Bandung NAM G77 ITO Commodity Trade Terms of Trade Brandt Commission South Commission

Bandung Conference

Adam Sneyd, McMaster University

Held between 18 and 24 April 1955, the Asia-Africa Conference was a watershed event in anti-colonialpolitics and modern international relations. Twenty-nine heads of state and government mainly fromnewly independent Asian and African nations, as well as representatives of national liberationmovements and civil rights organizations, were present at this gathering. Also known as the BandungConference, leaders in attendance included Indonesia's Sukarno, India's Nehru and a representative fromthe People's Republic of China (PRC), Zhou Enlai. Participants advocated self-determination andautonomous government for peoples in the Asian-African region, and sought for the first time to build acollective voice that would command respect amongst the former colonial powers and within the UnitedNations organization.

In a spirit of cooperation and respect for national sovereignty, participants debated the issue of alignmentwith either of the Cold War blocs. Although states such as the PRC, Turkey, Pakistan, and thePhilippines were aligned, many in attendance took up Nehru's call to move beyond defensearrangements that he viewed as only furthering the interests of the two superpowers. The Conference'sfinal communiqué reflected Nehru's push insofar as it declared universal disarmament to be an absolutenecessity for the preservation of peace, and affirmed the principle of "abstention from the use ofarrangements of collective self defense to further the interests of the big powers."

Conferees condemned colonialism in all its forms, including Soviet policies in Eastern Europe andCentral Asia. To improve their relative position in the world economy, Asian and African nations notedtheir desire to develop economic links within the region and obtain additional financing frominternational organizations. Participants also used the language of human rights to draw attention toracialism and cultural suppression. The necessity of tolerance and cultural cooperation in the region toovercome these colonial legacies was underscored.

The final communiqué indicated that the nations of Asia and Africa were capable of articulating theirdesire for more autonomy collectively and in a manner that was consistent with international diplomaticnorms. Western policy-makers were apprehensive about this organized appeal to fully extend establishedprinciples of international relations such as non-intervention, and uneasy about new principles such asthe equality of races. They questioned the PRC's involvement and feared that policies of non-alignmentcould become a front for Communist influence. Worries about an organized push for decolonization andthe formation of a "non-white" bloc were also expressed.

While no formal organization was established to implement Bandung's objectives, after the Conferencethe pace of decolonization increased and Third World solidarity grew. The Non-Aligned Movement(NAM) was established in 1961 to challenge Cold War spheres of influence, and the Joint Declaration ofthe 77 countries articulated in 1963 at the United Nations fuelled North-South debate about the ways and

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means to a more equitable world economy. Many Southern leaders appealed to the legacy of collectiveautonomy when then met in Bandung in April 2005 to mark the Asia-Africa Conference's GoldenJubilee.

Suggested Readings:Acharya, Amitav. 2005. Lessons of Bandung, then and now. Financial Times 22 April: 15.

Asia-Africa Conference website. Final Communiqué, 1955, www.iss.org.za/AF/RegOrg/unity_to_union/pdfs/asiaafrica/bandung55.pdf (accessed 16 August 2005).

Fraser, Cary. 2003. An American dilemma: Race and realpolitik in the American response to theBandung Conference, 1955. In Window on freedom: Race, civil rights, and foreign affairs, 1945-1988.ed. Brenda Gayle Plummer, 115-40. Chapel Hill: University of North Carolina Press.

Mackie, Jamie. 2005. Bandung 1955: Non-alignment and Afro-Asian solidarity. Singapore: EditionsDidier Millet.

Wright, Richard. 1956. The color curtain: A report on the Bandung Conference. Cleveland: WorldPublishing Co.

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Non-Aligned Movement


Six years after African and Asian nations condemned colonial and neo-colonial practices at the BandungConference, their coalition was formalized in September 1961 at the first Non-Aligned Movement(NAM) Summit held at Belgrade. The twenty-five countries present agreed to not enter into strategicalliances with either the United States or the Soviet Union.

Embracing Indian Prime Minister Nehru's vision for non-alignment, countries in attendance vowed torespect territorial boundaries and to not interfere with, or adopt aggressive postures towards, one another.Leaders such as Yugoslavia's Tito, Indonesia's Sukarno, Ghana's Nkrumah, and Egypt's Nasser believedthat the cooperative strategy would give new countries a more powerful voice in global affairs toovercome their economic weaknesses. Although the NAM doubled in size during the 1960s, this voicewas muted somewhat as many members accepted financial aid from the superpowers. Nonetheless, theNAM demonstrated its unity through supporting national liberation movements in Africa and seeking arestructuring of the world economy. Its efforts also focused on enabling members to pursue moreautonomous paths to interacting with the global economy. At their 1973 Summit meeting in Algiers, theNAM brought its development concerns into a single package of prescriptions for a New InternationalEconomic Order (NIEO) and mandated the Group of 77 (G-77) to follow through with this initiative atthe UN General Assembly.

