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EVALUATION OF FAO'S
WORK IN COMMODITIES AND TRADE
16 March 2007
Evaluation Team: Independent Expert Review Panel:
Ronald Duncan, Team Leader Michel Petit, Chair
Stanley Johnson John Baffes
Daniel Shallon Paola Fortucci
Soren Frandsen*
for Near East mission: Ashok Gulati*
Timothy Josling
Robert Moore Nelson Ndirangu
Mark Newman
Miguel Rodriguez Mendoza*
* present at February meeting only
Acknowledgement
The Evaluation Team (ET) expresses appreciation to all of those who made time to share their views
on the Commodities and Trade work of FAO, both in the field and at headquarters. The Team had the
occasion to interview a wide range of professionals from in-country agencies, intergovernmental
organizations (UN and others), regional economic bodies, international commodity bodies, private
sector companies and organizations, non-governmental organizations, and economic research
institutions, who were generous in sharing their views on the Commodities and Trade work of FAO.
Without their sincere cooperation, the ET could not have completed its assignment satisfactorily.
NB: Throughout this report, the designation used for the main FAO Division responsible
for commodities and trade work is "ESC", which was the acronym for the Commodities
and Trade Division for the duration of the work of the Evaluation Team.
This Division's name was officially changed just after the Team completed its work, and
it is now called the "Trade and Markets Division", abbreviated "EST".
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Table of Contents
ACRONYMS ..............................................................................................................V
EXECUTIVE SUMMARY AND MAJOR RECOMMENDATIONS.............................VII
A. Background and Terms of Reference.......................................................................................................vii
B. Major Conclusions and Recommendations .............................................................................................vii
I. INTRODUCTION AND CONTEXT ...................................................................... 1
II. SCOPE AND METHODOLOGY OF THE EVALUATION ................................ 1
A. Scope of the Evaluation ............................................................................................................................... 1
B. Evaluation Methodology ............................................................................................................................. 3
III. DIRECTIONS TO THE EVALUATION TEAM FROM THE EXPERT PANEL.. 5
IV. OVERVIEW OF FAO'S ACTIVITIES IN COMMODITIES AND TRADE........... 6
A. Understanding the Evolving Global Context for Trade and International Commodity Markets ........ 6
B. Evolution of FAO's Work in Commodities and Trade ............................................................................. 7
C. The Commodities and Trade Division ....................................................................................................... 8
1. Programme Design, 'Old' Divisional Organization and Working Arrangements ...................................... 8
2. Mandate ..................................................................................................................................................... 9
3. ESC's Main Capacities and Core Outputs in Commodities and Trade Work ............................................ 9
4. Restructuring of ESC Under the Ongoing FAO Reform Process............................................................ 10
5. Changes to the ESC Programme Entities Under the Reform................................................................... 12
D. Other FAO Divisions Doing Related Work ............................................................................................. 13
1. Agriculture and Development Economics Division (ESA) ..................................................................... 13
2. Policy Assistance Division (TCA) .......................................................................................................... 13
3. Statistics Division (ESS) ......................................................................................................................... 14
4. The Global Perspectives Studies Unit ..................................................................................................... 15
E. Interaction with Other Institutions Working in Commodities and Trade............................................ 15
1. International Commodity Bodies (ICBs)................................................................................................. 16
2. Non-government Organisations (NGOs) ................................................................................................. 16
3. Other Inter-governmental Organizations (IGOs)..................................................................................... 17
4. Regional Economic Bodies ..................................................................................................................... 17
5. Academic institutions .............................................................................................................................. 18
F. Regular Programme Resources ................................................................................................................ 18
1. Diminishing Human Resources ............................................................................................................... 18
2. Shrinking Financial Resources ................................................................................................................ 19
G. Extra-budgetary Resources for Headquarters Programmes............................................................. 20
H. Extra-Budgetary Resources for Field Activities ................................................................................. 21
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V. ASSESSMENT OF IMPLEMENTATION OF FAO COMMODITIES AND
TRADE WORK ........................................................................................................ 23
A. Clients and Target Audience of FAO's Commodities and Trade Work ............................................... 23
1. Main Concerns of Member Countries ..................................................................................................... 23
B. Review of Implementation of the "Old" Programme Entities............................................................... 25
1. PROGRAMME 2.2.3: Food and Agricultural Monitoring, Assessments and Outlooks ......................... 25
2. PROGRAMME 2.2.4: Agriculture, Food and Trade policy .................................................................... 26
3. Overall scoring of the Programme Entities.............................................................................................. 28
4. Notes on the scoring ................................................................................................................................ 29
5. Impact of Extra-Budgetary Support to the Headquarters Programme ..................................................... 30
C. Analytical Capabilities, Modelling and Data Management by ESC...................................................... 31
1. Data Needs for Commodity Analysis and Collaboration with the Statistics Division (ESS) .................. 31
2. Usefulness of Commodity and Trade Data to External Users ................................................................. 31
3. Economic Models and Modelling: the Case for COSIMO ...................................................................... 32
4. Impact of FAO's Commodity Market Analysis and Modelling............................................................... 32
5. Partnerships for Data Management and Analysis.................................................................................... 33
D. The Committee on Commodity Problems and the Intergovernmental Groups ................................... 34
1. Relevance, Participation and Outcomes of the CCP and the IGGs, 2000-2006 ...................................... 34
2. Future of the CCP and the IGGs.............................................................................................................. 37
E. Periodicals, Publications, the Internet, and Communicating FAO's Message ..................................... 38
1. Peer Reviews by the Expert Panel and the ET......................................................................................... 38
2. Views from Member Countries on the Focus of Analytical Studies ....................................................... 39
3. Summary Review of Citations................................................................................................................. 40
4. Web Presence and Internet Usage ........................................................................................................... 41
F. Direct Technical Assistance to Member Countries ................................................................................. 43
1. General issues.......................................................................................................................................... 43
2. Information and Publications................................................................................................................... 44
3. Advice to Governments on Trade Policy................................................................................................. 45
4. Training ................................................................................................................................................... 45
5. Results of Country Assistance and Future directions .............................................................................. 46
VI. KEY RECOMMENDATIONS FOR FAO'S WORK IN COMMODITIES AND
TRADE..................................................................................................................... 47
A. General Recommendations ....................................................................................................................... 47
B. Specific Recommendations........................................................................................................................ 49
1. Relations with the Private Sector............................................................................................................. 49
