I.MAJOR TRENDS AND POLICIES IN FOOD AND AGRICULTURE (continued)
I.PRINCIPALES TENDANCES ET POLITIQUES EN MATIERE D'ALIMENTATION ET D'AGRICULTURE (suite)
I.PRINCIPALES TENDENCIAS Y POLITICAS EN LA AGRICULTURA Y ALIMENTACION (continuación)

CHAIRMAN: The delegations of Barbados and Iraq have requested that their written statements on this item be' inserted in the verbatim record.

C. GOODING (Barbados): My delegation wishes to compliment the FAO Secretariat for the very useful and informative report, which it has prepared to facilitate discussion of this agenda item.

The report basically covers a very broad area so that there is a great deal that one can offer by way of comment. However, in view of the fact that so many delegations have already touched on the more important aspects of the report, I shall confine myself to making just a few brief remarks.

My delegation feels that the Guidelines and Targets for International Agricultural Adjustment provide a sound basis for the development of world agriculture. However, we contend that such

development can only materialize if the developed and developing world are prepared to adopt a spirit of true mutual cooperation.

It is noted that for the Third UN Development Decade the average annual rate of increase in food and agricultural production for developing countries has been set at 4 percent. If this level of increase is to be realized, however, developing countries will have to increase investment in the agricultural sector substantially. Unfortunately, this will not be easy. This is so since many developing economies are under severe pressure and indeed have been for some time now. Many of these countries have in fact had to limit public sector expenditure in order to control a recurring current account deficit so as to avoid the collapse of their economies.

Consequently, it is most unlikely that these countries will be able to increase investment in the agricultural sector from domestic resources. External financing will therefore have to be made available to the developing countries in increasing amounts. That is why my delegation considers it a great disappointment that the growth rate of official commitments to agriculture has been trending downwards. It is our view that this is a most undesirable situation, which is likely to undermine all efforts of realizing true food security.

It is no secret that many developing countries are heavily dependent on a few traditional agricultural export commodities such as sugar and bananas for the generation of a major proportion of their foreign exchange earnings. I may add that the foreign exchange thus generated is crucial for the financing of imported goods and services to facilitate economic development. Recent years have seen much instability in international markets. Declining prices, currency exchange rate fluctuations, increasing competition and other factors have all combined to depress foreign exchange earnings from the traditional agricultural exports with disastrous effects on the balance of payments position of affected countries. In such situations, the implications for agricultural development and, by extension, world food security, are clear.

More positive steps should therefore be made by the international community to promote stability in world markets. Towards this end, greater understanding will have to be shown by both exporting and importing countries in future negotiations on International Commodity Agreements so as to facilitate arrival at effective trading arrangements. Nothing short of the most positive attitude by all parties involved will suffice.

In conclusion, may I say that the Barbados Delegation welcomes the fact that for the first time since its inception by the World Food Conference in 1974, food aid in cereals will surpass the minimum annual target of 10 million tons. We believe, however, that while such aid offers temporary relief to the hungry and suffering, and by so doing provides some kind of breathing space, it will not provide any lasting solution to the problem. We are satisfied that the real solution lies in the removal of the basic causes of hunger and malnutrition.

Indeed we, like many other delegations, are of the view that the development of agricultural sectors of developing countries, particularly low-income and food-deficit countries, through implementation of appropriate food production and distribution programmes and projects, offer the only lasting solution.

We therefore urge that the international community give priority to the Guidelines when addressing the question of resource allocation. 1/

K.T. SALMAN (Iraq) (original language Arabic): The Iraqui delegation has presented its comments in the document regarding agricultural adjustment, with a request that they be added to the Conference documents.

Mr. Chairman, we are profoundly grateful to Dr Nuru Al Islam for reviewing the document on agricultural adjustment. We would like, however, to put forward a few comments regarding the methods therein indicated.

1. Small farmers in Iraq have access, both financially and technically, to modern technologies through state support. In this context, agricultural extension and training help small farmers and peasants acquire more knowledge and greater ability in the use of various agricultural machinery and technologies, with the aim of ensuring their proper use in the lands allotted to them. The Government also rents modern agricultural equipment to farmers who do not own similar equipment.

2. There are in Iraq numerous outlets for advanced technologies and discoveries to reach farmers, mainly through training courses and extension services. Therefore the gap between research and extension has been narrowed and the farmer has been vastly benefited from the application of scientific research results.

3. There are special agricultural extension and training units in all governorates in Iraq . Their activities include the task of integrating rural women as active participants in agricultural production and in recognizing their important role. Women are active participants in most extension programmes and training courses.

4. There is also a popular organization - the General Federation of Iraqi Women - whose membership is open to all Iraqi and Arab women who may wish to participate in its activities. Iraqi women are also entitled to join farmers' cooperatives and to possess agricultural land. Female members in these cooperatives now total 25 254.

The concept of underprivileged women does not apply to Iraq because our laws ensure equality in rights and duties for all citizens and all segments of society, men and women alike. Similarly an employed rural woman is entitled, upon retirement, to agricultural land for the purpose of investment.

5. Iraq has a special experience in the field of rural youth programmes. The goal of these programmes is:

(a)                to ensure that school curricula are production-oriented and that special lessons on agricultural development are provided.

(b)                to establish a specialized center for farmers' children, to provide annual training and extension programmes for them, to prepare them for work in mechanized agriculture, and to direct agricultural activities in general.

Every rural school was given an area of 5 Donums (1 Donum = 2 500 m²) for extension and productive field to provide the students with necessary training and sustained involvement in agriculture.

A study has been undertaken to determine the possibility of the Agricultural Co-operative Bank granting loans to rural students who complete their courses in the Training Center of farmers' children. This is to enable them to establish maintenance workshops for agricultural machines and tools in the rural areas with the aim of assisting agricultural cooperatives and agricultural activities in general.

Finally, we believe that trade barriers in the face of exports of agricultural products from the developing countries should be eliminated and doors opened for them. Moreover assistance should be provided to improve storage.and marketing procedures in developing countries to prevent losses of such products, since the loser here is not only the producing country, but the world at large.

N. ISLAM (Assistant Director-General, Economic and Social Policy Department): The Secretariat paper for the item C 85/19, Agricultural Price Policies, deals with the subject which has come into

great prominence recently. The document draws substantially on the agricultural experiences of developing member countries, especially as reviewed by each of the four regional conferences in 1984. A provisional version of the paper was discussed by the 8th Session of COAG in March 1985 which made a number of suggestions for further improvement The present document is an up-dated and expanded version of the COAG paper.

The Director-General, as you recall, decided to undertake this study first because agricultural prices are one of the key determinants of agricultural development and of the adequacy of food consumption; secondly because of the difficulties, which were - and still are - widely experienced by countries in establishing effective policies in this field.

The present paper endeavors to fulfill the last three objectives, particularly through the identification and analysis of key issues and options in price policy and by the presentation of data on the changing extent of price bias in agriculture.

The scope of the paper is chiefly that of the developing countries. But price policies are not made in a vacuum. The problems which they must tackle - combating price instability and uncertainty and adverse market trends, improving producer incentives, moderating impacts of high or rising food prices on the consumption of the very poor - all these are influenced by international trade conditions and not only by domestic circumstances. In accordance with the request of the Committee on Agriculture and Council, we have extended the scope of the paper to include, but somewhat more briefly, more attention to price policies in developed countries.