NAM Membership (2005)

The NAM has remained a uniquely unstructured international organization. It has not adopted a formalconstitution and has no permanent secretariat. Decisions are made by consensus at Summit Conferencesof Heads of State and Government that occur every three years. Hosts chair the NAM between Summits,coordinating members through day-to-day activities at the United Nations in New York and atMinisterial Conferences.


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Many commentators assert that the NAM lost its raison d'être with the end of the Cold War, though ithas continued to propound South-South cooperation to advance economic development. South AfricanPresident Thabo Mbeki, for one, has argued that the NAM remains a relevant forum for the developmentof common policy positions on poverty eradication, terrorism, and the restructuring of political,economic, and military power. As Cuba takes over the Chair in 2006 it confronts the reality that NAMmembers represent more than half the world's population, but continue to account for only a smallpercentage of global economic output.



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Group of 77


At the conclusion of the first intergovernmental meeting of UNCTAD on 15 June 1964, developingcountries issued the Joint Declaration of the 77. This Declaration indicated their willingness to worktogether to establish a new international division of labour and a framework for world trade that wouldaccelerate economic development. The coalition was formalized as the Group of 77 (G-77) developingcountries in October 1967 with the adoption of the Charter of Algiers. Highlighting the shrinking shareof developing countries in world trade due to import barriers they faced in developed countries, andlong-term declines in the terms of trade for primary commodity exporters, the Charter called for a newtrade policy for development. It advocated the relaxation of trade barriers and the introduction of asystem of trade preferences, as well as a scheme for stabilizing commodity prices at higher levels andthe diversification of developing country exports. On the whole, the Charter indicated the G-77's desirefor more autonomy and equity in the global economy.

Since Algiers, Ministerial Meetings to set the G-77's agenda have been held each year at the start of theGeneral Assembly's regular sessions in New York. The organization continues to produce jointstatements, declarations, and programs of action to advance the collective economic interests of itsmembers. Additionally, the G-77 sponsors and negotiates resolutions and decisions at global conferencesand other meetings held under the United Nations (UN) flag. Today the G-77 represents 135 countriesand has chapters at the Food and Agriculture Organization (FAO), United Nations IndustrialDevelopment Organization (UNIDO), United Nations Educational and Scientific Cultural Organization(UNESCO), United Nations Environment Programme (UNEP), and the International Monetary Fund(IMF)/World Bank. A subsidiary body, the G-77 Chamber of Commerce and Industry, promoteseconomic cooperation through its trade information network: a gateway for investors from membercountries to access the markets of other members.

Group of 77 Member Countries


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Many developed countries rejected the G-77's early initiatives, such as the Declaration and Programmeof Action for a New International Economic Order (NIEO), the Charter of Economic Rights and Duties ofStates, and the Integrated Programme for Commodities. Nonetheless, due to the Group's efforts,economic and social questions have a more prominent place on today's UN agenda than they did duringthe initial North-South debate.

In April 2000, prior to the Millennium Summit, G-77 Heads of State and Government met together forthe first time and made the case that the Joint Declaration of the 77 was still relevant. This event, termedthe South Summit, and subsequent negotiations driven by the group, led to the adoption of theMillennium Development Goals (MDGs). In June 2005, leaders of the G-77 held a Second SouthSummit in Doha and issued a Declaration and Programme of Action that affirmed the importance ofSouth-South cooperation to make economic globalization more equitable.

Suggested Readings:Group of 77 website. Doha Declaration and Plan of Action. Doha: Second South Summit of the G-77,www.g77.org/southsummit2/en/intro.html (accessed 14 July 2005).

Sauvant, Karl P. 1981. The Group of 77: Evolution, structure, organization. New York: OceanaPublications.

South Centre website. The Group of 77 at forty, www.southcentre.org/publications/booksindex.htm(accessed 14 July 2005).



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International Trade Organization


In 1946 the United Nations convened a Conference on Trade and Employment to consider proposalsbacked by the United States and the United Kingdom to create an International Trade Organization(ITO). The ITO was slated to join the International Bank for Reconstruction and Development (WorldBank) and the International Monetary Fund (IMF) as the third pillar of the post-war liberal internationaleconomic order. At the Conference, a preparatory committee was struck to draft a Charter for the newspecialized agency, and as their work proceeded, major trading nations began to negotiate tariffconcessions in a separate process. The following year these negotiations resulted in the GeneralAgreement on Tariffs and Trade (GATT). As the GATT entered into force through a temporary protocolsigned by twenty-three nations in January 1948, its backers assumed that it would form part of the morecomprehensive agreement. In March of that year, the ITO Charter was signed by fifty-three nations atHavana. However, two years later enthusiasm had waned in several countries, and US President Trumanindicated that he would not seek congressional ratification of the Havana Charter as it did not enjoy thesupport of the Senate or export-oriented corporations. With this move, the ITO's Interim Commissionwas left to administer the GATT, and subsequently became its Secretariat.