2. Government ............................................................................................................................................. 49
3. International Commodity Bodies (ICBs)................................................................................................. 49
4. U.N. Conference on Trade and Development.......................................................................................... 50
5. The Committee on Commodity Problems (CCP) .................................................................................... 50
6. Inter-Governmental Commodity Groups................................................................................................. 50
7. FAOSTAT ............................................................................................................................................... 50
8. NGOs....................................................................................................................................................... 50
9. Research Institutions ............................................................................................................................... 51
C. Divisional Issues ......................................................................................................................................... 51
1. Modelling Capabilities ............................................................................................................................ 51
2. Incentives within the Division ................................................................................................................. 51
3. Communications strategy and dissemination of publications.................................................................. 51
4. Thematic Research Areas ........................................................................................................................ 51
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D. Recommendations at Corporate Level for FAO to Consider................................................................. 51
1. FAO representatives ................................................................................................................................ 52
2. Rationalising ESA, EST and TCA Divisions .......................................................................................... 52
3. FAOSTAT ............................................................................................................................................... 52
4. FAO Interaction with the Private Sector ................................................................................................. 52
5. Incentives................................................................................................................................................. 52
APPENDIX: SUGGESTED THEMATIC AREAS FOR THE WORK OF EST
DIVISION ................................................................................................................. 54
1. Integrated Marketing ............................................................................................................................... 54
2. Food Aid.................................................................................................................................................. 54
3. Trade and Development........................................................................................................................... 55
4. Emerging countries able to change international commodity markets: Brazil, China and India ............. 55
5. Production of Bio-fuels and Materials..................................................................................................... 56
6. Commodity Risk Management................................................................................................................ 56
7. Standards and Certification ..................................................................................................................... 56
ANNEX I: METHODOLOGY FOR THE EVALUATION
ANNEX II: TERMS OF REFERENCE FOR THE EVALUATION
ANNEX III: REPORT OF THE FIRST EXPERT PANEL MEETING: REVIEW OF ISSUES
TO BE EVALUATED
ANNEX IV: PROGRAMME ENTITY REVIEW
ANNEX V: PUBLICATIONS OF THE COMMODITIES AND TRADE DIVISION
ANNEX VI: QUESTIONNAIRE SENT TO MEMBER COUNTRIES
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ACRONYMS
ACP Africa, Caribbean and Pacific Group of States
AGS Agricultural Support Systems Division (FAO)
ASEAN Association of South-East Asian Nations
AU African Union
CAFTA Central American Free Trade Agreement (with the US)
CARICOM Caribbean Community and Common Market
CARIFORUM CARICOM plus Haiti and Dominican Republic
CCP Committee on Commodity Problems (of the FAO Council)
CFC Common Fund for Commodities
CRNM Caribbean Regional Negotiating Machinery
CSA Collectif Stratégies Alimentaires (NGO)
DFID Department for International Development (UK)
EAC East African Community
EC European Commission
ECA UN Economic Commission for Africa (also UNECA)
ECLAC UN Economic Commission for Latin America and the Caribbean (also CEPAL)
ECOWAS UN Economic Commission for West African States (anglophone and francophone)
EPA Economic Partnership Agreement (EU with ACP countries)
ERS Economic Research Service (USDA)
ES Economic and Social Department (FAO)
ESA Agriculture and Development Economics Division (FAO)
ESC Commodities and Trade Division (renamed Trade and Markets Division - EST just
after the evaluation) (FAO)
ESCB Basic Foodstuffs Service, Commodities and Trade Division (FAO)
ESCG Global Information and Early Warning Service, ESC (FAO)
ESCP Commodity Policy and Projections Service, ESC (FAO)
ESCR Raw Materials, Tropical and Horticultural Products Service, ESC (FAO)
ESDG Global Perspectives Studies Unit (FAO)
ESS Statistics Division (FAO)
EST Trade and Markets Division (new name of ESC) (FAO)
ET Evaluation Team (of this evaluation)
EU European Union
FAO Food and Agriculture Organization of the United Nations
FAOSTAT The FAO Statistical Database
FAS Foreign Agricultural Service (USDA)
FTA Free Trade Agreement
GAFTA Grains and Feed Trade Association
GATT General Agreement on Tariffs and Trade
ICB International Commodity Body (generic term)
ICCO International Cocoa Organization
ICO International Coffee Organization
IFAP International Federation of Agricultural Producers
IFPRI International Food Policy Research Institute
IGC International Grains Council
IGG Inter-Governmental Commodity Groups (FAO commodity bodies)
v
IGO Inter-Governmental Organization (such as UN agencies, CGIAR institutes,
Development Banks, etc.)
IICA Inter-American Institute for Cooperation on Agriculture
INGO International Non-Governmental Organization
ITC International Trade Centre (WTO/UNCTAD)
MAFF Ministry of Agriculture, Forestry and Fisheries (Japan)
MERCOSUR Common Market of the South (Brazil, Argentina, Paraguay, Uruguay)
MOU Memorandum of Understanding
NGO Non-Governmental Organization
NTB Non-Tariff Barriers to trade
ODI Overseas Development Institute (UK)
OECD Organization for Economic Cooperation and Development
PE Programme Entity (in FAO's programming system)
PTA Preferential Trade Agreement
RAF Regional Office for Africa (FAO)
RAP Regional Office for Asia and the Pacific (FAO)
RAPP Policy Assistance Branch of RAP (FAO)
RLC Regional Office for Latin America and the Caribbean (FAO)
RNE Regional Office for the Near East (FAO)
SADC Southern Africa Development Community
SLAC Subregional Office for Latin America and the Pacific (FAO)
SOFA State of Food and Agriculture (FAO publication)
SPS Sanitary and Phyto-Sanitary (Measures, Agreement, etc.)
TBT Technical Barriers to Trade
TCA Policy Assistance Division (FAO)
TCP Technical Cooperation Programme (FAO fund for small projects)
UEMOA Union Economique et Monétaire Ouest-Africaine (West African Economic and
Monetary Union - Francophone countries)
UNCTAD United Nations Conference on Trade and Development
USAID United States Agency for International Development
USDA United States Department of Agriculture
WTO World Trade Organization
ZRG Zero Real Growth
vi
EXECUTIVE SUMMARY AND MAJOR RECOMMENDATIONS
A. Background and Terms of Reference
1. The assignment for the Evaluation Team (ET) is described in the Terms of Reference (TOR)
in Annex II. The evaluation was to assess the work of FAO in Commodities and Trade and in serving
the interests of member countries. The ET followed the evaluation methodology described in Annex
I. The TOR were reviewed by an Expert Panel prior to the ET undertaking the fieldwork, the
headquarters assessments, and sending out the questionnaire to all member countries. The outcome of
the review by the Expert Panel is provided in Annex III. The interaction with the Expert Panel and the
field and headquarters work took place between November 2005 and July 2006.
2. The divisions that are responsible for the major share of the work on Commodities and Trade
are the Commodities and Trade Division (ESC), the Agriculture and Development Economics
Division (ESA), the Policy Assistance Division (TCA), the Global Perspectives Studies Unit (ESDG)
and the Statistics Division (ESS). ESC carries out the major part of the work, along with data support
(FAOSTAT) from the Statistics Division (ESS). Other departments have commodities and trade as a
much smaller part of their mission.
3. Following preparation of a draft report by the ET, the Expert Panel met from 10 to 13 July
2006 to review the report and discuss with the ET and the management of the ESC Division the
evaluation and recommendations. The recommendations presented below have the endorsement of the
Expert Panel.
B. Major Conclusions and Recommendations
4. The major conclusions and recommendations from the Evaluation are listed below, with brief
comment. Three themes are evident in the recommendations:
(i) a focus on partnerships;
(ii) establishment of incentive structures to ensure that FAO staff are empowered to seek and
develop partnerships and added resources for commodities and trade work; and
(iii) concentration on major themes for the FAO work on commodities and trade.
5. Partnerships are important since the scope of the work on commodities and trade is expanding
and becoming more interconnected. Incentives are essential to the development and effective
management and resourcing of these partnerships. The focus on major themes will help clarify the
choice of partners and the substance of the partnership arrangements.
