CJ Starke and Matt Walsh
Notre Dame High School
Rutgers Model United Nations
UNCTAD
Commodity Based Trade and Development
Background
Commodities are essential to the economy of both developing and developed
nations. Commodities are non oil products such as metals and grain that countries trade
with each other in order to improve their economy. The fluctuation of prices of
commodities has a big effect on the economy. Because of this relationship of
commodities, the prices of commodities have a direct impact on the price of goods
(Theivakumaran 2). After World War II, regulations were set forth by the United States
and Great Britain, reducing trade barriers and attempting to create commodity agreements
between countries as well as working towards the problems of supply and demand in
commodities (3).
In the early1970’s, There was an excess of commodities developed, thereby
increasing the trade of commodities among countries. During this time, there was an
immense increase in the prices of commodities. This increase in the supply and the price
was the largest international trade scare in history. Because of the inflated prices The
UNCTAD developed the Program on the Establishment of a New International Economic
Order” which produced a program for export interest of commodities to be integrated into
developing countries (Theivakumaran 4). This increase in commodity prices led to a
major recession around the world in the 1970s. This immense increase showed how
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dependent economies are to the stability of commodity process. It became evident
because of this that developing states need stable economies if they depend, as most do,
on commodity trade.
In 2000, The Cotonou Agreement was developed and was based on the idea of
movement toward free competition among business firms. It established new trade
agreements and that they follow the World Trade Organization for the benefit of
developed nations helping through trade the developing nations (Theivakumaran 7).
Recently, developing countries have had a decrease in export prices. There has recently
been an increase in commodity prices which has had a worldwide effect with inflation
and interest rates as well as the decline of the stock market (8). This is primarily because
there is more demand than supply of many commodities. Demand has been constant, but
supply has been steadily decreasing.
Position
Commodity based trade is a very important asset for our country of Mexico.
According to the Millennium Development Goals (MDGs), the first of eight goals is to
eradicate extreme poverty and hunger (10). This is a very big issue in Mexico. As of
1992, of the approximately 85 million people then living in poverty, about 50 million of
them, or nearly 60%, were living in poverty. Of these 50 million people living in poverty,
approximately 40% or 20 million people were living in extreme poverty (Gellert 1).
There are many reasons why the Mexicans are living in poverty. For one, many of them
are not even making minimum wage, and the pro-government Congress of Labor says
that minimum wage covers only about 67% of basic necessities (1). This Commodity
based trading can benefit Mexico greatly if used correctly. Currently, Mexico is
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benefiting from the North American Free Trade Agreement between the countries of
Canada, the United States, and Mexico. Nearly all tariffs between these three countries
dealing with agricultural products have been eliminated or are in the process of being
eliminated. Without the NAFTA, the percentage of Mexicans who are living in poverty
would probably skyrocket, and the economy would become damaged beyond imaginable
repair. One way that we can help to decrease the poverty is to try to set up agreements
similar to the NAFTA, and make it UN policy, therefore helping the developing countries
to lessen the number of poverty stricken people.
Of course, financing the development of agriculture in the developing countries is
a very difficult task. Many large agriculture-producing companies take most of the
business, further driving the already poverty stricken farmers deeper into poverty. If these
farmers were given a fair shot at sales, then the poverty level would drop a considerable
amount. Agriculture is a major asset to the Mexican government, but a lot of the farmers
have many problems because of their poor education and lack of large scale production.
Some do not know how to make the land they have fertile or how to farm so that they can
reuse the land over and over again in consecutive years. Education in this matter would
greatly benefit not only the Mexican government, but other developing countries around
the world. Another problem with agriculture is the fact that the farmers do not know fair
market price for their products, and do not even know if the crops they are producing are
going to be able to be sold in the current market. One solution to fix all of these problems
for the poverty stricken farmers of all countries would be to contract farming
arrangements between small scale farmers and either their countries that are exporting the
goods, or large scale production companies who are selling for a profit. Even though
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these farmers may not get the highest value for their goods, it is still a considerable
amount above what they are getting if they sell them in the market place themselves, due
to them steeply lowering their prices to sell their goods.
Mexico would also support any resolution supporting the stabilization of
commodity prices for countries that wish to participate. This would benefit those
suffering from poverty greatly, and would drastically decline these numbers in countries
such as Mexico, African countries, and Latin America. Standards for common
commodity products such as metals, agricultural goods like grain, and energy. In doing
this, the United Nations would alleviate some of the poverty stricken countries and help
them develop their economy better. Concocting a resolution like this would also stop the
ever rising prices of commodity goods across the world, and help to ensure fair market
value for all farmers including the small production self reliant farmers, and the large
scale production companies. All of these are ways that we can help improve the
commodity-based trade and develop the lesser countries of the world, while helping the
world to lessen the poverty numbers. Mexico would support these solutions and more as
long as there are compliant with the simple stipulations that Mexico would like to lower
their poverty numbers drastically by the year 2015 as the Millennium Development Goals
suggests.
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Works Cited
Gellert, Peter. "Mexico's Poverty Gap Widens." Greenleft Weekly(1992). pg. 68
<http://www.greenleft.org.au/1992/68/2631>
Theivakumaran, Janaki. Commodity Based Trade and Development. The Institute for
Domestic and International Affairs, Inc. RUMUN 2007. 1 Nov 2007
<http://www.idia.net/Files/ConferenceCommitteeTopicFiles/>
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