The ITO envisioned in the Havana Charter was designed to facilitate much more than commercialinterests. Reflecting the objectives of embedded liberalism, the Charter contained many loopholes andescape clauses countries could use to ensure that commitments to liberalize did not undermine theirobligations to maintain full employment. At Havana, discussions also focused on the ways to balance theexpansion of trade with country needs such as the control of foreign investors, the maintenance of labourstandards, infant-industry protection, and economic development. On the latter, participants talked aboutthe means to ensure higher and more stable revenues for commodity exporting countries, foreshadowingthe UN Conference on Trade and Development (UNCTAD) and the work of the Group of 77 (G-77).While participants at Havana wanted to foreclose a return to the irrational tariff escalation of the early1930s, they endorsed a Charter enshrining a flexible approach to trade law that would have preservedtheir ability to pursue autonomous policies had it entered into force.

With the death of the ITO, major traders embraced progressive liberalization through the GATT, and freetrade fundamentalism resurfaced in economic policy circles. Nonetheless, developing countries haverecently worked together at the World Trade Organization (WTO) to reassert the Havana Charter's visionthrough making use of the dispute settlement mechanism, and issuing their ultimatum at the 2003 WTOMinisterial Meeting in Cancun. In June 2004, a new consensus was reached at the Sao Paulo UNCTADthat the trading system had to allow policy space for development.

Suggested Readings:Drache, Daniel. 2000. The short but significant life of the International Trade Organization (ITO):


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Lessons for our time. CSGR Working Paper No. 62/00. Centre for the Study of Globalisation andRegionalisation, University of Warwick, UK. Available: http://www2.warwick.ac.uk/fac/soc/csgr/research/abstracts/abwp6200a/ (accessed 28 June 2005)

Jackson, John H. 1969. World trade and the law of the GATT. New York: The Bobbs-Merrill Company.



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Commodity Trade


When a national government chooses to protect its commodity producers from international competition,does this decision impede the expansion of national income? How can international trade in food or oilimpact a state's ability to secure supplies of these commodities? If there are only a handful of powerfulbuyers, what are the consequences for citizens of countries that are limited to exporting commoditiessuch as coffee, cocoa, or cotton? Is a discussion of these matters limited if it focuses on trade in bulkproducts without addressing the problems societies face when people, land, and money are made intocommodities (Polanyi 1944)?

Perspectives on globalization and autonomy feature prominently in attempts to arrive at answers to theserelated questions. They inform ongoing political debates over the impacts of international trade incommodities, and national and international policy options to manage that trade.

This glossary article understands the commodity trade story to be about continuity, even though barriersposed by territory and distance to international flows of information, money, and rich people havedeclined in the present era of globalization (Scholte and Schnabel 2002). Each of the principal and relatedissues pointed to above — national income, security of supply, commodity dependence, and societal andecological impact — implies the importance of place. However, knowledge about commodity topicssuch as the oil situation and the plight of impoverished producers in the Least Developed Countries(LDCs) now spreads rapidly, shaping price fluctuations and shifting public opinion. States nonethelessremain at the heart of the matter. To underscore these points, the past sixty years of developing countryefforts to achieve more autonomy through commodity initiatives are detailed below.

After the Second World War, many policy-oriented economists recognized that the legacy of colonialtrade patterns had not disappeared with political independence. The economies of many new countriescontinued to be geared towards producing agricultural goods and raw materials for export. These expertsdeveloped theories and supported policy options that aimed to prevent massive commodity pricedeclines such as the price crash that contributed to the Great Depression (Singer 1989, Innis 1995). JohnMaynard Keynes believed that an international agency to stabilize commodity prices was a necessarycomponent of a lasting international economic order. When countries attempted to establish anInternational Trade Organization (ITO), International Commodity Agreements (ICAs) were near the topof the agenda.

The subsequent work of Raul Prebisch and Hans Singer on declining terms of trade showed that pricestability was only one aspect of overall commodity pricing problems. In 1958, Jagdish Bhagwatioutlined another facet. Countries dependent upon commodity exports faced a vicious circle when theworld price of one of their commodities was low. The only way to increase income was to boostproduction of the good in question, a self-defeating move that reduced its price further still (Bhagwati


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1958). Other thinkers such as Nicholas Kaldor focused on how the costs of fabrication, transportation,and distribution made up a high proportion of the final price of commodities. In his view, this trenddiminished the percentage of the final price that reached direct producers (Kaldor 1983).