1) ESC is in transformation, focusing more on analysis, markets and trade than on descriptive
work on commodity markets. This transformation is not complete, but the ET considers that
movement is generally in the correct direction. One of the reasons for the change is that the
international commodity bodies and the private sector are now doing much of the work that
was undertaken by ESC in the past.
2) Almost all of the trade in commodities is now undertaken by the private sector. This must be
more fully acknowledged in the member countries and within FAO. The activities of the Inter-
governmental Commodity Bodies (ICBs) and the private sector must be more fully recognized
and, through partnerships, made a part of the FAO work on commodities and trade,
particularly in work on the short-term outlook for commodities. The private sector is
developing new integrated commodity marketing systems. FAO must be a part of the study
and advise on the functions and regulation of these.
3) The traditional partners of FAO within member countries have been and still are the ministries
of agriculture. In most cases these ministries are no longer the locus of major decisions on
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trade, and in fact, are generally unprepared to be involved. For example, many ministries of
agriculture have no marketing or trade departments. If FAO is to be player in commodities and
trade analysis and policy, it will have to expand involvement within countries to include trade
and commerce ministries, as well as the private sector. This puts a new and heavy burden on
the Country Representatives and on the Policy Assistance Division (TCA), as well as the
divisions at headquarters.
4) The ET considers that some of the management and coordination problems that were evident
among the divisions involved in commodities and trade could be reduced by having the
divisions select major themes for their research and analysis. Detailed recommendations have
been made on possible themes for ESC, and perhaps other divisions involved in commodities
and trade. These are: integrated marketing or supply networks; food aid after the conclusion of
the WTO Doha round; supply response within countries that have reduced trade barriers;
agricultural and economic developments in China, India and other countries that have the
potential to change world markets for commodities; bio-fuels (and materials) produced from
agricultural products; commodity risk management; and standards and certification.
5) Incentives are an important issue in public and private organizations. It is suggested that a hard
look should be taken at the (largely implicit) incentive system operating within FAO, and
especially incentives facing the staff in the divisions involved in commodities and trade work.
In view of the budgetary constraints that it faces, FAO must obtain more direct donor grants
and contracts if it is to continue to be a major player in international agricultural and food
markets. There is an increased emphasis on incentive systems in universities, government
agencies, and in other international agencies - FAO should be a leader, not a follower, in
providing incentives to better achieve its mission.
6) Commodity risk management has long been a part of the commodities and trade agenda in
FAO. Government management of buffer funds and buffer stocks and other price stabilization
mechanisms has proved unviable and inconsistent with international trade laws. New
approaches to risk management that use financial derivatives are evolving and could be a
major part of the FAO work on commodities and trade.
7) Given the importance of FAO's commodity and trade data for ESC's work, the Evaluation
needed to make an assessment of the plans of ESS to update and improve the scope and
content of FAOSTAT. The changes to FAOSTAT that are planned will lead to considerable
improvements in the FAO data set, such as in timeliness and quality, and result in regaining
the ground lost during a period of apparent inactivity. These changes will also lead to
improvements in ESC's analytical capability.
8) NGOs have a great influence on the nature of development assistance and the willingness of
developed and developing countries to support it. FAO has little contact with these groups for
commodity and trade work. The ET understands that developing closer relationships with
NGOs is a risky process, given their advocacy focus. However, FAO needs to cooperate
productively with the NGOs for commodities and trade work, if it is to achieve its mission.
9) There are several ESC management issues that deserve comment. These are reviewed in detail
in the Key Recommendations section (VI):
a. The ET recommends that the COSIMO model should be the only large model
supported by the Division. If there is need for the services of other large models, they
should be accessed under partnership agreements with the organizations in which they
reside;
b. the ET encountered some unhappiness with the way in which field projects (such as
CFC projects and donor-funded projects) are managed by the Division, leading to the
view that the Division does not give high priority to such projects. A focal point is
needed within the Division for the management of these projects;
viii
c. a more user friendly and accessible communications and dissemination strategy needs
to be developed that reflects the expanded clientele for the data, information and
analysis of the Division; and
d. arrangements for the operation and management of the IGGs and the CFC projects
need to be examined. One suggestion is that the number of IGGs could be reduced and
the membership of the remaining IGGs expanded to include the private sector and
other non-official stakeholders. When appropriate, the projects supervised on behalf of
the CFC need to be brokered to divisions that have the necessary technical expertise.
6. There is a bright future for the commodities and trade work of FAO but one that will, of
necessity, involve more of a partnership approach: partnerships within FAO, partnerships with the
private sector, partnerships with government ministries other than agriculture, partnerships with
NGOs, partnerships with other agencies maintaining databases, partnerships with other organizations
doing related work, and more systematic and less bureaucratic partnerships with the member
countries. These partnerships will flourish only if more aggressive FAO incentives are in place to
generate internal and external cooperation. Partnerships and the incentives to manage them deserve
careful and immediate attention.
ix
I. INTRODUCTION AND CONTEXT
1. The growing globalisation of agricultural production and trade and its direct and indirect
effects on poverty and food security have given FAO's work on commodities and international trade
new significance. Traditional approaches to market management through controlled internal and
external commodity markets have been changing. International trade negotiations, in the context of
the World Trade Organization (WTO) and bilateral or regional preferential trade agreements have
become central to the agricultural and export economies of many countries. New markets and
additional value added in non-traditional agricultural exports have assumed growing importance.
Domestic and international agricultural trade policies are increasingly influenced by factors beyond
the control of individual countries or groups of countries. The private sector is playing a growing role
in setting the trade policy agenda. It is ever more important to have access to information of the right
kind at the right time for effective management of countries' trade and domestic commodity market
policies.
2. FAO's Commodities and Trade Division (ESC) under its past Programmes 2.2.3 and 2.2.4
(now modified, as detailed in the report) has had an important role in supporting member countries,
especially developing countries, with technical assistance, information and capacity building to
enhance the functioning of agricultural commodity markets and trade. This support has prepared the
countries for more effective participation in international trade negotiations such as at the WTO and
regional and bilateral trade agreements.
3. In view of the changing role of commodities and trade for the member countries, in the May
2004 session of the FAO Programme Committee it was requested that this aspect of the
Organization's work should be independently evaluated. With the new reform proposals recently
tabled by the Director-General and already partly implemented, as well as the ongoing Independent
External Evaluation of FAO (to which the current evaluation is a key input), it becomes even more
important to clearly identify the role that FAO can and should have in this area.
4. FAO's Programme Evaluations are undertaken to support decision making by the Governing
Bodies and management at all levels in order improve the strategic orientation of the Organization's
work, strengthen programme and project design, improve cost-effectiveness, and provide
accountability to member countries and other stakeholders. The Evaluation has examined the
normative work in this area that FAO undertakes at headquarters and in the Regional Offices, as well
as carrying out visits to 23 countries in both developed and developing regions to review the issues,
needs and impacts of commodities and trade work both within ESC and in the context of the
Technical Cooperation Programme (TCP) and the activities of other divisions. The results of the
Evaluation are being presented to the FAO Governing Bodies through the Programme Committee at
its May 2007 session.
