1. IMF Survey, 5 04 1982Google Scholar, IMF World Economic Outlook 1983, pp. 154–55Google Scholar. In aggregate, non–oil-exporting LDCs suffered a decline in their terms of trade of 4.1% in 1978, 0.2% in 1979, 4.4% in 1980, 2.2% in 1981, and 1.9% in 1982. For low-income countries the decline in terms of trade was even more drastic: 7.9% (1978), 7.4% (1979), 15% (1980), 8.3% (1981), 2.8% (1982). IMF World Economic Outlook 1982, pp. 137–38, 154–55Google Scholar.

2. Overseas Development Institute (ODI), Briefing Paper no. 1 (07 1982), p. 1Google Scholar.

3. Even the UNCTAD secretariat has admitted that “the achievements of the Integrated Programme for Commodities have fallen far short of expectations, and have not been commensurate with the efforts devoted to its implementation.” UNCTAD, Review of Progress in the Implementation of the Integrated Programme for Commodities, TD/B/C. 1/241 (Geneva, 5 01 1983), p. 1Google Scholar. The arguments for and against the IPC are reviewed in Behrman, Jere R., “International Commodity Agreements: An Evaluation of the UNCTAD Integrated Commodity Programme,” in Cline, William R., ed., Policy Alternatives for a New International Economic Order (New York: Praeger for the Overseas Development Council, 1979), pp. 63–153Google Scholar, and Smith, Gordon W., “Commodity Instability: New Order or Old Hat?” in Amacher, Ryan C., Haberler, Gottfried, and Willett, Thomas D., eds., Challenges to a Liberal International Economic Order (Washington, D.C.: American Enterprise Institute, 1979), pp. 91–136Google Scholar. An excellent survey of the negotiations for the Common Fund is provided by Rothstein, Robert L., Global Bargaining (Princeton: Princeton University Press, 1979)Google Scholar, while the difficulties in reaching agreement in one commodity are explored in Finlayson, Jock A. and Zacher, Mark W., “The Politics of International Commodity Regulation: The Negotiation and Operation of the International Cocoa Agreement,” Third World Quarterly 5 (04 1983), pp. 386–418Google Scholar.

4. Ruggie, John Gerard, “International Regimes, Transactions, and Change: Embedded Liberalism in the Postwar Economic Order,” International Organization 36 (Spring 1982), pp. 379–416Google Scholar.

5. Other objectives follow from these two, including the maintenance of the import capacity of LDCs in order to retain markets for domestic exports and the stabilization of prices of primary commodity inputs in order to avoid the “ratchet” effect. Industrialized countries have also been concerned that any assistance provided in the form of an improved commodities regime should not become merely an additional source of concessional resources for LDCs.

6. France had promoted the case for organized international markets for primary commodities at UNCTAD I in 1964; a report of the Parliamentary Conference of the Yaoundé Association in 1967 concluded that a “certain organization of markets is necessary” for cocoa, bananas, oilseeds, pineapples, vanilla, and cotton. The Community's 1967 proposals for price supports for associates” oilseeds and vegetable oils were regarded as a model for future arrangements. Although the 1967 proposal was never implemented, the very fact that agreement was reached illustrated the strength of the sentiment in favor of price supports that existed within the Community. Communauté Economique Européenne—Etats Africains et Malgache Associés: Conference Parlementaire de l'Association, “Rapport fait au nom de la Commission paritaire sur les solutions susceptibles de favoriser la commercialisation au sein de la CEE, à des prix stables et remunerateurs, des produits des Etats associés,” Document no. 20 (20 November 1967).

7. EC Commission, “Renewal and Enlargement of the Association with the AASM and Certain Commonwealth Developing Countries,” EC Bulletin, Supplement 1/73 (1973), p. 20Google Scholar.