By the 1960s, empirical evidence indicated that commodity producing nations faced price instability,declining prices, and long-term reductions in the purchasing power their exports afforded. Third Worldgovernments sought autonomy from these forces and used their numerical majority at the UN to demandmanagement of the commodity trade that would improve their relative economic positions. Theyestablished the UN Conference on Trade and Development (UNCTAD), and parties to the GeneralAgreement on Tariffs and Trade (GATT) subsequently accepted the principle of differential and morefavourable treatment for developing country exports. However, it wasn't until after the Organization ofthe Petroleum Exporting Countries (OPEC) leveled the "oil-weapon" in 1973 that the commodity agendatook centre stage in what came to be known as the North-South debate. The commodity initiative was akey component of the demand for a New International Economic Order (NIEO), and it aimed to increaseforeign exchange earnings in the South and enable a greater share of those earnings to be retained there.Articulated by the Group of 77 (G-77) in 1975 in the Dakar Declaration, the program sought to createmanaged supplies or "buffer stocks" of eighteen commodities of export interest to developing countries.Stocks were to be managed to secure stable and higher prices. A special fund was called for to financethese arrangements, and improved measures to compensate producing countries for price fluctuationswere advocated. Members of the G-77 also wanted a council of associations to oversee ICAs andcoordinate the actions of producer associations such as OPEC.

To secure the General Assembly's support for the NIEO, the G-77 agreed to postpone commodityquestions until UNCTAD IV in 1976. At that conference, negotiations on an integrated program forcommodities (IPC) commenced, and the need for a "Common Fund" to finance the program was agreedupon. The South proposed a pricing system whereby each commodity's price would be tied to pricechanges in a basket of manufactures. Viewing this proposal as an invitation to worldwide inflation, theUnited States became quite skeptical of the process and raised questions about the high costs the Northwould pay for the IPC, the program's scope, and its failure to rely upon market-based pricing.Negotiations subsequently bogged down. However, the Common Fund for Commodities did emergefrom this North-South battle, though it did so without receiving sufficient funding for the managementof stocks. Despite calls made by the conciliatory Brandt Commission in 1980 to stabilize commodityprices at higher levels, many ICAs eventually had to abandon the objective of managing stocks due toinsufficient funds. Some ICAs, such as the agreements for coffee and tin, collapsed altogether.Consequently, the South's collective attempt to globalize the management of the commodity trade andachieve the level of autonomy required to transcend pricing problems and restructure their economiesmet with little success. Many oil exporting states and larger rapidly industrializing countries no longerprioritized commodity issues of interest to the poorest members of the South coalition.

As embedded liberalism gave way to Thatcherism and Reaganomics, non-oil exporting countries wereselling fewer goods at lower relative prices to the developed world, and relying upon loans to pay for


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their increasing import bills. These trends continue to this day. Even with the expansion of world trade,the share of non-fuel commodities in total trade has declined over the past thirty years. Nonetheless,seventeen of the most heavily indebted LDCs in Sub-Saharan Africa continue to depend upon exports ofnon-oil primary commodities for over three quarters of their foreign exchange earnings (FAO 2004,UNCTAD 2003a). Due partly to their reliance upon exports in low demand, the LDC's share of soaringglobal export earnings fell to 0.68 percent in 2004 (UNCTAD 2004). World prices for many of theireighteen important export commodities continued to be lower in real terms than in 1980. Cotton stood at33 percent of its 1980 value, while coffee was at 17 percent (FAO 2004). In the case of the latter,Vietnam's exports flooded the market and depressed the world price, though overall, low prices remainedonly one part of problem. The purchasing power of LDC exports declined by 25 percent during the1990s, and price volatility continued to impact the livelihoods of direct producers. Overall, these issueshave caused balance of payments problems and led many to take on new debts. The autonomy of LDCsfacing such adversity has consequently declined in the recent period, while oil exporters and largerdeveloping countries seem to have achieved more policy space.

