Clare): The purpose of the Bill is to approve the terms of the agreement establishing the Common Fund for Commodities and to enable this country to honour its financial obligations as a signatory.
The concept of a common fund arose from a very real concern about the manner in which primary commodities are traded. At present the trade is subject to repeated fluctuations of price and supply. These fluctuations not only affect developed countries, including Ireland, which consume the commodities but, most seriously, the fluctuations affect the developing countries. In some cases their entire economies depend completely on the production and export of a few basic crops or raw materials for industries.
Another very important aspect is the need to aid and encourage developing countries to exploit their production capacity more fully through additional processing within their own territories and better approaches to marketing.
With these considerations in mind, the Fourth United Nations Conference on Trade and Development (UNCTAD-IV) adopted an integrated programme for commidities in May 1976. The programme named 18 commodities of particular interest to developing countries. Examples are rubber, cocoa, coffee and tin. It was further agreed at UNCTAD-IV that a Common Fund For Commodities should be a key factor in the integrated programme.
The negotiations which followed resulted in the present agreement, which was adopted in June 1980. Ireland signed the agreement in February 1981.
The Common Fund is designed specifically to tackle the two issues which I have mentioned. It will have a First Account with a resources target of $400 million to be used to facilitate stability of price and supply It will also have a Second Account of $350 million. The First Account will operate by lending money to International Commodity Organisations (ICOs). These are organisations set up to oversee international commodity agreements. It is hoped that establishing a Common Fund will not only help existing ICOs but will facilitate the conclusion of more commodity agreements.
Money borrowed from the fund by ICOs will be used solely for purchasing buffer stocks. The fund will promote the joint financing of such stocks by producers and consumers, a development which will foster greater international economic co-operation. Buffer stocks are used to stabilise price and demand. Stocks are acquired by the ICO when a commodity is in abundant supply to stop the price falling below a floor price which is equitable to both producers and consumers. Alternatively stocks are released onto the market when the commodity is in short supply and the price is beginning to rise above an equitable ceiling. Buffer stocking is a means of preventing or, at the least, curbing disruptive speculation which damages both producers and consumers, and can be particularly damaging to the economies of some of the least developed countries.
The First Account will be financed from directly contributed capital, in other words members' subscriptions to shares in the fund, and also from capital guarantees and cash deposits from ICOs associated with the fund as well as borrowings from the financial markets.
In addition to the First Account, there is, as I mentioned earlier, an amount of $350 million in the Fund's Second Account. The Second Account is designed to assist in research and development of commodity production and marketing and it is hoped that it will encourage developing producer countries to diversify and expand their commodity trading and develop further processing of their commodities rather than relying solely on export in the raw state.
The Second Account is financed by means of an initial allocation of $70 million from the share subscription to the First Account, by additional voluntary contributions from members and by borrowings by the fund on the financial markets.
Membership of the fund is open to all States who are members of the United Nations or of any of its specialised agencies or of the International Atomic Energy Agency. It will be managed by a Governing Council and an Executive Board. Each member state will appoint one governor to the council which will elect 28 executive directors to the board.
The agreement also makes the customary provisions for legal status of the fund, immunities from judicial proceedings, interpretation and arbitration procedures, process of amendment and provision for entry into force.
Ireland's commitments to the fund will consist of $1,000,000 for the purchase of shares in the First Account. The Bill provides a higher ceiling so that we can take up additional shares if additional capital is required. We will also provide a voluntary contribution of $250,000 to the Second Account. Payments will be spread over the two years after entry into force of the agreement. In addition, we will have certain commitments arising out of our membership of ICOs associated with the fund. We make a small annual membership subscription to the ICOs at present. Under this agreement we would also provide guarantees to the Common Fund as part security for borrowings by the ICOs. These guarantees would replace payments that we currently make to ICOs for buffer stocking.
I would like to give Senators a brief example of the importance of commodities in this country. Ireland is a member of the present International Natural Rubber Organisation. It is in our interest to have stability of price and supply. Industries related to this commodity employ 3,300 people in this country. In 1981 we imported over 7,000 tonnes of raw rubber at a cost of around £6 million. Our exports in that year came to 33,000 tonnes of raw and manufactured rubber products which were worth some £52 million.
Before turning to the provisions of the Bill, I would like to draw Senators' attention to an aspect of the Common Fund which I feel to be particularly relevant. We all appreciate the necessity, both moral and practical, of aiding, and cooperating in the development of, Third World countries. The Brandt Report in particular demonstrated the pressing need to assist such countries in a practical, long term way rather than by measures providing only temporary reliefs which must be constantly supplemented, leaving the Third World depending largely on the fickle goodwill of the industrialised nations. There has also been much concern and adverse comment about the misdirection and abuse of aid, where assistance is diverted from its intended recipients or is inequitably distributed. We are hopeful that the Second Account of the Common Fund will do much to improve this situation by aiding projects aimed at improving the structural conditions in market research and development, productivity improvements and processing development. In other words, we are seeking to improve the capacity of developing countries to exploit their own natural resources for the benefit of their economies and their people.
In conclusion I will summarise briefly the provisions of the Bill. Section 1 defines various terms and section 2 provides for approval of the agreement. Section 3 contains the financial provisions for payment of subscriptions for shares in the fund's First Account, and contributions to the Second Account and for borrowing guarantees, required by reason of participation in international commodity organisations associated with the fund. Sections 4 and 5 relate to the disposal of any moneys received under the agreement and to payment of administration expenses. The Schedule contains the text of the agreement.
I commend the Bill for the approval of the House.