8. Interview with a senior Commission official, July 1980.

9. These figures refer to the system under Lomé II. During the first Convention, the dependence thresholds were 7.5% (except for sisal, for which the threshold was 5%) and 2.5% for the LLICs; the fluctuation thresholds were 7.5% and 2.5% respectively. The same lower dependency threshold for sisal was maintained in Lomé II.

10. Sugar is covered by a separate protocol “of unlimited duration.” This provides that ACP producers will receive prices “within the range prevailing in the Community” for specified quantities of their exports to the EEC. This at least partially indexes the price received (since European farmers have been successful in raising the price paid to European producers under the CAP) but offers no guarantee regarding export earnings. For a discussion of the EC's sugar policies, see Webb, Carole, “Mr. Cube versus Monsieur Beet: The Politics of Sugar in the European Communities,” in Wallace, Helen, Wallace, William, and Webb, , eds., Policy-Making in the European Communities (New York: John Wiley, 1977), pp. 197–226Google Scholar, and Mahler, Vincent A., “Britain, the European Community, and the Developing Commonwealth: Dependence, Interdependence, and the Political Economy of Sugar,” International Organization 35 (Summer 1981), pp. 467–92CrossRefGoogle Scholar.

11. During the first convention, other products were added to the scheme: vanilla, cloves, sheep's or lamb's wool, mohair, gum arabic, pyrethrum, essential oils of cloves, niaouli, ylangylang, and sesame seeds. The second Convention extended coverage to cashew nuts, pepper, shrimps and prawns, rubber, squid, cotton seeds, oil cake, peas, beans, and lentils. Of these additional products, only rubber is a significant ACP export, accounting for approximately 1% of total ACP earnings from the export of STABEX products to the Community. The other 18 products combined account for only 3%.

12. EC Commission, “Comprehensive Report on the Export Earnings Stabilization System Established by the Lomé Convention for the Years 1975 to 1979,” SEC(81) 1104 (Brussels, 13 07 1981), p. 43Google Scholar.

13. The Community issued a statement asserting that it had “agreed to the inclusion of this product [iron ore] only for the sake of securing a general agreement and remains firmly opposed to mineral products being included in the system.” The Courier no. 31 (03 1975), p. 25Google Scholar. A scheme to assist ACP producers of minerals was included in the second Lomé Convention. Known by its French acronym, SYSMIN, it differs significantly from STABEX. An ACP state may apply for assistance under SYSMIN if production difficulties interrupt its ability to export to the European market. Dependency and fluctuation thresholds must be met, but this will not guarantee a transfer: transfers are made at the discretion of the Community and depend on agreement with the ACP state on the use of the transfer for projects and programs aimed at restoring production and exports. Unlike STABEX, the scheme makes no pretense of acting to guarantee ACP export earnings; it is triggered by a fall in production or export capacity rather than in export earnings. Transfers take the form of low-interest loans repayable over 40 years with a 10-year grace period. SYSMIN covers copper, phosphates, bauxite, alumina, manganese, and tin: at the end of the second Lomé Convention on 28 February 1985, iron ore will be transferred from STABEX to SYSMIN. SYSMIN is examined in detail in Ravenhill, John, Collective Clientelism: The Lomé Convention and North-South Relations (New York: Columbia University Press, 1984), chap. 3Google Scholar.

14. EC Commission, “STABEX in Lomé II,” un-numbered document (11 1979)Google Scholar.

15. Internal Community document. The Commission estimated the “risks” that would have to be covered if tobacco were included in STABEX at 15 mua for Malawi and 10 mua for Tanzania. This was substantially more than the estimated total cost of including rubber (7 mua budget for both Liberia and Cameroon) and has increased significantly with Zimbabwe's accession to the Convention. A second CAP product excluded from the system—beef—is of significant interest to Botswana.