To meet the conditions of further financing from multilateral lenders many LDCs have removedinefficient national marketing boards for agricultural commodities. Moves to "get the prices right" haveoften increased the share of export prices going to direct producers, though their costs have also risen asthey have lost access to subsidized credit, fertilizers, and marketing. While this policy option has freedup government resources, the roots of the LDC commodity crisis have not yet been addressed.Developed countries continue to dump their heavily subsidized excess production of sugar, cotton, andother commodities onto global markets, fueling an oversupply situation. Other factors driving downprices include the entry of many lower cost producers, the development of new synthetic products toreplace raw materials, and the high tariffs many of the South's agricultural products face in the North.Given this context, the fact that LDCs have not moved up the global value chain indicates theirprecarious position. They lack control over many of the sites where value is added to their exports,including processing, shipping, insurance, distribution, and marketing. Regarding processing, nearly allcocoa bean production occurs in developing countries, while only 4 percent of all chocolate is actuallyproduced there (www.maketradefair.org). LDCs face many barriers to entry in the other areas of valueaddition, as the dominance of transnational corporations (TNCs) is well established (Gibbon and Ponte2005). The case of coffee demonstrates the LDCs' weakness. Unless the product has been certified by anorganization promoting "fair trade," the price paid to producers is often less than 1 percent of the retailprice of a cup (www.maketradefair.org). In summary, the LDCs' ongoing reliance on commodity exportsindicates that they have failed to diversify their economies and move beyond the legacy of colonialism.In the era of globalization, these states continue to be excluded from the benefits of integration whiletheir autonomy has diminished.

Oil-related issues of energy security and potential environmental catastrophe have overshadowed LDCconcerns on the international commodity agenda for two decades, though of late voices for change havebeen more prominent. UNCTAD has been tasked with identifying the obstacles non-oil commodityexporters face and articulating the means to overcome them. Based upon their work, in June 2004 at


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UNCTAD XI, the Sao Paulo Consensus included objectives for commodity issues. It sought to moveLDC exports up the global value chain, diversify LDC economies, and enhance their access to marketsin the developed countries. The Consensus called for increased financial and technical assistance,infrastructure investments, and transparency to ensure that these objectives were realized.

Representatives of governments, international organizations, non-governmental organizations (NGOs),and academics are currently debating many ways forward, and developing potential solutions.Mechanisms to compensate countries for price fluctuations and insulate them from future volatility,including the renewal of the Common Fund's original mandate, are on the table. The head of UNCTAD'scommodity division has advocated an aid for trade fund to assist with the costs of diversification and tofinance the technical assistance and capacity building required to move up value chains (Puri 2005).Other organizations, such as the World Food Programme, have floated schemes aimed at managing pricevolatility through insurance and forward pricing. In the developed countries, the fair trade movement hasmade inroads amongst commodity consumers. For their part, NGOs such as Oxfam support a return toICAs and the creation of a new institution to manage commodities. Many NGOs, experts, andgovernments are also backing a campaign to make trade fair by eliminating subsidies in the North.Recently these campaigners claimed some success as the WTO ruled US cotton subsidies and the EUsugar regime to be illegal. A further initiative spearheaded by UNCTAD envisioned duty-free andquota-free access to markets in the developed countries for LDC exports (UNCTAD 2003b, Puri 2005).Countries of the South also continued to work together to trade more amongst themselves. Many playersconsider action on commodity questions to be essential to the achievement of the MillenniumDevelopment Goals articulated at the UN Millennium Summit in 2000.

Works Cited:Bhagwati, Jagdish. 1958. Immiserizing growth: A geometrical note. Review of Economic Studies 25:201-5.

FAO (Food and Agriculture Organization). 2004. The state of agricultural commodity markets.Rome: Commodities and Trade Division. Available: http://www.fao.org/es/ESC/en/Index.html (accessed28 February 2006)

Gibbon, Peter and Stefano Ponte. 2005. Trading down: Africa, value chains, and the global economy.Philadelphia: Temple University Press.

Innis, Harold A. 1995. Staples, markets and cultural change: Selected essays, ed. Daniel Drache,Montreal: McGill-Queen's University Press.

Kaldor, Nicholas. 1983. The role of commodity prices in economic recovery. Lloyd's Bank Review 149(July): 21-34.

Polanyi, Karl. 1944/2001. The great transformation: The political and economic origins of our time.Boston: Beacon Press.


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Puri, Lakshmi. 2005. Towards a new trade 'Marshall Plan' for Least Developed Countries. New Yorkand Geneva: UNCTAD. Available: http://www.unctad.org (accessed 22 August 2005)

Scholte, J.A. and A. Schnabe. eds. 2002. Civil society and global finance. London: Routledge.

Singer, Hans. 1989. Lessons of the post-war development experience: 1945-1988. Institute ofDevelopment Studies Discussion Paper No. 260, University of Sussex, Brighton, UK.