II. SCOPE AND METHODOLOGY OF THE EVALUATION
A. Scope of the Evaluation
5. The Evaluation was mainly concerned with the work of ESC, and in particular ESCD
(Divisional Management), ESCB (Basic Foodstuffs Service), ESCP (Commodity Policy and
Projections Service) and ESCR (Raw Materials, Tropical and Horticultural Products Service). The
Global Information and Early Warning Service (ESCG) has been covered only for those aspects of its
work done together with ESCB on global and country-level monitoring of food commodity supplies.
Work on trade by other divisions of FAO has been examined where found to be relevant, in particular
the commodities and trade work of the Statistics Division, the Policy Assistance Division (especially
in the field) and the Agriculture and Development Economics Division. The detailed Terms of
Reference of the evaluation can be seen in Annex II of this report.
6. Most of the commodities and trade work of FAO was carried out under seven programme
entities (PEs) in two programmes (2.2.3 and 2.2.4) described in the 2004-09 Medium Term Plan
1
(MTP 04-09), of which one is a "Technical Project" with a time limit of six years, five are
"Continuing Programmes" and one is a Service entity. The Programmes and PEs are listed below:
a) Under Programme 2.2.3: Food and Agriculture Monitoring, Assessments and Outlooks
223P3 (CP) Market Assessments for Basic Food Commodities and Impact on Global Food
Security
223P4 (CP) Projections and Global Commodity Market Assessments
223P5 (CP) Market Assessments of Tropical, Horticultural and Raw Material Commodities and
Impact on Food Security
223S1 Technical Support Services to Member Nations and the Field Programme,
including servicing of the Committee on Commodity Problems and the Inter-
Governmental Commodity Groups
b) Under Programme 2.2.4: Agriculture, Food Security and Trade Policy
224A2 (TP) Commodity and Trade Policy Support to Developing Countries for Trade
Negotiations (Under the proposed Medium Term Plan for 2006-11 (This entity will
end in 2005, to be replaced by 224A4: Support for Implementation of Multilateral
Trade Negotiation Outcomes.)
224P4 (CP) Analysis and Consensus-Building on Emerging Commodity and Trade Issues
224P5 (CP) Enhancing Diversification and Competitiveness of Agricultural Commodities
7. The work being reviewed under the two identified programmes, 2.2.3 and 2.2.4, provides a
major input to FAO's work on the four Strategic Objectives B1, B2, E1 and E2. In particular,
Programme 2.2.4 provides input to Corporate Strategy B: Promoting, developing and reinforcing
policy and regulatory frameworks for food, agriculture, fisheries and forestry. Strategic Objectives of
this Strategy include:
B1: International instruments concerning food, agriculture, fisheries and forestry, and the
production, safe use and fair exchange of agricultural, fishery and forestry goods; and
B2: National policies, legal instruments and supporting mechanisms that respond to domestic
requirements and are consistent with the international policy and regulatory framework
8. Programme 2.2.3 provides input to Corporate Strategy E: Improving decision-making through
the provision of information and assessments and fostering of knowledge management for food and
agriculture. Strategic Objectives of this Strategy include:
E1: An integrated information resource base, with current, relevant and reliable statistics,
information and knowledge made accessible to all FAO clients; and
E2: Regular assessments, analyses and outlook studies for food and agriculture.
9. The activities under the selected Programme Entities also address Strategic Objective C1:
Policy options and institutional measures to improve efficiency and adaptability in production,
processing and marketing systems, and meet the changing needs of producers and consumers,
10. Programme Entities 224P4 and 224P5 underwent auto-evaluation in 2004 (together with a
part of 223S1 - Technical Support Services - which funds commodity group activities). The results of
that evaluation were used as input into this independent evaluation.
11. During the course of the Evaluation, the PEs underwent a thorough redesign as part of the
FAO reform process currently underway, resulting in a reduction from eight PEs to five. These
changes are detailed below in Section IV.C.5.
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B. Evaluation Methodology
12. The evaluation took place in three main stages: i) a headquarters review and initial meeting
with the Peer Review Panel on the design of the evaluation; ii) field work and questionnaires in FAO
member countries; and iii) the preparation of a synthesis report and the second Panel meeting to
finalise the recommendations.
13. The review at FAO Headquarters examined the work of the main technical division
responsible for FAO's commodities and trade activities, ESC, and led to preparation of an "Issues
Paper" for presentation to an Expert Panel Workshop that was held in early February 2006. The Panel
of nine global experts on trade and commodities from different institutions and regions reviewed the
proposed approach and direction of the evaluation, and provided detailed guidance on the areas on
which the evaluation should focus. The report of this first Expert Panel meeting is attached to this
evaluation report as Annex III.
14. Following the workshop, the Evaluation Team carried out its field work, which included the
following:
a. Visits to 16 developing countries in four missions to Asia, the Near East and Central
Asia, Latin America and the Caribbean, and Africa.1 The selection of countries was based
on the need for a cross-section of countries that represented various regions and levels of
development and either: a) participate actively in the CCP and its IGGs on commodities;
b) have been involved in FAO field activities; c) are particularly important in matters of
trade in agricultural commodities (e.g. China, Brazil); or d) have expressed no interest in
FAO support in this area (to understand why). The ET spent on average only three days in
each country, but extensive preparations prior to arrival in the countries enabled them to
meet a wide range of interviewees during this time;
b. Visits to seven major developed countries, including the USA, Japan and several
European countries2, as well as the European Commission;
c. Visits to a wide range of institutions working in commodities and trade, including
UNCTAD, ITC, IFPRI, World Bank, OECD, WTO, African Union, major commodity
organizations and associations, research institutes and universities, and major NGOs.
15. During the country visits, the ET applied country check lists in its meetings with high-level
representatives of ministries of agriculture, ministries of trade and commerce, regulatory and customs
bodies, major donors and multilateral institutions, private sector associations and major companies,
universities, and civil society organizations. Altogether more than 200 people were interviewed face
to face by the Team. Discussions focused on country needs and capacity in commodity marketing and
regional and international trade, and the extent to which interviewees were aware of and used FAO-
produced assistance and outputs, including normative products. Where there were or had recently
been projects, the ET also discussed the implementation and follow-up of the project interventions.
With FAO's implementing partners (actual or potential), the ET discussed their assessment of country
needs, and of the work carried out by FAO in that country or region. Individual working papers were
prepared on these visits.
16. Following each field mission, the ET prepared a summary regional report on main findings
and recommendations arising from the mission. A separate report was prepared on the meetings with
key institutions. These reports formed the background for this final report.
17. As a further means of gathering member country views, the evaluation included a
questionnaire survey among FAO member countries to assess their views and suggestions on FAO's
role and work in commodities and trade. The questionnaire in Annex VI was sent to almost all FAO
1
The countries visited were: China, Thailand, Sri Lanka, Egypt, Turkey, Turkmenistan, Chile, Brazil, Barbados,
Trinidad and Tobago, Costa Rica, Dominican Republic, Ghana, Burkina Faso, Ethiopia and Tanzania.
2
The countries visited were Japan, USA, UK, France, Belgium, the Netherlands and Switzerland.
3
member countries. Altogether, 47 out of about 170 countries which received it (28%) sent in 52
completed questionnaires (three countries filled in more than one). The regional breakdown is given
in Table 1 below.