16. Commission Communication to the Council, “Report on the Operation During 1975 of the System Set Up by the Lomé Convention for Stabilizing Export Earnings,” COM(76) 656 final (9 12 1976), p. 13Google Scholar. At ACP request, the second Lomé Convention allows for the “globalization” of products and subproducts for the purpose of meeting the dependency threshold—which reduces the effect of the scheme as a deterrent against processing for those commodities where processed products as well as the raw material are included in STABEX.

17. See, for instance, Opinion of the Presidents of the Chambers of Commerce of the Ports of the North Sea on the Renegotiation of the ACP-EEC Convention, r/1922/f/78 (10 July 1978), p. 5. During the Lomé II negotiations, future inclusion of sisal products within STABEX was made dependent on ACP procedures reaching agreement with EUROCORD, the group representing European manufacturers of rope and string.

18. Internal Community document. Trade in STABEX products for Nigeria for the period 1974–78 illustrates how value varies with different dependency thresholds. With a zero threshold, total trade is 939.6 mua, a yearly average of 187.9 mua. A 2% threshold gives total trade of 493.1 mua, a 98.6 mua annual average; at 4%, the figures are 397.5 mua and 79.5 mua; at 6%, 72.8 mua and 14.6 mua. With a 7.5% threshold, Nigeria's trade in STABEX products for the years concerned is zero.

19. France, Ministère de la Coopération, “La stabilisation des recettes d'exportation: consequences pour la CEE des accords de Lomé et d'une extension à d'autres produits pour les pays en voie de dfeveloppement,” Etudes et Documents no. 21 (09 1975), pp. 12–13Google Scholar.

20. “Compensatory Finance to Stabilize Export Earnings,” ODI Briefing Paper no. 1 (03 1979), p. 3Google Scholar.

21. The negotiation of the second Lomé Convention produced an interesting example of the sensitivities involved in the classification. Zaire, whose economy has in recent years regressed rapidly toward subsistence levels, requested to be categorized as a landlocked country or, failing that, for a special “semi-landlocked” category to be established so that it might benefit from concessional treatment. Under Lomé I, Zaire was considered to be neither landlocked nor least developed. The Commission responded by offering to classify Zaire as “least developed,” a suggestion reported to have been indignantly rejected by the Zaire government. Eventually, the Commission agreed to treat Zaire as a landlocked country, although it would not so classify it.

22. “Compte rendu de la 3eme séance de travail ACP/CEE sur la stabilisation des recettes d'exportation” (9 November 1978), p. 3.

23. Communication de la Commission au Conseil, “Une action internationale de stabilisation des recettes d'exportation” (n.d.), p. 4. A supplementary Commission Communication to the Council noted three aspects of the IMF Facility “which beneficiaries might regard as irksome: interest charges; the obligation to redeem; and the margin of appreciation.” International Action on Stabilization of Export Earnings, COM (75) 294 final (11 06 1975), p. 8Google Scholar.

24. The phrase is that of Finger, J. M. and Derosa, Dean A., who describe some of the problems in “The Compensatory Finance Facility and Export Instability,” Journal of World Trade Law 14 (01–02 1980), pp. 14–22Google Scholar.

25. Annual Report of the Court of Auditors for the 1978 financial year, EC Official Journal no. C 326 (31 12 1979), p. 217Google Scholar.

26. African, Caribbean and Pacific Group of States, STABEX: A Review, by Rao, S. K. of the Commonwealth Secretariat, ACP/1/79 (1979), pp. 20–21, 31–32Google Scholar. An analysis of some of the problems involved in indexation is presented in Cuddy, J. D. A., International Price Indexation (Lexington, Mass.: Lexington Books, 1976)Google Scholar. See also Cuddy, , “Indexation: A Missing Link in ACP/EEC Relations?” in Long, Frank, ed., The Political Economy of EEC Relations with African, Caribbean and Pacific States (Oxford: Pergamon Press, 1980), pp. 53–90CrossRefGoogle Scholar.