UNCTAD (United Nations Conference on Trade and Development). 2003a. Economic developmentin Africa: Trade performance and commodity dependency. Geneva: UNCTAD. Available:http://www.unctad.org (accessed 22 August 2005)

UNCTAD (United Nations Conference on Trade and Development). 2003b. Report of the Meeting ofEminent Persons on Commodity Issues. TD/B/50/11. Geneva: UNCTAD. Available:http://www.unctad.org (accessed 22 August 2005)

UNCTAD (United Nations Conference on Trade and Development). 2004. Least DevelopedCountries Report. Geneva: UNCTAD. Available: http://www.unctad.org (accessed 22 August 2005)



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Terms of Trade


During the era of formal political decolonization and its aftermath, Third World countries undertookcollective actions to better their economic standing in the international economy relative to the richcountries. This territorially-based community — a "trade union" of poor nations — made especiallystrong efforts to change the world trading system (Haq 1976). It attempted to secure new rules to stabilizeand raise the prices of principal sources of export earnings: primary products. A view shared by manycoalition members was that international exchanges of raw materials for finished goods were unequaland impoverishing in the long run. This understanding was referred to as the Third World's "terms oftrade" argument. It was deployed as part of the broader attempt to overcome the legacies of colonialismand achieve a more autonomous future.

Previously, developed countries had made individual efforts to better their terms of trade (a concept thatcan be defined mathematically as the ratio of average export prices to import prices in a given country orgroup of countries). Since the Industrial Revolution, states such as Germany and the United States hadpursued more favourable terms of trade through imposing tariffs on selected imports. This policy optioninduced the world price of the targeted products to decline relative to the prices the country applying thetariff received for its exports. However, the limitations of this approach were revealed in the 1930s whensuch moves escalated and a generalized retreat into protectionism ensued.

Nearly twenty years later, Hans Singer (1950) and Raul Prebisch (1950) penned papers that many nowconsider to have stimulated the collective activism of Third World states. Working independently withinthe UN system, first Singer, and then Prebisch, concluded that there was a "secular" or long-termdownward trend in the terms of trade between primary products and manufactured goods. They notedthat technological progress and economic growth in the rich countries increased the demand formanufactures there relative to the demand for agricultural produce, as consumers with higher incomescould only spend a limited amount of their increased purchasing power on more food. Consequently,they argued that demand for the Third World's exports was limited, or as economists term it, "inelastic."Prebisch and Singer also showed that productivity was increasing more rapidly in the South than in theNorth, thereby reducing the prices Third World countries fetched for their exports relative to the costs oftheir imports. The overall message was that reliance upon agricultural and other primary commodityexports — often a direct result of colonialism — led to a transfer of incomes from the South to the Northover time. The essence of their position was that the same amount of coffee exports, for example, yearafter year would enable the purchase of fewer and fewer technological goods imports. As such, Singerconcluded that primary product exporters were unintentionally subsidizing the North's rising livingstandards. Prebisch echoed this position, and argued that measures to improve terms of trade, in general,might lead to welfare gains in the Third World and increase the resources available for development.

The Prebisch-Singer thesis was controversial at the time of its articulation, and remains so in the


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discipline of economics to this day. One reason for debate early on was that their work inverted thestandard position of nineteenth century political economists on declining terms of trade (Toye and Toye2003). The old thinking had been that the prices of manufactured goods would decline relative toagricultural products as populations expanded. Now the contest is largely about the explanatory poweror validity of their thesis as regards the record of the twentieth century, though the issue of what exactlytheir data sets showed is still debated (Hadass and Williamson 2001).

Empirically speaking, several recent studies indicate that terms of trade declines have been especiallyharmful for the group of vulnerable states designated by the United Nations as the Least DevelopedCountries (LDCs), and especially Sub-Saharan African countries that do not export oil. At leastforty-three countries continue to rely upon exports of three or fewer non-oil primary commodities for 20to 90 percent of their export earnings (Watkins and Fowler 2002; FAO 2004; UNCTAD 2004). Theseheavily-indebted countries have remained marginal players as world trade volumes have expanded, andthey have generally not been able to diversify their economies out of export-oriented agriculture and rawmaterials production. In 2000, prices of their eighteen major export commodities were 25 percent lowerin real terms than they were in 1980 (Watkins and Fowler 2002). Regarding agriculture specifically, overa forty-year period ending in 2001, real prices for LDC exports declined relative to the prices of theirmanufactured goods imports by almost 70 percent (FAO 2004). According to the FAO study this trendwas more severe in recent times. Between 1986 and 2001 the LDCs saw their agricultural terms of tradecut in half. Including all sectors, since the early 1960s, LDC terms of trade have also declined by half.Due to this trend, one study estimates that the non-oil exporting nations of Sub-Saharan Africa have lostfifty cents on every dollar sent to the region in aid since the early 1970s (Watkins and Fowler 2002).Overall, factors such as the development of synthetic products, productivity increases elsewhere, andprotectionism in the developed countries have exacerbated low earnings.