Our lengthy experience with price policies do point to some lessons of value in other countries. I must, of course, draw the attention of distinguished delegates to the fact that, in a necessarily summary treatment, as given in this document, important details tend to be obscured.

One practical problem met in the preparation of the paper is the inadequacy of price data. Our experience confirms that this is one of the areas of most acute statistical deficiencies. Therefore, a great deal of the time and resources in the whole study were devoted to compiling and checking, with the cooperation of numerous national and international institutions, comparable price and related statistics.

The paper before you is a substantial one and I will only point to some of its highlights.

In the first place, domestic and international prices for agricultural products, real prices, rose over most of the 1970s. Then, as we all know only too well, from the late seventies and in the early years of this decade, international prices fell heavily. Price changes varied considerably among countries and commodities but in 1981-83, despite those price falls, producer and international real price levels for cereals and export crops of developing countries were either above or equal to those at the start of the 1970s. Retail food prices were about 10 percent higher.

Secondly, African farmers fared worse than farmers elsewhere in the developing world as regards prices of both cereals and, especially, export crops.

Thirdly, there was widespread price bias against agriculture in developing countries. This downward price bias has been more pronounced for export crops than for basic foods and it was particularly marked in a number of African countries. In the early years of the 1980s there was widespread lessening of adverse price bias. While this to some extent simply reflected falls in international prices, in every region producer prices did rise relatively to falling international prices and almost half the countries studied in this document raised the absolute level of producer prices for cereals.

This change is indicative of the much greater attention, which began to be paid to agricultural prices in the first half of the 1980s and to the need for producer incentives.

National price policies had to cope with the impacts of a high degree of instability in commodity prices on international markets. Latin American and a number of African countries were confronted with particularly unstable export prices. This commodity price instability and uncertainty, coupled with depressed international markets in recent years, increases the need for national agricultural price policies and adds appreciably to the difficulties in applying them effectively.

Countries use a wide variety of measures in their price policies. In developing countries, government purchase and subsequent release of part of production is a frequent means of keeping prices within target levels. Trade in agricultural products is usually subject to controls, or is undertaken by parastatal bodies. Governments intervene widely not only in pricing and marketing of farmers' output but also in that of agricultural inputs and in retail consumer prices.

The paper identifies some nine major issues in formulating and implementing price policies in developing market economies. They are listed in Part II of the Table of Contents on its cover page.

One is the macro-economic links of agricultural prices. The interdependence of agricultural prices with the economy as a whole has been given too little attention. Adverse terms of trade in the agricultural sector often caused by over-valued exchange rates or administered lower prices for agriculture typify how the needs of agriculture have been widely overlooked in broader policy decisions.

Decisions on support or intervention price levels - and the criteria underlying these decisions -lie at the heart of agricultural price policy. We think that no single criteria by itself is adequate. There are strong arguments for giving more weight to international price trends as a criterion although this does not mean that domestic prices should be the full equivalent of international prices, particularly when they are seriously depressed because of widespread subsidies. While cost of production must always be an influence on decisions as to price support or intervention levels, undue reliance on this criterion can lead to prices falling badly out of line with basic supply/demand conditions. It is vitally important that policy should result in a price, which will really be an incentive to farmers, small as well as large.

Regarding the long-standing controversy in agricultural policy concerning the roles which can appropriately be given to input subsidies and output price support, there is no valid universal answer. When a more rapid adoption of an improved and available technology is desirable or when international prices suddenly and probably temporarily soar, subsidies may be justified. Input subsidies are, however, difficult to implement effectively and equitably, and experience points to the general superiority of output price incentives.

A fundamental issue is how to reconcile producer and consumer interests in food pricing. There are two principles which any policy action must respect. Firstly, in the long run, consumer food prices for the bulk of output must cover the costs, including an adequate return to the farmer. Secondly, some food subsidies are likely to be essential to safeguard the nutrition of the very poor. But they must be strictly targeted for that purpose.

Questions of equity within agriculture are another issue. An increase in producer prices will directly benefit large farmers to a greater extent, proportionately and absolutely, than smaller farmers. The same is likely to be true of subsidies on inputs. It is easy to say that price policies should take account of the circumstances of the poorer members of the agricultural population but the practical means of doing so are very limited. Some do exist and must be exploited to the fullest.

-Another issue, really a set of issues, which the paper draws attention to is the administration of price policies. The best formulated of policies are useless, indeed they may be actually damaging, if they cannot be carried out effectively.

We have tried to distill the essence of experience of the countries with formulating and applying agricultural price policies in the form of a number of practical suggestions, and they are given in a "box" in paragraph 329.

While the document before you is basically oriented to developing countries, we have also referred briefly to price policies in developed countries. They have a long history of intervention in agricultural prices. Although their policy instruments vary widely and are still in the course of evolution, a widespread result has been the protection national agricultures and the raising of domestic prices of several commodities or maintaining them at relatively high levels. A number of independent research studies point to reduced international prices and greater instability as consequences of developed country price policies, supported by import restrictions or export subsidies.

The general result of protection has been adverse to an orderly and stable expansion of world trade even though food availabilities at consequently lower prices and on concessional terms have benefited many developing and some developed importing countries, at least in the shorter run.

Although the public ownership of the means of production of much of the agricultural sector is a fundamental difference in comparison with market economies, price policies under the two systems do share a number of issues. One which has come into increasing prominence recently, is the need for prices to be flexible enough to reflect changing demand and supply conditions. Socialist countries, while still retaining the basic form of a managed economy, are making innovations in agricultural pricing and marketing in order to raise producer incentives and to increase efficiency,

There can be no general blueprint. Nevertheless, there is a good deal of common ground in the broad economic and social conditions of developing countries and in the nature of the issues bearing on price policy decisions.

Your discussion of the subject of price policies is most timely. This is undoubtedly a time of change as regards these policies in most countries, not only developing countries, to allow prices to reflect to a greater extent than before underlying trends in supply and demand, internationally and nationally, while at the same time taking safeguards against pricing food out of the reach of the very poor. We still have far to go before reaching this goal.

Finally, I should confirm that the Director-General intends to give whatever assistance he can to countries in their difficult but essential and rewarding task of improving their food and agricultural price policies. Examples of action envisaged by FAO are set out in the document before you.

CHAIRMAN: Thank you very much for this clear introduction. May I now ask the Member countries who want to take the floor on this point to give their names.

V.M. DEL ANGEL GONZALES (México): Con su permiso, Sr. Presidente, la delegación mexicana felicita al Dr. Islam por su brillante introducción al debate de las políticas de precios agrícolas. Tema difícil sin duda, pero apreciamos los importantes avances que se observan en el documento C 85/19, en relación con los propósitos que motivaron el estudio.

Las lecciones que se derivan de las experiencias analizadas son claras y concisas. Una de ellas, adecuadamente destacada, es la que se refiere al carácter particular que adoptan las políticas de precios en cada país, en atención a sus propios objetivos de desarrollo y a las circunstancias que enfrentan.

Es éste, a nuestro juicio, el aspecto más importante que no debemos perder de vista, pues nos obliga, en consecuencia, a realizar análisis detallados de nuestras realidades nacionales, para valorar los alcances y limitaciones de los precios, como instrumentos de política, y adecuar sus modalidades operativas. Este reconocimiento no invalida las orientaciones generales del estudio, ya que es incues tionable su utilidad analítica para la formulación y aplicación de las políticas de precios alimentarios y agrícolas.