Table 1: Responses by region
(multiple responses from same country in parentheses)
Africa 12 (+2)
Asia 7 (+3)
Latin America and Caribbean 13
Near East and North Africa 9
OECD countries 6
Total 47 (+5)
18. The evaluation also carried out, with the help of members of the Expert Panel, a peer review
of key ESC publications on commodities and trade.
19. The final stage of the evaluation was the preparation of this Synthesis Report bringing
together the outcomes of all the above work. The draft conclusions and recommendations of this
report were discussed with the same Expert Panel that participated in the design of the evaluation at a
second meeting in Rome in July 2006. The ET and the Panel worked closely together to finalize the
evaluation conclusions and recommendations during that meeting, and the final version was approved
by both.
20. The ET then finalised the evaluation report, after which it was circulated to FAO management
for a detailed response. The timetable and phases of the evaluation were as follows:
12-16 Dec 2005 Briefing/orientation of Team Leader in Rome
23 Jan – 3 Feb 2006 Preparation of an Issues and Discussion Paper involving desk studies of HQ-
based projects; HQ interviews and group discussions; and review of major
publications and analytical work
6 – 8 Feb 2006 3-day Expert Panel Meeting, to assist in identifying issues and approach for
the evaluation
Feb-March 2006 • Preparation and mailing of a questionnaires to member countries
• Peer review of Commodities and Trade publications
March-June 2006 • Field missions to 16 developing countries and 7 developed countries;
• Meetings with 25 key international organizations, ICBs, research
institutes and NGOs
June-July 2006 Preparation of the draft Synthesis Report, including further discussions with
ESC and other staff and management
10 – 12 July 2006 3-day 2nd Expert Panel Meeting with the same Panel of Experts that
participated in the evaluation start-up in February. Their input was sought
for the formulation of the main evaluation recommendations
March 2007 Finalisation of the Synthesis Report; delivery to Senior Management for
preparation of the Management Response
May 2007 Presentation and discussion of the final Evaluation Report and the
Management Response to the FAO Programme Committee at its 97th session
4
III. DIRECTIONS TO THE EVALUATION TEAM FROM THE EXPERT PANEL
21. At its initial meeting, the Expert Panel provided the Evaluation Team with its views on the
issues that should receive attention in the Evaluation. The report of the first Expert Panel meeting is in
Annex III to this report. The issues highlighted by the Expert Panel can be summarized as follows:
• Work priorities: stakeholders and comparative advantage
o Commodity monitoring and projections, applied research and policy analysis: identify ESC's
clientele and assess their demand for ESC's services (e.g., CCP, IGGs, analytical studies,
projections, trade training and policy assistance, etc.); critically evaluate ESC's mandate (e.g.
on advice to developing member governments about commodity policy, trade, etc.); define
ESC's comparative advantage (is it in provision of short-term commodity information, longer-
term commodity analysis, which commodities/countries to focus on, modelling and
projections); and examine harmonisation of FAOSTAT and ESC commodity databases.
o CCP and IGGs: evaluate usefulness, structure, etc. of these meetings, and development of
better relations with the private sector.
o New and proposed activities: evaluate ESC's role in analysis of commodity risk management,
value chains, supply constraints, future trade negotiations and agreements, regional trade
agreements, GMOs, and Aid for Trade.
o Publications/Dissemination: which reports to publish and how, and how to improve
dissemination of the Division's outputs while reducing cost?
• Management:
o Staffing: structure of incentives, staff motivation, the relevance and impact of the
Organization's decentralisation, and use of external consultants.
o Funding: extra-budgetary funds (incentives to raise funds, appropriate level of extra-
budgetary funds), avoiding distortion of work programme priorities when extra-budgetary
funding is used, and the appropriate compensation for services to CFC projects.
o Divisional organization: Divisional structure and functions, partnerships, inter-divisional
collaboration in analysis and data collection, and avoidance of unnecessary duplication of
work across divisions.
22. The Chairperson of the Expert Panel noted that issues regarding the programme of activities
should be considered first and then the consequences for management discussed. Regarding the
former, he stressed the need to sharpen the definition of the work on commodities, in particular to
select which commodities to focus on and for whom. In addition, there was a need to explore potential
partnerships with other institutions for work on commodities, bearing in mind the need to maintain
FAO's role and reputation as an "honest broker".
23. Regarding trade issues, the Expert Panel suggested that a considerable amount of work had
already been undertaken by the Division and there was significant evidence that it was highly valued
by some stakeholders. While assistance would continue to be required in the negotiating phases of the
current WTO Round, it could be necessary if the round succeeded to devote much attention in future
years to the "post-Doha agenda". This would require work on implementation of the future
multilateral agreement and also on the increasingly important and numerous regional and bilateral
trade agreements. But most importantly, there was likely to be a huge agenda for developing countries
to take advantage of the improved market access opportunities expected from the Doha Round should
it succeed, or from a further round of negotiations. These countries often face major supply
constraints that will need to be overcome. The set of issues involved is much broader than those that
fall solely within the mandate and competencies of ESC. Thus, defining the appropriate role of the
5
Division in this area and fostering the necessary and increased collaboration across divisions will be a
great challenge. The same remarks are applicable to the welcome increase in analysis of value chains.
24. Regarding the Committee on Commodity Problems (CCP), the inter-governmental
commodity groups (IGGs) and the CFC, the Chairman noted that they should be examined in the
context of an assessment of the demand for the services of the Division. The Panel recommended that
the ET rely on past evaluations of these institutional mechanisms but that it probe further in its
country visits. In this respect it urged the Team to contact a broad range of stakeholders. This would
also help the Team to make recommendations on the Division's publications and dissemination
strategy - an important component of its mission.
25. On management issues, the Chairman noted that the Evaluation would have to draw a fine
line between systemic issues at the FAO-wide level and those that can be addressed at Division level.
Recommendations on the latter will be most pertinent but the identification of the inefficiencies and
bottlenecks caused by Organization-level constraints can also be useful. The Panel recommended that
the ET reflect on the impact of external funding on staff incentives and, conversely, on the impact of
existing incentives on the mobilization of extra-budgetary funding. Finally, the issue of incentives will
be critical to the examination of the obstacles to closer collaboration among units and individual staff
within the Division and across divisions in FAO. The Panel emphasized that collaboration will
become more critical in the future because the new agenda will be more complex and because such
collaboration will be needed to enhance the ability of the Division to respond to new issues.
IV. OVERVIEW OF FAO'S ACTIVITIES IN COMMODITIES AND TRADE
A. Understanding the Evolving Global Context for Trade and International Commodity
Markets
26. Several changes have occurred, are occurring, or are about to occur in the national and
international environments in which these FAO activities operate. These changes have significant
implications for the evaluation and for the recommendations. These changes in the circumstances in
which ESC and related divisions operate (and will operate), and some of the questions they raise, are
described briefly below.