27. Initially, Burundi, Ethiopia, Guinea Bissau, Rwanda, and Swaziland benefited from coverage of their exports to all markets. Cape Verde, Western Samoa, Tonga, Comoros, Lesotho, Seychelles, Solomon Islands, and Tuvalu were later added.

28. EC Commission, SEC(81) 1104, p. 40.

29. Moss, Joanna and Ravenhill, John, “Trade Developments During the First Lomé Convention,” World Development 10 (10 1982), pp. 841–56CrossRefGoogle Scholar.

30. For the complete list of situations, see EC Commission, SEC(81) 1104, pp. 53–56.

31. Since some of the transfers went to countries whose exports to all destinations were covered by the system (in which case the issue of trade diversion did not arise), the actual percentage of transfers subject to negotiation was higher than these figures suggest.

32. Annual Report for 1977, EC OfficialJournal no. C 313 (30 12 1978), p. 148Google Scholar.

33. Ibid., p. 150.

34. Ibid.

35. In a subsequent report, the Court of Auditors noted that “In the absence of well-defined rules for arriving at the statistics which should serve as the basis for the calculation of the transfer, the figures finally adopted owe more to negotiations than to mathematical analysis, with the result that in certain cases the actual amount of the transfer exceeds that of the initial request; in other cases, it is equal or lower.” Annual Report for 1978, EC Official Journal no. C 326 (31 12 1979), p. 312Google Scholar.

36. Reginald Herbold Green, “STABEX: What Is To Be Done?” in The Renegotiation of the Lomé Convention (London: Catholic Institute of International Relations, 1978), p. 17Google Scholar.

37. EC Court of Auditors, “Comments on the Operation of the Export Earnings Stabilization System,” attached as appendix to COM (80) 211 final, p. 1Google Scholar.

38. Com (80) 211 final, p. 10.

39. Ibid., Appendix p. 2.

40. Ibid., Appendix p. 17.

41. Goodwin, Geoffrey, “The OECD Industrialised Countries' Response,” in Goodwin, and Mayall, James, eds., A New International Commodity Regime (London: Croom Helm, 1979), p. 113Google Scholar.

42. Com (80) 211 final, p. 2. The grant element in repayable STABEX transfers varies according to the time that elapses before repayment is required. Herrmann estimated that it ranged from 6.28 to 10.22% of total repayable transfers during the first Convention. More generous terms for repayment, introduced in Lomé II, will increase the grant element in the repayable transfers and thus the extent to which it transfers resources to the higher-income group of ACP states. Herrmann, Roland, “On the Economic Evaluation of the STABEX System,” Intereconomics 17 (01–02 1982), pp. 7–12CrossRefGoogle Scholar.

43. Although procedures exist for the payment of advance transfers, only 7 were made during the first Convention (the Commission noting that it had received “a mere ten or so requests” [SEC (81) 1104, p. 34]). Another EEC study found that ACP states were either unaware of the mechanism through which advance payments could be obtained or unable to provide the necessary statistics (SEC[82] 1336). On average during the first Convention, five months elapsed between a regular request and the payment of a transfer. Since payment almost inevitably occurred during the financial year following that in which the loss of earnings had been experienced, any effect on earnings stabilization would be coincidental.

44. Herrmann, , “On the Economic Evaluation,” pp. 7–12Google Scholar.

45. COM (79) 277 final. Similarly, the Court of Auditors concluded that “hellip; apart from the ten or so special cases observed during a specific year, the final impact on the economies of the recipient ACP States was probably slight. Sporadic transfers cannot have lasting effect, and the amount of financial resources involved is usually too small. Among the few recipient countries where the volume of aid reached a significant proportion during a financial year, some chose to allocate these funds simply to sustaining the flow of imports rather than promoting economic development.” Appendix to COM (80) 211 final, p. 20.

46. Goreux, Louis M., Compensatory Financing Facility, Pamphlet Series no. 34 (Washington, D.C.: IMF, 1980), p. 44Google Scholar.