As regards the BRICSAM countries — Brazil, Russia, India, China, South Africa, Association ofSoutheast Asia Nations (ASEAN) members and Mexico — and other major emerging markets anddeveloping world oil exporters, the terms of trade argument seems to hold less well in the recent period.Many of these states have been able to achieve economies of scale in the production of certain primaryproducts, such as cotton or corn, and have diversified their economies away from exclusive relianceupon raw material exports. The predictions of Prebisch and Singer also do not seem to fit too neatly thesituation of countries that rely upon extractive industries for foreign exchange earnings. However, thenational accounts of a number of these states benefit from a collective pricing arrangement (Organizationof the Petroleum Exporting Countries) that was clearly inspired by the terms of trade argument.

In the present era of globalization, negative terms of trade continue to undermine the livelihoods of asignificant number of people in the poorest countries. Resurgent Third World solidarity at the level ofstates, evident at the 2003 WTO Ministerial Meeting in Cancun, has focused the attention of theinternational community on the pricing problems associated with the commodities. Yet it remains farfrom a sure bet that the Doha Round will achieve outcomes for the poorest countries which will redresstheir long-standing grievances. Even so, a growing transworld movement might be altering the negative


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results historically associated with poor terms of trade at the level of individuals and local collectivitiesin ways that interstate activism has thus far been unable to achieve. The anti-poverty campaigns ofawareness-raising NGOs such as Oxfam have helped millions of relatively well off people to find outwhat they can personally do to better the lives of direct producers. The rise of a market for ethicalproducts and the growth of fair trade certification systems also indicate that there are nascentsupraterritorial solutions on offer to a condition historically associated with the international economy.As a consequence, the terms of trade argument has globalized. The discourse of fairness has shifted fromone of interstate relations to one of transnational relations, and developments are ongoing.

Works Cited:FAO (Food and Agriculture Organization). 2004. The state of agricultural commodity markets.Rome: Commodities and Trade Division. Available: http://www.fao.org/es/ESC/en/Index.html (accessed28 February 2006)

Hadass, Yael S. and Jeffrey G. Williamson. 2001. Terms of trade shocks and economic performance1870-1940: Prebisch and Singer revisited. National Bureau of Economic Research Working Paper No.8188. Available: http://www.nber.org/papers/W8188 (accessed 28 February 2006)

Haq, Mahbub ul. 1976. The poverty curtain: Choices for the Third World. New York: ColumbiaUniversity Press.

Prebisch, Raul. 1950. The economic development of Latin America and its principal problems. NewYork: United Nations.

Singer, Hans. 1950. The distribution of gains between investing and borrowing countries. AmericanEconomic Review 40 (2): 473-85.

Toye, John and Richard Toye. 2003. The origins and interpretations of the Prebisch-Singer thesis.History of Political Economy 35 (3): 437-67.

UNCTAD (United Nations Conference on Trade and Development). 2004. Least-developed countriesreport. Geneva: UNCTAD. Available: http://www.unctad.org (accessed 28 February 2006)

Watkins, Kevin and Penny Fowler. 2002. Primary commodities: Trading into decline. In Rigged rulesand double standards: Trade, globalization and the fight against poverty. Oxford: Oxfam. Available:http://www.maketradefair.org (accessed 28 February 2006)

Suggested Readings:Bloch, H. and D. Sapsford. 2000. Whither the terms of trade? An elaboration of the Prebisch-Singerhypothesis. Cambridge Journal of Economics 24: 461-81.

Broda, Christian and Cedric Tille. 2003. Coping with terms-of-trade shocks in developing countries.


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Federal Reserve Bank of New York, Current Issues in Economics and Finance 9 (11): 32 para. Available:http://www.newyorkfed.org/research/current_issues/ci9-11/ci9-11.html (accessed 28 February 2006)

Maizels, Alfred. n.d. New evidence on North-South terms of trade. South Letter 27: 15 para. Available:http://www.southcentre.org/southletter/sl27/SL27%20HTMLtrans-10.htm (accessed 28 February 2006)

Ram, Rati. 2004. Trends in developing countries commodity terms-of-trade since 1970. Review ofRadical Political Economics 36 (2): 241-53.



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Brandt Commission


On 28 September 1977, former West German Chancellor and Nobel Laureate Willy Brandt announcedthat he had agreed to lead a Commission on International Development Issues. Brandt had embracedWorld Bank President Robert McNamara's suggestion that an autonomous Commission aimed atimproving the climate of North-South negotiations was needed.