Nuestra delegación, Sr. Presidente, agradece el tratamiento que se le dio a algunas de las recomendaciones que hicimos en el período de sesiones del Comité de Agricultura en marzo del presente año. No obstante, Sr. Presidente, deseamos reiterar nuestra llamada de atención sobre las distorsiones que genera la participación transnacional en el comercio y la transformación de productos agropecuarios; sobre la importancia de los sistemas de intercambio compensado de productos o de trueque entre países para superar la falta de divisas sobre la eliminación del proteccionismo contra nuestros productos de exportación y la necesidad de adoptar las medidas complementarias para orientar la investigación y el desarrollo tecnológico hacia los productos de consumo popular.

Adicionalmente, enfatizamos la importancia estratégica que tiene la productividad para los propósitos de estabilización de los precios y de desarrollo rural. Es bien sabido que en los períodos de inflación creciente, como los que viven la mayoría de nuestros países en desarrollo, el aumento

sostenido que sufren los costos de producción sólo pueden resolverse por dos vías: el incremento de los precios finales que, sin embargo, retroalimentaría el proceso inflacionario, o bien, el incremento de la productividad, sin duda que no son soluciones yuxtapuestas.

Son la productividad y el cambio tecnológico los factores relevantes, puesto que se asocian además, como se sabe, al aumento en el producto, el ingreso, y el bienestar social en general.

La política de precios debe hacer atractiva la adopción del cambio tecnológico entre los productores medianos y marginados; pero no debe generar ganancias extraordinarias para los productores modernos, ni tampoco solapar ineficiencias productivas. El costo económico y social de esos extremos no lo pueden seguir soportando nuestras debilitadas economías. Lograr el delicado equilibrio que eso significa debe ser una preocupación permanente de quienes toman las decisiones en materia de precios agrícolas.

El mejor camino es no pretender obtener demasiado del instrumento precios, sino ubicarlo en su potencialidad real y complementarlo con otros instrumentos de promoción y estímulo de la productividad y la producción.

Tengamos presente que en las estructuras productivas agrícolas de nuestros países prevalecen con mucho las producciones de tipo campesino y éstas son relativamente insensibles a los estímulos de los precios, porque no están insertos en los mecanismos del mercado. Su móvil no es la ganancia, sino la sobrevivencia. En consecuencia, su riesgo es mayor, aunque no se pueda medir en términos monetarios. Aún más, para estos pequeños productores los incrementos en los precios de sus productos pueden resultar contraproducentes, porque tendrán que comprar más caros los escasos bienes que adquieren, incluso su propio producto.

Sin embargo, son estas pequeñas unidades de producción y las medianas las que tienen mayor posibilidad de incrementar sus remanentes, con un costo relativamente menor. Para ello es necesario compartir los riesgos del cambio tecnológico y no permitir que el mercado asigne de manera autónoma los escasos medios productivos de que disponemos.

Bajo esta consideración, no puede admitirse a ultranza la supuesta influencia modernizadora de los precios. Por sí solos son un instrumento limitado y pueden inclusive reproducir tendencias perniciosas

Sr. Presidente, en el documento analizado queda claro que la política de precios es un instrumento útil de corto plazo, que no debe manejarse aislado, que su nivel debe tender a compatibilizar distintos objetivos de desarrollo; que los precios internos deben mantenerse en estrecha relación con los internacionales; que deben superarse las distorsiones del proceso de comercialización y que la administración de los precios regulados debe ser eficiente y ágil, entre otras recomendaciones igualmente útiles.

Estos aspectos, Sr. Presidente, que en muchas ocasiones se constituyen en severas restricciones, al socaire de la política de precios como instrumento de desarrollo rural integral, se agravan cuando los insertamos en la problemática financiera y de comercio internacional, que enfrentan los países en desarrollo.

En efecto, las dificultades para recuperarnos de la recesión, el problema de la balanza comercial, el peso de la ,deuda y su carga financiera, el deterioro de los valores monetarios y la creciente inflación y sobre todo la continua presión de los organismos financieros internacionales por imponer a nuestros países políticas contraccionistas y un sospechoso neoliberalismo económico, atenúan con siderablemente la importancia de los precios en la promoción del desarrollo social.

Ante esas circunstancias, Sr. Presidente, consideramos que la intervención de los gobiernos en la normatividad del conjunto de instrumentos de política y en particular de los precios, principalmente de productos agrícolas básicos, es condición fundamental para las políticas de seguridad alimentaria y de desarrollo rural.

N. HINTIKKA (Finland\): First of all, my delegation wishes to extend its sincere thanks to the Secretariat for this interesting study. Never before, perhaps, have agricultural price policies been examined in such a comprehensive manner from the point of view of developing countries.

We understand that the lack of information and insufficient data in many instances have created difficult problems. However, the Secretariat has overcome these defects and the study largely covers all major agricultural price policy measures and mechanisms. The impact of various systems are analyzed and several problems brought out. Also, the main results are presented in a concise way. This study is a notable attempt to give guidance on how to organize price and market conditions in favour of both food producers and consumers.

On many occasions Finland has stressed that the family farm is a cornerstone of the agricultural sector. More attention should be paid, especially in developing countries, to small family farms. This concerns agricultural policy in general and price policy in particular. A large part of agricultural output comes from small-scale and poor producers. Their interests should be taken into account in various actions directed to agriculture. Otherwise, all efforts in seeking long-lasting solutions to the food problem will fail. We are pleased to note that throughout the report discussed now this standpoint is an integral part of the analysis.

The main objective of price policies is to give incentives to producers. In spite of such a clear target, developing countries face several major obstacles in their path in creating necessary incentives. One of those obstacles is so-called urban bias, which certainly is a very sensitive issue because the interests of the politically strong minority of urban consumers and less influential rural population strike against each other. But somehow this problem must be solved. We feel that in order to increase food production and improve the terms of trade in favour of the rural areas, the needs of farmers have to be put ahead of the immediate needs of the distribution system and the consumers in pricing decisions.

Another unfortunately too often found obstacle is costly and inefficient marketing of farm inputs and outputs. Severe fluctuations in domestic production have led most governments to develop some form of stabilization arrangement. Public agencies are established with the intention that they should be commercially self-supporting. For several reasons, this has not been achieved, and these parastatals must cover their operating costs either by cutting prices paid to producers or by claiming support from the Treasury. These and many other obstacles to price policies are very well described in the report.

Taken altogether, several improvements are found in the study as compared to the version presented to the Committee of Agriculture last March. However, a better balance in dealing with various countries' influence on world markets would still be necessary in the report. In many connections throughout the study, the idea is given that developed countries are responsible for market instability, increased price fluctuations and low world market prices.

We agree that, generally speaking, the developed countries have an important role in determining the international environment for price policies. At the same time, it must be stressed that the developed countries differ considerably in economic power and national policies. Their influence on world markets is not uniform. Many developed countries do not want large world market shares for their agricultural products. As an exemple, my own country tries to limit her food production to meet only the needs of domestic consumption. Such production, comprising only an extremely small portion of the world total, cannot have detrimental effects on world markets. Hence, we hope that more analysis of these aspects will be incorporated in the final report.

G. NIELSEN (Denmark\): In congratulating the Secretariat for an excellent report, I would take the opportunity to emphasize that these are exactly the kinds of studies that we should like to be given priority by the FAO Secretariat in the future. Through the formulation of such practical and down to earth advice as contained in this report, FAO can provide extremely valuable guidance not only to member countries in formulating their agricultural strategies, but also to the developing assistance community, inside or outside FAO, in creating the conceptual framework for agricultural development projects.