47. The value of the European unit of account expressed in terms of Special Drawing Rights (SDRs) fluctuated considerably over the five years of the first Convention. At the mid-point, in 1977, the unit of account was worth 1.15 SDR.

48. Benin, Cape Verde, Gabon, Ghana, Liberia, Madagascar, Niger, Somalia, Swaziland, Tonga, Upper Volta.

49. The limited assistance that the CFF supplies to the least developed countries is also illustrated by the finding that it provided only about 4% of the finance required to offset the impact of deteriorating terms of trade for sub-Saharan African countries in 1980–81. JohnWilliamson, , The Lending Policies of the International Monetary Fund, quoted in Helleiner, G. K., The IMF and Africa in the 1980s, Princeton Essays in International Finance no. 152 (Princeton, N.J., 07 1983), p. 12Google Scholar. In 1981–82, at a time when STABEX resources were exhausted, CFF drawings rose to record levels. In 1982 alone, ACP countries borrowed over 480 million SDRs through the CFF, often accompanied by purchases from the Extended Fund Facility (which required compliance with an IMF program).

50. UNCTAD's proposed Complementary Facility would provide subsidized loans to developing countries to compensate them for the shortfall in export earnings measured on a gross (i.e., commodity-by-commodity) basis, with the reference level being calculated as a 10-year exponential trend in real earnings. There would be no thresholds or balance-of-payments tests. Special concessionary terms would be made available to the least developed. The UNCTAD secretariat estimated that the Facility would require a paid-in capital of approximately $61 billion for the period 1981–90. See UNCTAD, “Complementary Facility for Commodity-Related Shortfalls in Export Earnings (Resolution 125 (V)), Proposal by the UNCTAD Secretariat,” TD/B/C.1/221 (2 12 1981)Google Scholar, and UNCTAD, “Complementary Facility for Commodity-Related Shortfalls in Export Earnings (Resolution 125 (V)), Feasibility Study by the UNCTAD Secretariat,” TD/B/C.1/222 (19 10 1981)Google Scholar.

51. TD/B/C.l/222, pp. 10–11.

52. SEC(82) 1336, pp. 28–30.

53. Commonwealth Secretariat, Towards a New Bretton Woods (London: Commonwealth Secretariat, 1982)Google Scholar.

54. The United States and Canada have bluntly refused to consider the issue of compensatory finance other than from a balance-of-payments perspective and have stated that it cannot be discussed outside the IMF or the joint IMF-IBRD Development Committee. The spokesman for Group B commented that the UNCTAD secretariat's scheme “resembled a vast mechanism for the transfer of resources rather than an instrument specifically intended for the stabilization of export earnings.” United Nations, Press Release, TAD/1136 (16 02 1982)Google Scholar.

55. Helleiner, G. K., “Lender of Last Resort: The IMF and the Poorest,” American Economic Review 73 (05 1983), p. 353Google Scholar. Maintaining responsibility for compensatory financing under the auspices of the IMF rather than UNCTAD has obvious attractions for Group B countries. Expansion and possible liberalization of the IMF Facility would also be less costly and less likely to introduce further distortions into international trade, since it (unlike the UNCTAD proposal) includes all export earnings. Both UNCTAD and the IMF agree that the method of calculating shortfalls in terms of gross export earnings results in savings of at least one-third compared to compensating shortfalls on a commodity-by-commodity basis. On the other hand, transfers calculated on the basis of net shortfalls lack the obvious link with the performance of specific sectors that is found in a system like STABEX. Even if the IMF continues to impose conditions on the use of purchases under the CFF, these are normally in respect of macroeconomic objectives and only secondarily focus on government policy toward specific sectors. Accordingly, it is unlikely that compensatory finance from the IMF will make a significant contribution to the industrialized countries' goal of maintaining investments in specific sectors in order to achieve long-term security of raw material supplies. This, it would appear, can only be achieved through measures that act directly on the price received by producers.