27. Private Sector Dominance in Trade: Trade in agricultural commodities in developing and
developed economies is now mostly conducted by the private sector. This situation is very different
from only 10-15 years ago when much of the national and international trade in commodities in
developing countries was conducted by governments. The possibilities for governments to absorb the
risks of commodity price fluctuations on behalf of producers have been greatly reduced. Private
traders tend to pass price fluctuations directly to the producer. There is now a different role for
government: the provision of important regulatory functions. As the private sector is doing the
trading, it has become more involved in trade policy. It also means that the source of useful trade
statistics in many cases is no longer the agricultural ministry and country statistics offices to which
FAO has traditionally gone for such information. A much wider and more country-specific network
may be required to generate the critical trade statistics describing the activities of the private sector.
28. Value or Supply Chains - Integrated Marketing: The integrated marketing strategies of the
private sector are growing in importance. Supply chains connecting producers and consumers, or
value chains, are forming a growing part of the trade among countries. There is considerable concern
in developing countries that smallholder farmers are not participating effectively in these networks
because of the high transaction costs of including them and that sufficient jobs are not being created.
These changes raise important questions for commodities and trade analysis undertaken by FAO.
6
29. Multinational Companies: Many of the private companies involved in trade and in integrated
marketing networks are multinationals. For example, the major retailers in developed countries are
gaining access to commodities at their source and have developed capacities to bring them to the
shelves of their stores in qualities, packaging and sizes that meet consumer demands. The marketing
of the commodities is highly integrated, from planning production to transportation to processing to
delivery to the stores.
30. Certification and Standards: The issues of standards and the certification and conformity to
them are becoming more important in trade and in access to markets in developed countries. Most
developing countries have at best a limited capacity to assure that their products meet these standards
and to certify that the products are compliant with standards that may be imposed by trade partners.
31. Commodity Risk Management: With the dismantling of national commodity marketing boards
and the cessation of international commodity price stabilisation schemes, the extent of government
intervention at national and international level in commodity marketing has been substantially
reduced. One consequence of this change has been that commodity price risk in developing countries
has been shifted from national governments and intergovernmental bodies back to producers and
private marketing entities. As a result, since the early 1990s there has been substantial analysis in
UNCTAD, the World Bank, and more recently FAO, on the use of mechanisms such as financial
derivatives for managing the commodity price risk of governments and producers and traders.
Financial market mechanisms (crop insurance) for managing production risk are also being tried.
32. Preferential Bilateral and Regional Trade Agreements: Many of the most important
negotiations on trade policy are not being undertaken within the WTO context. Bilateral and regional
preferential trade agreements (PTAs) have become important for many of the developing countries.
Here again the private sector is often an important driving force in the agreements. The agricultural
ministries have little to offer in terms of negotiating or managing their implementation. They are often
managed within the ministries of trade or commerce with little information about their implications
for agriculture and the producers. The ET found that in many cases bilateral and regional trade
agreements are perceived as of more immediate importance to the country or at least a part of the
agricultural sector, than is the completion or implementation of the WTO agreement.
33. Institutional Locus of Decision-Making for Trade: In a number of the countries visited, the
agricultural ministries with which FAO traditionally works are mainly production-focussed and have
little involvement in marketing and international trade issues. While several of them did have more or
less important consultative roles on agricultural trade, the locus of trade policy decisions and
negotiation responsibility is usually with the ministries of trade, commerce, finance, or international
relations. These ministries often have limited experience in agriculture or with agricultural products.
Furthermore, in the poorer countries these trade, commerce, international relations and economics
ministries often have young staff, inexperienced and unfamiliar with agricultural institutions or
production methods. To further complicate matters, the ministries in charge of trade policy were
found in several cases to have limited contact with private traders, the entities most involved in trade.
The result is that agricultural trade decisions are often made without good understanding of the sector
or the traders.
B. Evolution of FAO's Work in Commodities and Trade
34. FAO was established in 1945 and in 1949 became the first organization in the UN system to
set up a "Commodity Division" (later the "Commodities and Trade Division", or ESC). The
international context was dominated by post-war debates on emergency reserves, use of commodity
surpluses, and international (particularly commodity) agreements. In this context the Division initiated
global commodity activities, including economic analysis on a commodity by commodity basis,
production of the first set of global commodity projections, international agreements such as the
Principles of Surplus Disposal and the sisal and tea quota arrangements, and the establishment of
intergovernmental commodity bodies. Following the world food crisis of the early 1970s, the
7
Commodities and Trade Division undertook responsibility for the operation of the Global Information
and Early Warning System (GIEWS), which was established in 1975.
35. During the restructuring of FAO in the mid-1990s, part of the food security function was
taken from ESC and placed in the Agriculture and Development Economics Division (ESA) and, in a
general sense, the division of labour between these two divisions was drawn at the national border:
very roughly, studies of the economics of international markets and trade were the domain of ESC,
while in-country economic issues relating to commodity production and markets (including basic
commodities and food security) were under ESA.
36. FAO also has other units involved in marketing and trade. Technical support to in-country
marketing is handled by a small group in the Agricultural Services Division (AGS). For fisheries and
forestry, marketing and trade issues are handled by the respective departments. FAO's work on food
safety and standards for trade and phytosanitary standards for trade is also handled by separate
divisions.
37. In the area of commodity market intelligence, in addition to FAO there was the World Bank
until the late 1990s which undertook much of the analysis of commodity markets of importance to
developing countries and made short- and long-term projections of prices, production, consumption
and trade for these commodities. However when the World Bank considerably reduced its activity in
this area, FAO (through ESC) became the only international organization undertaking such analysis.
38. With the move away from controlled commodity markets and government commodity trading
in the 1980s and 1990s, the purpose and functions of FAO's Commodities and Trade Division needed
to change. The FAO Committee on Commodity Problems (CCP) and its commodity-specific Inter-
Governmental Groups (IGGs) were originally created and functioned as meeting places for
government officials to receive and discuss information relevant to government intervention mainly
directed at stabilizing prices and incomes. As the possibility of major government intervention
disappeared, FAO has had to review its basic functions and roles, and take on more policy analysis
and policy advisory roles. This evolution is still underway and is subject to widely differing demands
and perceptions on the part of FAO members.
C. The Commodities and Trade Division
1. Programme Design, 'Old' Divisional Organization and Working Arrangements
39. Currently, ESC is primarily focused on agricultural commodity markets and trade, related
problems and policies that affect the livelihoods of agricultural producers, and the food security of
FAO member countries. It also generates early warnings of food shortages and crises. ESC is
currently the largest and most significant international entity with a focus on the commodity market
and trade dimensions of agriculture and food issues, placing particular emphasis on those
commodities of importance to developing countries. It is also the only international entity that, on a
regular basis, informs the world about impending food shortages, especially in poor and vulnerable
countries.
40. In addition to the Director's office (1 Director and 5 administrative staff), the Division was
composed of four Services at the time of the evaluation, as follows:
• ESCB - the Basic Foodstuffs Service (11 Professional staff, 10 General Service staff,
including statistical clerks) - monitoring and analysing international markets for grains,
livestock products, oil crops and meals, and roots and tubers
• ESCP - Commodity Policy and Projections Service (9 Professional staff, 3 General Service
staff) - trade and commodity policy analysis, support for trade negotiations and agreements,
and projections of world commodity markets
8
• ESCR - Raw Materials, Tropical and Horticultural Products Service (10 Professional staff, 7
General Service staff) - monitoring and analysing international markets for 'non-traditional'
commodities, including most of the major developing country exports (e.g., sugar, cotton, tea,
coffee, cocoa, bananas and other tropical fruit, citrus, vegetables, and hard fibres)
• ESCG - Global Information and Early Warning Service (11 Professional staff, 8 General
Service staff) - keeps the world food supply and demand situation under continuous review,
tracks impending shortages and food crises, publishes regular bulletins on the world food
situation (N.B.: ESCG is not within the terms of reference of this evaluation, although a few
comments are made on its work as it relates to the other work of ESC)
41. With the recent budget reductions and the ongoing reform process in FAO, ESC now has one
less Service Chief level post (D-1), leaving three Service Chiefs. As a result, the Division is
undergoing a restructuring exercise, which includes some shifting of responsibilities and change in
focus, as detailed in sub-section 4 on restructuring, below.