I should like to refer to the Joint Nordic Statement made by Sweden in COAG, the Committee on Agriculture, where reference was made to the Nordic dialogue with the SADCC countries. It was stated that prices were one among several other important elements in a very complex structure of incentives that can stimulate agricultural production in the developing countries.

I should like to make a few comments on the report itself. As already stated, we highly appreciate that the advice of the report is down to earth and that it emphatically warns against being over-ambitious, i.e. pursuing too many goals with too few means. Basically, reliance on free market market forces will always be the most effective price policy. A price policy should issue clear

signals that are understandable to all farmers, not least to the small ones. In this context, I should like to stress the importance of the creation of, and participation by, powerful farmers ' organizations in price and market policies with the aim of establishing balance with, but certainly not dominance over, consumer interests in urban areas.

Although the advice of the report is down to earth, it might be appropriate to issue a slight warning against interpreting it as encouragement to be rather regulatory in market management and thereby restrict the play of free market forces. Too much regulation normally entails problems with time lags and distortion of relative prices, as there is an imminent risk of creating unwieldy bureaucracies. A general preparedness in order to buffer excessive price fluctuations may, however, be appropriate in order to protect the weaker segments of the population, be it small farmers or poor consumers. Permissiveness in front of very wide price fluctuations may be of a speculative nature and may also undermine people's respect for the functions of free markets. It requires an administrative capacity to strike the right balance between laissez faire and interventionism. The international community might, in the shorter run, assist and supplement developing countries in administering their price policies, but, we fully support the report when it underlines that, in the longer run, it will be indispensable to create the necessary administrative capacity and structures to tackle national market and price policies. No one can claim to be a world champion in the field of price policies. The developed countries are also struggling to establish and update appropriate price policies. It is therefore useful to make these current policies subject to critical reviews, provided that this policy fosters open dialogues in the international communities. One-sided criticisms may, on the other hand, cut off such dialogue and push people back into the trenches.

In the EEC, of which Denmark is a member country, we may see some tendencies unilaterally to attack our price policies. We fully support the EEC Commission's proposal for re-establishment of a reasonable balance in the criticism of developed countries. After all, the EEC is and will probably remain, the world's greatest importer of agricultural products.

In conclusion, I would repeat our general support for these kinds of studies because we believe that this contributes fundamentally to the formulation and updating of national or regional agricultural strategies. We have noted that quite a few developing countries feel a bit saturated with UN agricultural analyses. We should not concentrate on implementation, they say. Indeed, Mr Chairman, but we all appreciate the danger of making analyses an excuse for the existence of bureaucracies. We maintain, however, that, without general background analysis and identification of issues, we shall more or less fail to have the necessary substantial exchange of views on issues which constitute the necessary, although not always sufficient, basis for implementation. The analyses have constantly to be updated and adjusted to new and foreseen developments. Therefore this kind of analysis must remain a hard core task of the FAO.

J. LADAN (Nigeria\): My delegation welcomes this paper and congratulates Professor Nurul Islam for his lucid introduction to it. This agenda item was presented to the 13th African Regional Conference in Harare in 1984, and views were expressed in that meeting. We are happy to note that most of these views are reflected in the final text presented to us. My delegation wishes to stress some points, however.

Pricing policy should be viewed as not only one of the key determinants of agricultural production, but also as a key determinant of food consumption, both in developed and developing countries. The document presented before us reports on the experience of the developing countries. There is a need for FAO to carry out a further study on the pricing policy of the developed countries and come up with a useful correlation. It is only after this is done that the problems confronting the weaker nations regarding agricultural trade may be properly appraised.

Pricing policy varies from country to Country. However, a common problem exists in the developing countries, namely the problem of drawing up appropriate and implementable price policies. The governments of developing countries are confronted with the problems of both the producer and the consumer. Producers in developing regions are producing only when they find that they can sell their products. At the same time, the consumers, mostly those living in urban areas, are looking for cheaper food items, which invariably, for those who are on salary, take a lot out of their take-home earnings.

The government, on behalf of the producer, is trying to find markets for the national products, but unfortunately, as we know today, the developing countries cannot sell their products in the international markets for the reasons stated in the document. Therefore the government has to make complex decisions affecting the producer and the consumer as to which one to subsidize if production is to continue for a long time.

In the case of producers, the government tries to do this in the form of input subsidies. For the consumer, the government tries to impose a ceiling price on food items. For cash crops, the government tries to maintain minimum guaranteed prices. The whole set of decisions is so complex that the pricing system hardly works in the developing countries.

As I stated earlier, the difficulties confronting developing countries in selling their agricultural raw materials are complicated by the debt burden, and now the conditions imposed by creditors, particularly the IMF, to force countries either to devalue their currencies or to remove food subsidies. These measures are certainly hurting the developing countries. These decisions at international levels have their long-term repercussions in the developing countries where we cannot guarantee high production levels in the future. Imagine if the developing countries were faced with the problem of the United States of America , where agricultural products, particularly food crops, were piled up and the government had to come with its programme of payment in kind to set aside agricultural land out of production. If this situation should occur in developing countries, governments cannot intervene to keep the farmers producing for the future, but the farmers would instead be forced out of a job. That would not only have repercussions on the respective national economies, but would create a lot of unemployment because people would have to desert agriculture. They cannot just produce and see their products thrown away.

Therefore, if the objectives of the pricing policies are to be achieved, then international agricultural trade should be adjusted. There is a need to develop international, regional and sub-regional marketing systems to make international agricultural trade more efficient. For the developing countries, particularly in Africa, there is a need to encourage triangular transactions to dispose of surpluses. We have been told that during this growing season Malawi, Kenya and Zimbabwe have a large stock of grains which they cannot sell unless some sort of triangular transaction can be adopted, particularly by the eight donor countries. Better prices for agricultural commodities should also be offered for the products of developing countries.

With these few comments, we wholeheartedly support all the suggestions contained in the document. We hope that they can be implemented at the country level as well as at the international, regional and sub-regional levels.

We welcome the offer for FAO to assist the developing countries in formulating and administering their agricultural price policy. Apart from the lack of capacity to formulate an appropriate pricing policy, developing countries lack the administrative capacity to implement it. If FAO can continue with its study and find a way to assist the developing countries, surely this is a step in the right direction.

E.G. MOYO (Tanzania): The study conducted by FAO to review the agricultural pricing policy in both developed and developing countries, at the same time to identify key issues in the policy, and the suggestions for the nature of policy action to be taken are all highly recommended and appreciated by my delegation. On behalf of my government, I congratulate the Secretariat for the work they have done so well in presenting this report. In the context of this report, I will briefly review the approach of my country in formulating and implementing its food and agricultural pricing policy.

Pricing policy is one of the most important and effective tools in influencing both total agricultural output and its composition in my country. My government sets producer prices for its major export and food crops. For export crops, the main constraints in setting produce prices are the market prices of the world, the cost of marketing and the exchange rate. For domestic crops, the main constraints are consumer prices and the cost of marketing. The real producer price index of all export products fell consistently from 1976/77 to 1982/83. There was a slight recovery in prices in 1983/84 and in 1984/85, but they have declined again in the crop season of 1985/86. In real terms, producer prices prevailing in the early 1970s were 50 percent higher than those set for 1985/86.