The Commission adopted terms of reference that would guide its work, and set out to produce arepresentative and authoritative account of the conditions brought on by socio-economic disparitiesbetween countries. Its work would also detail the path towards a more equitable liberal internationalorder. Financed largely by the Dutch and other European government sources, a Secretariat wasestablished and a Commission was struck, consisting of mainly former politicians and internationalofficials from Western countries and the South. In seeking to influence public opinion and improveintergovernmental cooperation for development, the Brandt Commission stressed that both North andSouth had a mutual interest in freeing the world economy from the scourges of "dependence andoppression…hunger and distress" (Independent Commission on International Development Issues 1980:29).

In 1980 the Commission released its report, North-South: A Programme for Survival. Selling nearly onemillion copies, the report presented the shared-interests thesis and articulated policy options. It maderecommendations to transcend problems associated with the operations of transnational corporations,food and agricultural production and distribution, declining terms of trade for primary commodityexporters, Northern protectionism, high energy prices, population growth and movements, theinternational financial and monetary system, unsustainable foreign debt loads, low levels of developmentassistance, and the high costs of the arms race. The Report's central pillar was an emergency program toend poverty in the Least Developed Countries that would require an additional $4 billion in aid flows peryear over twenty years. To meet this goal developed nations were challenged to make foreign aidequivalent to 1 percent of their GDP by the year 2000. The North-South report also called for a newinternational division of labour to redistribute productive resources and incomes to the Global South. Aswell, the report advocated the creation of a comprehensive international trade organization that wouldincorporate development concerns.

Efforts to implement the Commission's recommendations and reframe North-South negotiations at the1981 Cancun Summit on International Development were derailed by US President Ronald Reagan'srejection of the process and his administration's subsequent policy stances. Nevertheless, the popularCommission continued its work, producing a second report in 1983. However, through the 1980s and1990s governments in the North failed to reach the aid target or implement open trade policies. In 2005the Commission for Africa led by British Prime Minister Tony Blair sought to further Brandt's vision byreasserting the view that world leaders have a mutual interest in African development and updating


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Brandt's policy prescriptions.

Suggested Readings:Independent Commission on International Development Issues. 1980. North-South: A programmefor survival. London: Pan Books.

Independent Commission on International Development Issues. 1983. Common crisis North-South:Cooperation for world recovery. Cambridge, MA: MIT Press.

Quilligan, James Bernard. 2002. The Brandt equation: 21st century blueprint for the new globaleconomy. Available: http://www.brandt21forum.info/ (accessed 15 August 2005)



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South Commission/South Centre


When leaders of the Non-Aligned Movement met in Harare in September 1986 it was clear that the 1980swere to become a "lost decade" for economic development in the Global South. Citing debt crises, highinterest rates, low world prices for commodities, and ongoing Northern protectionism, Malaysian PrimeMinister Mahathir Mohamad announced that a Commission on the development experience would bestruck.

Julius Nyerere, former President of Tanzania, agreed to Chair the Commission. Having established aSecretariat in Geneva with the financial assistance of Switzerland and developing countries in 1987, theSouth Commission set out to independently assess development and articulate future policy options.Operating for three years, the Commission issued statements on the debt problem and the UruguayRound of trade negotiations, and released its final report, The Challenge to the South, in August 1990.The report emphasized the need to focus efforts on human development, and the desirability of increasedcooperation amongst Southern countries to raise their bargaining power in global economic negotiations.

Building upon the Report's recommendations and the work of the South Commission's follow-up office,forty-six developing countries agreed to establish a permanent centre on South-South cooperation in July1995. The South Centre was tasked with promoting South solidarity, knowledge sharing, andcooperation, as well as coordinating common development policy positions on the world economy. Tomeet the goal of functioning as a think tank and a policy support organization for the Global South, theSouth Centre was mandated to disseminate its research output widely. Overall, the Centre seeks morepolicy space or autonomy for Southern countries interacting with the global economy, and a moreequitable distribution of global income.

Members meet at least every three years as the Council of Representatives to set the direction of theBoard, which is charged with day-to-day oversight and fundraising. Under the leadership of currentBoard Chair and former UN Secretary General Boutros Boutros-Ghali, the South Centre typicallyproduces news and policy reports on topics that the Group of 77 has suggested. Its principal researchfocuses on intellectual property and trade. On the latter, the Centre helps to coordinate developingcountry policy positions in the WTO's Doha Round of negotiations. Its output helped to facilitate theSouth's united front evident at the WTO Ministerial Conference in Cancun.

Suggested Readings:South Centre website. www.southcentre.org (accessed 14 July 2005).

South Commission. 1990. The challenge to the South. Oxford: Oxford University Press.


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Documents

Bandung NAM G77 ITO Commodity Trade Terms of Trade Brandt Commission South Commission