2. Mandate
42. The mandate of the Division is determined with the guidance of the CCP. Prior to the recent
restructuring exercise, the mandate included the following functions:
• Maintaining a constant watch on the world market situation and outlook for all main
agricultural commodities;
• servicing the arrangements for food security and early warning of food shortfalls and
operation of the GIEWS;
• servicing the CCP and the IGGs;
• identifying commodity problems and proposing actions to mitigate them;
• providing commodity and trade policy analysis and support to developing countries for trade
negotiations;
• advising individual developing countries on formulating and implementing their national
commodity policies;
• providing a comprehensive information and intelligence service on agricultural commodities
and monitoring continuously the world supply/demand outlook for basic foods; and
• providing support for FAO's programme of work on world food security analysis.
3. ESC's Main Capacities and Core Outputs in Commodities and Trade Work
43. FAO currently houses the world's largest international body of staff devoted to studying
global agricultural commodity markets and trade. While others (the World Bank in particular) have
had strong capacity in this area in the past, most have greatly diminished their attention in recent
years. FAO's expertise spans most commodities and all geographic areas and consequently involves
experience in the evaluation of most types of commodity problems and policy efforts to address them.
44. ESC has a wide range of technical experts from all regions, with an extended network of
international contacts. These experts are supported by a solid group of experienced staff working on
data, information management, and print and electronic publications. As part of its major role in
collecting and storing agriculture and food data, FAO houses unique commodity databases. Unlike
other sources of commodity information, FAO focuses on developing countries and therefore is often
the only source of information for a particular region or country, or for a particular 'minor'
commodity. FAO's commodities and trade work also benefit from being in a large organization with a
great diversity of expertise.
45. ESC's core outputs fall into four categories:
1. data management, analysis and modelling related to international trade in agricultural
commodities
9
2. global and regional meetings for discussion of policy issues in commodity trade, in
particular the FAO Committee on Commodity Problems (CCP) and its Inter-Governmental
Commodity Groups (IGGs), as well as other supporting consultations, workshops, seminars
and conferences
3. publications of various types, including periodicals, studies, policy papers and global
assessments
4. direct technical assistance to FAO member countries, in the areas of trade policy,
commodity markets and strengthening of production.
46. Under its data and publications activities, the Division is responsible for the following
publications and documents:
• Food Outlook (4 per year, in five languages - recently reduced to 2 per year)
• Food Crops and Shortages (3 per year, in four languages)
• Food Supply Situation and Crop Prospects in sub-Saharan Africa (3 per year, in two
languages)
• Sahel Weather and Crop Situation (6 per year, in two languages)
• FAO/WFP Crop and Food Supply Assessments (ad-hoc, 25-30 per year)
• Review of Basis Food Policies (one per year)
• Commodity Market Review (one per biennium)
• State of World Commodity Markets (one per biennium)
• Medium Term Projections (annual)
• Publications such as working papers, studies and briefs on particular commodity issues,
including trade policy, trade negotiations, and food security
• Electronic commodity notes on the Internet.
47. The Division's responsibility for meetings, consultations and conferences includes servicing
the following:
• The Committee on Commodity Problems (CCP - a committee of the FAO Council; meets
biennially)
• Eight Inter-Governmental Commodity Groups and four Sub-Groups3 (IGGs - tied to the CCP;
scheduled to meet biennially, actually meeting somewhat less)
• Ad hoc consultations and conferences on trade policy and commodity market issues
• Consultations and conferences on specific commodities
• Consultations and technical meetings on assessments of needs and appropriate responses for
countries in crisis.
4. Restructuring of ESC Under the Ongoing FAO Reform Process
48. ESC has cut down from four Services to three. The Division is being renamed the Trade and
Markets Division, abbreviated EST. It will be divided into the Services listed below. Within each of
the new Services there are two to three working groups. While the old structure was still current
during the work of the ET, the new structure of the Division is given below, with key publications
placed with the groups to better identify what they will be doing.
49. The ET has examined this new structure and supports it. The ET noted that the regular
publications have decreased both in frequency and in number. The major reductions will be in the
publications related to Food Crops and Shortages, Food Supply Situation and Crop Prospects in sub-
3
The IGGs are Rice; Grains; Jute, Kenaf and Allied Fibres; Oilseeds, Oils and Fats; Bananas and Tropical
Fruits; Hard Fibres; Tea; and Meat and Dairy Products. The Sub-Groups are Sisal and Henequen; Tropical Fruit;
Bananas; Citrus; and Hides and Skins.
10
Saharan Africa, and Sahel Weather and Crop Situation. Where possible these publications will be
replaced by electronic notes.
50. ESTD: Division Direction: This is the divisional management unit (not a Service) and
comprises the Division Director and administrative staff.
51. ESTM: Commodity Markets, Policy Analysis and Projections Service: Includes all of the
former ESCB and parts of ESCR and will assemble and analyze commodity market information and
provide projections using the COSIMO model, as well as manage the special ESC databases. It will
also supply the secretariat for the CCP and IGGs and supervision for the CFC projects.
Market Assessments and Analysis of Basic Foods Group (including IGG and CFC activities)
• Global Food Outlook (published two times per year instead of four, in five languages)
• Shared Responsibility for the Commodity Market Review (annual)
• State of the World Commodity Markets (annual)
• Commodity Analysis Reports
Market Assessments and Analysis of Raw Materials, Tropical and Horticultural Products Group
(including IGG and CFC activities)
• Global Food Outlook (published two times per year instead of four, in five languages)
• Commodity Market Review (annual)
• State of the World Commodity Markets (annual)
• Commodity Analysis Reports
Market Analysis and Projections Group
• COSIMO outlook, medium term projections (annual, in three languages)
• Agricultural Policy Indicators
• Electronic Commodity Analysis and Policy Notes
52. ESTT: Trade Policy Service: combines components of the current ESCR with ESCP. Major
activities will include cross-cutting and cross-country analyses on trade and commodities policies,
from global trade analysis to value chains. It will continue the work on WTO negotiations and
implementation, and on bilateral and regional trade agreements.
Trade and Development Group
• Publications on Country, Regional and Global Analysis of Trade and Development
• Publications on Linkages between Domestic and International Markets
• Publications on Country, Regional and Global Analysis of Food Security
Trade Agreements Group (Multilateral and Regional)
• Publications on WTO, Negotiations and Implementation
• Publications on Bilateral and Regional Trade Agreements
Emerging Commodity and Trade Issues Group
• Publications on Commodity Supply or Value Chains
• Publications on Commodity Risk Management
• Publications on Emerging Trade and Commodity Market Issues
53. ESTG: Global Information and Early Warning System: This Service, which is not part of the
present evaluation, will operate as before, providing early warning and analysis of food crises and
expanding its analysis of FAOSTAT data, including analysis of food crises, weather risks, and related
impacts on commodity markets and trade.