However, the response of the index to real price increases in 1983/84 and 1984/85 was not encouraging. A closer examination of individual crops indicates a significant response by some crops to change in real prices. Tea, cotton, arabica coffee and cocoa all showed positive responses to real price changes.

In evaluating the impact of recent policy changes in agricultural exports, it might be useful to recognize that there has been a secular trend towards lower real international prices for most commodities in the past two decades. This decline, which has been approximately one percent per annum, means that the quantity my country has had to export to bring in a fixed amount of imported seeds has been rising at least one percent per annum. Where the price of imported goods has risen in real terms, the quantity of exports has had to rise by more than one percent. In order to compensate for this decline in real prices, agricultural exports need to rise at more than one percent per, annum so that farmers will be able to maintain their level of income and at the same time, so the country will be able to maintain its level of imports.

For some crops, notably robusta coffee and cashews, changes in the trend of real producer prices have not resulted in changes in production trends. Obviously other factors have overshadowed the response to change in real prices. Unfortunately the success in increasing the procurement of export crops has been accompanied by weak commodity prices and hence, the pressure on the balance of payments has not yet been relieved.

With regard to domestically consumed crops, the real producer price fell from 1977/78 to 1982/83 and recovered in 1983/84 and 1984/85. The 1984/85 price rise for maize was very significan, raising its real price to the fourth highest price in 12 years. Some slight erosion in real prices has followed in the crop season 1985/86.

In evaluating the effect of price policy in my country, and especially its impact of food costs, it must be realized that the scale of food crops outside their official market is an option for most farmers and therefore, prices must be considered relative to the open market prices.

On the question of the agricultural pricing policy, my government recognizes the importance of producer prices as a tool for stimulating agricultural production. The policy identifies weaknesses in past government pricing policies in particular because producer prices have been inadequate for incentive purposes, because they have not been used efficiently for guiding the composition of agricultural output in light of planned targets, because pan-territorial products and consumer prices have ignored the impact of transport costs. That result in high marketing costs, and lastly because increasing consumer price subsidies for preferred staples over a period of time have increased the burden on the national budget and have biased consumption patterns in favor preserved staples which do not have a national comparative advantage in production.

In view of these weaknesses, the foolowing policies have been adopted with respect to foodgrain crops: regional pricing system, as opposed to a pan-territorial one, has been introduced to encourage the production of drought-resistant staples in drought-prone areas, and to encourage the production of preferred staples in those areas most suitable for their production. Under the system, producer prices are announced early enough before the planting season in order to help farmers plan properly. The announced prices are intended to boost the production of particular crops and as far as possible are coordinated with a supply of adequate inputs. The rate of inflation, the cost of efficient production are taken into account when prices are fixed by the Government. The Government also encourages the production and consumption of those food crops which make the least demand on foreign echange such as cassava, potatoes and bananas, and which have other comparative production advantages in regions with marginal rainfall. As far as possible consumer prices are fixed to encourage the consumption of those foodstuffs in which my country has a production advantage and distribution and marketing arrangements for foodgrains have been altered as a result of the 1982 Cooperative Society Act. The cooperatives have resumed the role of procuring grain from their members and selling it to selected guaranteed outlets. Then we come to liberalization of trade in domestic food crops. In that regard, the open market is allowed to operate in all parts of the country as before, without too many restrictions.

With regard to consumer prices, price policies have changed significantly since 1984; subsidies on maize flour have been removed. Nevertheless government policies with

respect to consumer prices are highlighted in the national agricultural policy. Major recommendations include restriction of consumer prices in favour of food crops which can be grown cheaply and are more reliable in the country - cassava, millet and sorghum, and introduction of full cost prices for crops such as maize, wheat and rice. All major food staples were subject to price increases between 1984 and 1985. Despite this, official market prices were considerably lower than those in the unofficial markets and this reflected changes in the supply and demand situation.

With this brief outline of the agricultural policy of my country, I am grateful for having been given a chance to speak during this session.

M. BRZOSKA (Poland\): My delegation is of the 'opinion that this study can be useful in shaping pricing policy in many countries and can provide a basis for FAO assistance. Agricultural prices have always been the main determinant of production and of the economic situation of agriculture. The fixing of those prices is always the most difficult part of agricultural policy. It is all the more difficult at a time when rapid price fluctuations in the world, not only prices for agricultural products but also for fuel and technical means, call for essential reorientation in agricultural prices, or even for a change in production policies. We have experienced such a situation in Poland .

Poland has its own unfavorable experiences of the late seventies, when delays in changing prices for agricultural products and food became a check for production increases and modernization of farms. Poland has also had favourable experiences in the past four years, when price levels for basic products were raised making their production profitable, when free markets and free prices for non-essential articles were introduced, and yearly price revisions, taking into consideration the agricultural self-management principle, were introduced. That provided a considerable, unexpected impulse for production growth.

The document encompasses not only price theory and experiences in shaping agricultural prices in different countries, but also the influence - which is essential - of agricultural prices in developed countries on world prices, particularly on export and import terms, of food from and to developing countries. Thinking along these lines is a prerequisite in overcoming unfavourable terms of trade for developing countries.

R. TREMINIO (Nicaragua): El Informe C 85/19 elaborado y presentado por la FAO a las diferentes delegaciones aquí presentes, es verdaderamente una labor muy acertada y de gran valor, que amerita un aporte sustancial y que orienta a la vez en experiencias y criterios para la formulación y puesta en práctica de políticas de precios agrícolas en nuestros países.

Es importante en este sentido plantear el sistema de intercambio internacional que establece precios notablemente desiguales entre los países en desarrollo y desarrollados. Los precios de los productos agrícolas bajan o se estancan y los precios de las manufacturas o de los insumos agrícolas se incrementan en forma desproporcionada y alarmante.

Esta relación de precios internacionales sigue acentuando en los países en desarrollo el incremen to de la deudà externa, una balanza comercial muy deficiente, el déficit fiscal y limitaciones serias para vivir dignamente. Esta relación de intercambio injusta de mercado hace que el desarrollo y la producción agrícola de estos países se mantengan en niveles de estancamiento o en crisis. La economía sufre golpes constantes y mortales y las posibilidades de trabajo y desarrollo toman carácter de sobrevivencia.

Por otra parte, el proteccionismo agrícola establecido por los países desarrollados ha sido perjudicial para una expansión ordenada y estable del comercio mundial, provocando el descenso de los precios de una serie de productos y favoreciendo altas fluctuaciones de los mismos. Medidas como el establecimiento de barreras arancelarias y de subsidios indiscriminados han sido elementos determinantes.

El dumping es otra modalidad de política el cual es un factor decisivo que tiende a bajar los precios internacionales de los productos agrícolas en detrimento de la economía de los países pobres.

Una posible alternativa de solución a este problema podría ser la adopción de una división internacional del trabajo entre los países donde se establezca el qué producir, con qué prioridad y en qué magnitud. Un análisis serio de estas interrogantes podría dar luces y alternativas viables para combatir el intercambio desigual e injusto en el mercado internacional.

En el marco interno de los países, podríamos señalar, por otra parte, que el ejercicio de políticas de precios aunque fundamentales, por sí solas no producen efectos positivos o decisivos en la producción agrícola. Su impacto en la producción dependerá de las oportunidades reales de factores y servicios de apoyo como la oferta tecnológica, el crédito, el abastecimiento de insumos, la mecanización, inversiones de fomento para el riego, el acceso a la tierra de buen potencial agro-ecológico, la disposición de caminos y carreteras, la capacidad de almacenamiento y comercialización. Todo conjugado bajo un sistema único de políticas. Esta sería una senda viable para el aprovechamiento efectivo de la política de precios.

