stocks, which was 60,000 tons in excess of normal.

Why then the high prices in Europe? Mr. Birkeland said "the, explanation for the present market situation is found outside the fishing industry." It was related to he general business recession provoked by anti-recessionary measures. This had hit most commodities in Europe but frozen fish the most. Fish was no longer a cheap food. It was "a high-priced commodity responding to the upsand downs in the spending power of the public." And as a resutl there had been a drop in fish consumption in Europe of 10-15-20 per cent.

But the fisherman had taken the main blow. The cost of diesel fuel had gone up three times; nets and maintenance by two times, and "unions get what they ask for." Hence it was "very Monetary reform PARIS Disagreements between France and the United ates prevented progress towards world monetary' reform at a eeting of top level financial officials here. Thursday, in formed -sources said. The meeting of the deputies of the so-called Grbepof Ten, including Canada, was called to prepare the way for a two-day session in June of the interim committee on international monetary reform, set up last year. France presses for gold to be allowed, to be sold by member countries of the Internatbnal Monetary Fund when and how they wish.

U. 8. favors the end of gold asmonetary asset. EEC aid to UK $1 billion BRUSSELS In less than 2'4 years, of membership, Britain has received more than $1 billion worth of aid and more than $6S0 million worth of loans from the European Common Market, figures released Thursday by its executive commission show. The largest loans were to the British coal and steel industries, which amounted to $342 million.

U.S. OUTPUT U.S. output declines WASHINGTON Output of United States Industry de-clined four-tenths of one per cent in April, the seventh straight monthly decline but the smallest drop since last August, the federal reserve board reported Thursday. Although production of autos increased 13 per cent in April, the board said output exceeded sales and that auto manufacturers are cutting back on production plans for coming months. Bank rate cut in WASHINGTON The federal reserve board approved Thursday a cut in the U.S.

bank rate to six per cent from 6.2S per cent. The rate will be at its lowest level since June 11, 1973, when it was per cent. Shell profits down LONDON An unprecedented fall in world demand for ofl trimmed profits of the Royal Dutch Shell group by nearly $230 million in the first quarter of 197S, compared with the same period last year, the company reported. The slackness in most of the firm's markets towards the end of 1974 gathered pace during, the first three months of 1975. high difficult as a processor to come to the fishermen and ask for a very substantial price reduction." Prices set Government intervention had reared its head.

The EEC has set a series of minimum import prices (reference prices) at all Common Market ports. From April 1, the EEC had.begun levying heavy export premiums to third countries six to seven cents a pound for cod and 4.5 cents a pound for haddock. Noting there had been a slowdown in fish production in Europe, Mr. Birkeland said. Norway had converted two fish trawlers into oil tankers, taking seven million pounds of cod out of the UK market.

In fact, the outlook was for "several thousand tons less, production." He foresaw further in'erventioa. in the industry in Europe. However, the stock position of the five traditional suppliers to the U.S. market was "not heavy" at present. At the end of January, stocks of these five suppliers were 13 per cent more than last year for cod fillets and 25 per cent less for pollock.

In the last quarter of 1974, Denmark, the Faeroe Islands, Iceland, Norway and Canada increased their share in cod blocks of U.S. total frozen block imports (used for fish sticks, etc.) to 55 per from 35 per cent in the first half of 1974. For Europe, Mr. Birkeland forecast no general price improvement. The stock clean-u would continue.i There were prospects for a general business improvement, and' the meat market would stabilize in the UK first economy appears set for a period of long-sought bogs down U.S.

Joshua John, manager, marketing services division, fisheries and marine service, Environment Canada, dealt wi'h the 1975 supply and demand outlook" for groundfish in the U.S. market Consumption to rise He said. the drop in total groundfish consumption experienced during 1974 was not expected to continue into 1975. "In fact, as against a 590 million pound consumption year, 1975 consumption may edge up slightly towards the 600 million pound mark, partly helped by annual popula-tiorj increase, a lessening rate of inflation, and government measures to revive the economy." Mr. John said on the groundfish supply side, there 'were some expansionary forces which might bring an increased level of supplies, while other factors might work in the opposite direction.

An important factor on the supply side would be direct and indirect impacts of government programs in producing countries to maintain income and employment. One of the major factors which could also lead to a decline in groundfish supplies was the continuing losses faced by producers. "Processors in all the supplying countries are experiencing a tremendous cost-price squeeze due to rising unit costs of production in the face of sta-t i a demand and poor market prices." Given the anticipated somewhat heavy level of supplies, particularly in blocks, prices were not expected to register any major improvement in 1975..