La agricultura campesina reviste gran complejidad en los países en desarrollo. Este sector en la mayoría de los países en desarrollo, soporta el mayor peso en la generación de alimentos, al mercado y su ambiente de operación se ubica principalmente en áreas marginales, baja disponibilidad de recursos y sistemas productivos con una base tecnológica tradicional y deficiente. Incentivar e impulsar la producción bajo estas condiciones implica también transformar esta estructura gradualmente con el manejo de políticas, incentivos e inversiones bien dirigidas.

Nuestra experiencia en Nicaragua , Sr. Presidente, con el desarrollo de un modelo de economía mixta nos ha llevado a plantear y poner en marcha políticas de precios agrícolas.

La política económica en el marco de la estrategia de desarrollo agropecuario establece como objetivo inmediato la instrumentalización de una política de precios para impulsar la producción tecnificada, la adopción y aprovechamiento de insumos agrícolas mejorados, un mayor acceso al crédito y la asistencia técnica. Esto incluye además medidas complementarias relacionadas con tasas diferenciales de financiamiento, según el desarrollo de la infraestructura productiva en los diferentes sectores sociales de la producción.

La estructura de precios manejada actualmente en Nicaragua está ligada fuertemente a la variación de los precios en el mercado mundial de productos agrícolas. En el transcurso de los últimos cuatro años se ha implementado una política de precios de garantía y un sistema de incentivos tanto para la producción de alimentos como para la de agroexportación.

Como incentivos directos, se adoptó últimamente la asignación proporcional de divisas a los productores en términos de la eficiencia productiva lograda en una cosecha.

Los elementos de políticas aplicadas en el sector agrícola se resumen así: Establecimiento deprecios a los productos agropecuarios independientemente del nivel técnico y de la organización.social de la producción, permitiendo mayores utilidades a productores con mayor eficiencia productiva. La forma adoptada por esta política de precios ha sido evitar en lo posible resultados negativos en la gestión de producción.

Otros elementos adoptados en la política de precios al productor, han sido el sistema de cambios múltiples, el sistema de precios de garantía y la liberación del crédito.

El sistema de cambios múltiples surge del creciente deterioro de las relaciones de intercambio y las presiones inflacionarias internas que afectaron la rentabilidad de los principales productos agropecuarios. Este sistema estableció un tipo de cambio diferencial para los principales productos de exportación consiguiendo a través de la devaluación selectiva implícita, la vinculación entre los precios internos y precios internacionales. Los tipos de cambio han sido ajustados por la presión inflacionaria cuando se producen aumentos en los costos de producción en los diferentes rubros o se producen bajas sensibles en los precios internacionales.

Los precios de garantía constituyen una medida en la cual el Estado absorbe el riesgo de producción. El principal criterio utilizado son los costos de producción, el precio internacional y distintas opciones de márgenes y de ganancias.

En lo que se refiere a liberación del crédito, el Gobierno tiende a suministrar el apoyo financiero necesario para producir en todos los sectores sociales. Esto con el fin de impulsar y fortalecer las estructuras productivas en desarrollo y motivar la confianza del productor.

Otra política que se implantó en los primeros cuatro años de revolución fue la de subsidio a los insumos y otros factores productivos. Esta medida fue eliminada dada la alta carga fiscal que representaba para el Estado. Esta política también fue válida para los productos agrícolas de consumo.

Esta experiencia nicaragüense en términos de políticas de precios, se ve menguada en su impacto a la producción por la agresión sistemática y el bloqueo económico y político que le toca vivir al pueblo de Sandino. No puede un país pobre desarrollar una política de impulso productivo y económico si a cada instante ve amenazada su independencia y soberanía territorial. Sobre esto nos toca vivir el gran peso de la deuda externa y los precios impuestos para nuestros productos en el mercado internacional, que hacen más difícil nuestras posibilidades de desarrollo.

Mi delegación, Sr. Presidente, expresa su satisfacción y apoyo por la iniciativa de la FAO de atender el problema de los precios agrícolas.

L.E. BIRGEGARD (Sweden\): Firstly, the Swedish delegation wishes to join other speakers in complimenting the Secretariat for yet another good report. In particular, we find it commendable that the report is comprehensive in dealing with the many facets of agricultural pricing, and that the report hereby elaborates a broader and more relevant framework for discussion.

The subject we are facing is complex. I shall hardly do justice either to the subject, or to the report, when I confine myself to a few remarks of a rather general nature. Time constraints strongly suggest this approach, however. In line with the arguments in the report our delegation wants to remind us of the risk of making too simplistic analyses and subsequently too simplistic prescriptions. A onesided focus on producer prices in development dialogues is a case in point. Evidence in the report before us as well as analyses elsewhere suggest that producer prices as a determinant to the level of aggregate agricultural production have notable limitations. There are fairly conclusive indications that other factors like institutional arrangements for inputs supply and marketing at times are as important in explaining aggregate production levels. From this follows that a series of actions, among which adjustment of producer prices is often likely to be one, are necessary to increase production.

We also want to draw attention to the importance of relative producer prices in the composition of agricultural production. Farmers normally respond quickly and in a substantive manner to alterations in relative producer prices. In fixing agricultural prices this fact may lead to a conflict between the objective to expand staple food production and the objective to increase export crop production in order to alleviate a serious foreign exchange situation.

In line with Swedish development philosophy we would prefer to see a clearer stand on this issue than is taken-in the report. We advocate that pricing policies should be designed in such a way so that priority is given to staple food production. One reason for this position is that we question the feasibility of the idea that developing countries with large foreign exchange deficits can escape the problem by increasing exports. For one thing our difficulties in solving such a problem with an export recipe under much more favourable conditions give good reason to assume a cautions attitude.

As a third point we would like to express concern that discussions of pricing policies, and agricultural policies in general, might tend to focus on aggregate production with decreasing regard to distributive considerations.

In situations of stagnating or falling per capita agricultural production, poor and marginalized sections of a population stand to loose most. This means that distributive aspects matter more, not less. Consequently, any strategy designed to rectify the situation should explicitly raise questions like production by who, production to satisfy the need of whom? Poor people with low incomes and inadequate subsistance production will not necessarily find their food and nutritonal situation improved if aggregate agricultural production increases. Pricing policies and other dimensions of agricultural policy should be formulated with this in mind.

Finally, we would like to outline briefly our view on the process of formulation and implementation of agricultural policy including pricing policy and FAO's role therein. As noted we think that a number of variables affect performance in agricultural development. These variables and their relative

importance are country specific, reflecting, among others, the objectives that are pursued. As a consequence, a series of country specific activities, among which adjustment of prices is one, will be required.

Given prevailing constraints in all countries, including political realities, policy change will have to be gradual and extend over a considerable period. A one time change, in one or a few variables, as sometimes pressed for by donor agencies, is likely to have limited lasting impact.

In our opinion a different approach is needed. We advocate the formulation of long-term national plans of gradual policy adjustment covering a range of factors like exchange rates, consumer and producer prices and subsidies, institutional arrangements for inputs supply and marketing of produce, etc., to mention some. The plan should outline the direction of change and the steps to be taken over time.

We think that it is preferable to institutionalize a mechanism for formulation and monitoring of such plans at the national, level. Without disputing the importance of workshops as proposed in the report as part of FAO's tasks ahead, we feel, maybe, that FAO could play an even more useful role by undertaking to promote the idea of planned gradual policy adjustment and to support Member governments in implementing such an approach. This suggestion is merely an elaboration of the role proposed for FAO in paragraph 103 of the report.

M. SUBRAMANIAN (India\): Let me on behalf of my delegation first complement Dr Islam and the Secretariat for what I consider to be one of the most comprehensive analyses I have seen on the very intricate problem of price policy. We are of the view that the recommendation made in paragraph 317 on page 53 of this report is very well founded, namely that price policy cannot be set by the executive government without being advised by a çompetent set of economists who will take an overall view of the various implications of price policy, both in the short-term and in the long-term. We are happy that our effort in this direction has been to some extent recognized in the report by the reference in the "box" on page 19 of the report to the formal criteria and procedures which we are following for setting agricultural prices in India .

India relies on the expertise of what is now known as The Commission on Agricultural Costs and Prices, which is headed by a distinguished economist who is generally of the rank of secretary to the Government, for advice on the price policies to be followed. It is an expert body which has very comprehensive terms of reference. I am glad to say that the multiple criteria of price policy suggested by this report is to some extent reflected in the terms of reference which we have for this national Commission in India. The factors which the Commission takes into account while recommending agricultural price policy to the Government of India are: the cost of production, changes in input prices, input/output price parity, trends in market prices, demand and supply constraints, inter-crop price parity, the effect on industrial cost structures, the effect on the general price index, the effect on consumer cost of living, the international market price situation and the parity between the prices paid and the prices received by the farmers. We supply the Commission with comprehensive data on the cost of cultivation of the principal crops on which the Commission is required to give advice. As of now, the cost of cultivation data is being generated through a comprehensive scheme implemented by agricultural universities and research institutes, where a total of 9 000 samples are studied every year so as to generate the basic information on cost estimates relating to the principal agricultural crops and their production programmes. I believe this has enabled us to adopt long-term-strategies of pricing and price support operations.

I would like 'to refer to the concept of price parity, or price bias which has been mentioned in the report and also to the figures given on page 116 of the report. You would find that the figures relating to India might indicate that there has been a decline in the real farm prices realized by farmers. I would like to add that the price policy of any country cannot be judged on the basis of the long-term trend in the price parity between agricultural commodities and the industrially manufactured products. I believe that there are inherent limitations in the mechanics of applying the concept of terms of trade for the purposes of price policy in an agricultural economy susceptible to high degrees of variation in rainfall. Fluctuation in production is too frequent, and sometimes too large, to permit a stable link or parity between the prices of agricultural and non agricultural commodities. Stability of terms of trade is a medium-term concept which cannot be the subject of yearly adjustments. Therefore we, in India , try to correct in the long-term unfavourable trends which may affect the farmers of our country. I am glad to say that after the year 1980 when we included the terms of trade as a principal element of consideration for the Commission on Agricultural Costs and Prices, our pricing strategies have been able to coorect this trend. There has been no further deterioration, of a noticeable kind in price parity between agricultural prices

and non-agricultural prices. Therefore, it is only when terms of trade continue to grow unfavorably in the agricultural sector for a number of years in succession that any corrective action may be called for.

I would also like to bring to your notice the fact that we have not been able, very successfully, to take into consideration international prices for the purposes of regulating our agricultural pricing policies. I think the limitations of this approach are outlined in the report. I say with some emphasis that the belief expressed in the report that, with all these limitations it should still be possible for us to take international prices as some indication of national price policies, is to my mind a wish that may not be fulfilled in the coming years unless the recommendations of this Commission on international pricing strategies, and the removal of barriers to international trade are actually accepted, and acted upon, by the member countries of this august body.

I would like to emphasize that price bias, by itself, is not a very difficult issue to handle. What is more important is a policy, which tries to balance a number of considerations. We, in India, have tried to use a mixture of various policies such as input subsidies to the extent that they are relevant in promoting the growth of input use, particularly by marginal and small farmers, and to the extent that modern technologies may have to be adopted for unirrigated land and consumer subsidies may have to be adapted to enhance the access of the rural poor to food and other essential commodities. I would like to indicate to you that these subsidies are also relevant to the demand for food grains and other commodities. Please remember that at the market price the demands for these commodities may not be the same without the additional demand which may be generated when a part of the system is subsidized to support the rural poor and enhance their consumption and nutritional levels. It is therefore a complex policy of demand stimulation by pricing, nutrition and access to food for the rural poor, as well as stimulation of production by proper input subsidies. The Indian scene is one in which the policy is a mix of all these, and to that extent I believe we have been able to bring greater stability to the system over a long period. I personally believe that the role of technology in pricing is much more relevant than many other factors which are mentioned here. I would ask this august Conference to include in the factors affecting pricing policies the role of technology as a means of reducing costs and increasing output. This I find is not very specifically stated as a very relevant criterion, but I think it is an important criterion for developing economies.

We in India have been able to use technology as an important parameter, and I think that our growth, which was over 4 percent recently, was not merely on account of our ability to contain the price bias, but also of our ability to stimulate production through appropriate technological and extension support.

Another factor which I would like to bring to your notice is that we are not able to really identify the real international price. As has been mentioned in the report, it is really true that in many cases international prices are residual market prices. Truly all the prices you see for commodities in surplus are subsidized prices as in the case of sugar or wheat. I fully endorse the reference in paragraph 434, page 74 of the report, which refers to the fact that India 's export potential for cereals is substantially hit by the price policies of other countries in the world. I think it is necessary that international pricing policies are better regulated before national policies are regulated on the basis of international prices.

Another aspect which I would like to cover is the importance of price parity between input costs and output costs. I would like to draw the attention of Professor Islam to the fact that in the two major countries, which were complimented for incremental production, China and India , the parity is very different. The amount of grain which you would require to purchase one kilo of fertilizer in China is much lower that the amount of grain which you would require in India for purchasing one kilo of fertilizer. But still there is a fertilizer subsidy in the Indian economy, so the reference to budgetary subsidies does not give you the answer. It is perhaps on account of this difference that the productivity levels in China and India are divergent. I would request of the Secretariat that in any further analysis that they make, they should also compare the input/output ratios, particularly in terms of fertilizer prices and commodity prices at the national level, and give us the benefit of the inter-country comparisons to first know to what extent these strategies are promoting agricultural production at the national and international levels, and to what extent they are not doing so. And therefore, I would say that the mere

comparison of output prices does not give you the answer. Comparison of input prices and the input/output relationship, not in absolute terms but in relative terms, is a very relevant issue as far as price policy is concerned.

Then I would turn to what the report has said about the coverage. I find in paragraph 151 on page 21 of the report that we are cautioned not to extend the coverage to too many commodities. I would respectfully differ from this recommendation. At the national level, unless you cover the large number of important commodities, you will not be able to really use price policy as a means of changing the cropping pattern in the desirable direction. We in India have included oilseeds and pulses and other grains in addition to rice and wheat. We have also included potatoes and onions. We intend to include the coconut palm in the pricing strategy. Now if we do not diversify our pricing strategy, we cannot diverisfy our cropping strategy, and therefore it is necessary that perishables, which are referred to in this paragraph, are not excluded. In fact, perishables are a very important part of the national economy, and their preservation and pricing must receive adequate attention from the national price commission.

I next refer to the very interesting references made in the report regarding the food stamps or the limited access policy pursued in a number of countries for subsidized food grains. I am afraid that a clear-cut indication of how targeting can be achieved satisfactorily does not emerge from the report. It is understandable, because we in India are still struggling with the problem of targeting, whether we should follow exclusion criteria, whether we should follow regional criteria, or whether we should follow income criteria. I find that each of these has its problems and its merits, but I do agree with the suggestion that food subsidies, if they are to be contained, have to be limited, and therefore targeting will have to be a major aspect of price policy. We would like FAO to help us in India; if possible, to determine what set of targeting policies would be suitable to a vast sub-continent like India , which certainly would like to limit its food subsidies without hurting the nutritional levels of the rural poor.

I would next turn to the need for a very important constraint to be recognized that of the impact of producer prices on the general economic situation and the price index. I believe there cannot by any price policy for agriculture which ignores the possibility of inflation on the basis of steep increases in producer prices. We have, therefore, come to the conclusion in India that price policies must be implemented in a longer perspective. Even desirable changes must be achieved without pain and without hurting the economy, which is possible only if they are gradual and violent fluctuations in prices in producer commodities or in consumables are to be avoided. We believe in India that price stability is a very important issue, and price stability really means containing the fluctuations in prices within a desirable range while recognizing the seasonality in prices in any agricultural economy. Now this has to be achieved through a policy which will assure a minimum support price to producers and also a policy which will ensure that through an adequate supply available in fair price shops, the maximum price paid by consumers will not exceed the limit which we have set. But in this market intervention we support the concept which has been mentioned here- that there should be a minimum intervention by the state, and it is the market mechanism that should really be regulated in order that price changes occur in the desirable direction. We in India have always tried to intervene through the public sector to correct aberrations in the market place, which may occur from time to time. At the same time, there is another area which I would like to refer to which is not mentioned in the report. The creative policy of the National Bank can be a very powerful instrument in regulating the distribution and pricing system in the private market. Our National Bank, the Reserve Bank of India, has a policy of selective credit controls evolved over a number of decades, where the credit policy, interest rate, and access to credit is so regulated that there is a credit squeeze when the prices go up and there is a credit liberalization when the prices go down. So apart from support price operations and efficient procurement a creative credit policy can play a very important role in containing violent price fluctuations.

As far as the effective marketing of surpluses is concerned, I believe that any large country which has marketable surpluses must have long-term access to export markets. I am afraid our efforts in the Conference have not been very successful in finalizing long-term international agreements by which access to export markets for surplus producing countries can be assured. Until then, certain price instabilities, stimulated not by national policies but by policies at the international level are unavoidable, and they cannot be corrected through national pricing strategies.

I would particularly refer to the need for pricing policies to be evolved on a continuous basis as a part of the national economic policy. I believe that price support operations are crucial to any pricing policy. In our country, the procurement of rice and wheat has been successfully carried out to the benefit of the farmers in a way that has resulted in a large surplus and we carry an inventory of no less than 29 million tons of food grain. We have decided that wherever necessary to support the producers of oilseeds, the producers of coarsegrains and the producers of other principal crops, our National Agricultural Marketing Federation will intervene and procure these commodities at minimum support prices. But we do recognize that procurement is not enough. The development of an effective marketing system by which surpluses can be transferred to the areas which require these commodities is very important. I therefore reiterate my suggestion to this Conference that FAO should increasingly look at the distribution system for transferring surpluses within the domestic market so that the countries which are represented at this Conference are able to more effectively transfer to their domestic market and to their rural poor, the surplus commodities which will be procured on the basis of any price support strategy. With these words, it is my privilege to commend to this Conference the adoption of the recommendations in this report with the addition of the suggestion, which we have thought fit to place before you based upon our long experience in administering what we consider a modestly successful effort in price support policies and procurement strategies.

A. SAGELUMO (Norway\): Firstly, the Norwegian delegation would like to compliment the Secretariat on this very comprehensive and interesting study on agricultural price policies. We should also like to thank Professor Islam for his concise and learned introduction.

My delegation feels that implementing appropriate agricultural policy is one of the most difficult political tasks, both in developed and developing countries. Agricultural policy always has a number of goals, which should be achieved, both within the sector itself and in the economy as a whole. These goals cover, for example, needs for increased agricultural production, needs for increased incomes in the agricultural sector, needs for growth in the economy as a whole, and reasonable distribution of wealth derived from increased growth. In other words, the agricultural policy will always have to be integrated in a broader and complex political context, and the setting of agricultural prices is only one of the methods in the overall policy.

In my delegation's view, the future work of FAO should be directed towards ensuring that agriculture and agricultural policy are given sufficient priority in all countries, both developed and developing. In our view, agricultural pricing should be used as an economic instrument in the struggle for transition and development in rural areas. The most important method is to give farmers sufficient incentives to increase production for the market. The Norwegian delegation feels that the lack of attention to the incentive framework is the most important reason why marketed agricultural production has declined in some areas.

In order to increase food production and improve terms of trade in favour of rural areas, we feel that the needs of farmers have to be put ahead of the immediate wish of consumers for low food prices. My delegation is aware that such a policy may involve a considerable political risk. However, the risk of increasing price incentives has to be taken if agricultural productivity is to increase.

With regard to how these incentives should be determined, whether by increasing farm-gate prices or by subsidizing inputs, my delegation has found the discussion in the document very satisfactory. Nor do we have any further comments on the difficult matter regarding subsidization of food consumption.

The Norwegian delegation has some more specific comments on the document. Paragraph 57 sums up the criteria most commonly used for making decisions as to producer price interventions, such as production costs market prospects and international prices. As already stated, the Norwegian view is that decisions on agricultural pricing should start with identifying the goals of agricultural development. Decisions will then be less dependent upon criteria, but policy-makers have of course, to take into account the fact that some goals might be better accomplished by other means rather than pricing.

Paragraphs 59 and 60 deal with linking domestic prices to international price movements. My delegation thinks the study in these paragraphs gives a realistic review of the problems connected with the use of international prices as a basis for determining domestic prices. The fact is that many products are prices artificially low on world markets. For some products in some countries, international prices do not cover average costs of production.

A part of the study deals with the effects of price policies in developed countries on international trade in general, and the export possibilities of developing countries in particular. My delegation finds the assessments in the report on this issue somewhat unbalanced. An important goal of price policy in many developed countries, among them Norway , is to reduce the surplus of agricultural products. In Norway we have succeeded, through price policy, in reducing the over-production of agricultural products. In this way we avoid a surplus which otherwise would have depressed the price on the world market. In addition, it contributes to a higher degree of price stability in international trade. My delegation feels that these effects of price policy in developed countries have not been covered sufficiently in the report.

The international economic crisis makes it imperative to give priority to economic growth and development. In many developing countries increased agricultural production is the most important growth element. There are, of course, conflicts between increased farm earnings and increasingly important agricultural sectors on the one hand, and society as a whole on the other. More important, however, is the positive inter-relationship. It is important that FAO give higher priority to these inter-sectoral aspects of agricultural development. It is necessary for FAO to take up these questions in a broader context if it is to be in the forefront in solving the problems. We find the FAO study on agricultural price policies to be an important element in a developing strategy. We hope the study will be a basis for further work in a broader context and in cooperation with other UN Agencies.

The meeting rose at 12.25 hours
La séance est levée à 12 h 25
Se levanta la sesión a las 12.25 horas