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5. Changes to the ESC Programme Entities Under the Reform
54. ESC management has embraced the reform process as an opportunity for major changes in
the work programme of the Division. These changes have already been drawn up and approved within
FAO, including the reduction from four Services to three and redesigning of the Programme Entities
to reduce them from eight to five. Tables 2 and 3 below give the previous and new entities, with a
description of how they were rearranged.
Table 2: Programme Entity breakdown in 2004-05
Previous Title
Prog. Entity
2.2.3.P3 Market Assessments for Basic Food Commodities and Impact on Global Food
Security
2.2.3.P4 Projections and Global Commodity Market Assessments
2.2.3.P5 Market Assessments of Tropical, Horticultural and Raw Material Commodities and
Impact on Food Security
2.2.3.S1 Technical Support Services to Member Nations and the Field Programme
2.2.4.A2 Commodity and Trade Policy Support to Developing Countries for Trade
Negotiations
2.2.4.P4 Analysis and Consensus-Building on Emerging Commodity and Trade Issues
2.2.4.P5 Enhancing Diversification and Competitiveness of Agricultural Commodities
Table 3: New Programme Entities under the Revised PWB 2006-07
New New Programme Entity Title From old Programme Entities
Entity
3CA02 Support to the Multilateral Trade Negotiations and support for Negotiations related activities from
Implementation of Multi-Lateral Trade Negotiations 224A2 and 224P4
3CP06 Global socioeconomic analysis and market assessment of Monitoring, analysis and projection
agricultural products and impact on food security activities from 223P3, 223P4,
223P5, 224P4
3CP07 Analysis of globalization and trade issues relevant to agricultural Trade policy related activities from
markets 223P3, 223P4, 223P5, 224P4
3CP08 Support to CCP CCP, IGG and related activities
from 223S1 and 224P4
3CS01 Technical Support Services to Members and the Field Field activities from 223S1 and
Programme 224P5 (mainly CFC type work)
55. As described in the new Programme of Work and Budget, Programme 3C covers FAO's
ongoing trade and commodity market analysis work, contributing to better commodity policy and
trade strategies compatible with members' development objectives.
56. The programme also supports policies for diversification and value-addition in both domestic
and export markets. Analyses are also carried out on national and international food supply and
demand, commodity market developments in support of GIEWS, and trade issues in terms of their
impact on national and household food security. With respect to international agricultural trade policy,
the programme will include: analyses, technical assistance to countries, and capacity-building to
support effective participation in international trade negotiations and implementation of multilateral
trade arrangements.
57. Entity 3CP06 also addresses global and regional assessments of the livestock sector and
livestock commodities to guide priorities in development, research and investment; while entity
3CP07 deals with transboundary animal diseases and food safety hazards in value or supply chains,
the costs and economic impacts of animal diseases and of their control, and standards and
certification.
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D. Other FAO Divisions Doing Related Work
1. Agriculture and Development Economics Division (ESA)
58. ESA works mostly within countries and on many topics that do not directly relate to
commodities and trade. However, there are three areas where there is possible overlap with ESC: food
security, integrated marketing strategies and value chains, and trade and development. FAO's food
security analysis work is presently split between the divisions in an almost ad hoc way. ESC
undertakes the early warning analysis (GIEWS) while ESA (particularly its Food Security and
Agricultural Projects Analysis Service) works on other aspects of food security information and
undertakes analysis of factors for securing national and local food security. It emerged clearly from
the interviews in the field and at headquarters that these two groups do not work particularly well
together. It is important to investigate and resolve this organizational issue.
59. In the integrated marketing area there are a variety of places where the two divisions must
coordinate. Supply or value chains depend upon the development of different producer organizations
in order to succeed. These organizations may involve arrangements for smallholders that are not the
same as for larger farmers. Standards and certification are also an important part of integrated
marketing systems. How these standards are determined and how they impact on farming
communities are important issues that fall in the grey area between the two divisions. As long as the
two divisions remain separate, the answer to good coordination is closer communication, not just in
the day-to-day work but in planning and development as well. Perhaps - and as subsequently
recommended for ESC - ESA should select areas of emphasis or themes for their work. With such
information available to the two divisions, coordination could be much improved.
60. The third area in which there could be significant overlap is trade and development. This area
of work encompasses a large number of issues that are important to the growth and development of
less developed countries. Some of these relate to the agricultural supply response to the liberalisation
of trading regimes. There are many complicated supply constraints in areas such as finance, land
tenure, institutions and culture, agricultural policy, and risk management that come into play. In order
to have greatly improved supply response, it is important to understand what the restrictions are and to
develop policies and institutions to alleviate them. This work should be central to the missions of both
divisions. The ET considers that agricultural supply constraints are one of the major limitations to
development in many developing countries. However, trade and development issues do not stop at
problems on the supply side of markets. There is also the important issue of the appropriate role for
government. Again, short of some combination of the two divisions, there is opportunity in this area
to cooperate through developing themes and coordination in planning and strategy development. The
ET recommends much better coordination between the two divisions, or consideration of more serious
restructuring.
2. Policy Assistance Division (TCA)
61. TCA was once a part of ESA, in the same department as the Commodities and Trade
Division. TCA regards itself as an FAO extension service for policy advice and training, adapting the
normative work of the Organization to countries and regions, and responding to the policy issues
raised by them. TCA has had a significant amount of field activity over recent years in the area of
training on trade policy issues, mainly regarding the outcomes of the Uruguay Round and their
implementation, and on negotiating skills for participation in WTO trade negotiations. Overall during
the period 2000-06, TCA has implemented four donor-funded regional and global training
programmes directly related to trade negotiations, as well as two TCP-funded programmes. In all,
these TCA projects have amounted to about US$ 1.65 million and have covered most developing
regions of the world.
62. TCA is involved in a gradual reorganization as positions open up, endeavouring to hire
specialists in policy areas that resonate with the countries and regions instead of the 'generalists' that
presently make up most of its staff. The first such specialists to be hired are trade economists, as trade
policy is reportedly at the top of the list in terms of requests for advice from all regions. ET contacts
13
with TCA units in FAO Regional Offices indicated that there are opportunities to obtain support for
projects that they develop. This presents an opportunity for partnerships in acquiring extra-budgetary
resources by jointly developing projects between ESC and TCA field offices.
63. The ET met with the Director and staff of TCA to discuss the coordination of policy work
between the field and headquarters. TCA, like ESC, is concerned about the need for better
cooperation between the two divisions (and other divisions involved in policy). There is recognition
on both sides that divisions do not cooperate effectively. One obstacle is lack of appropriate
incentives to encourage cooperation, a problem that has not been addressed by the Organization.
Another is poor communication, which may be improved with the hiring of specialists by TCA.
64. Another possible reason for the lack of effective cooperation is that ESC has not developed
clearly identified areas of specialization in trade. This problem may be reduced by this evaluation’s
recommendation on selecting research themes. If ESC, in collaboration with the trade economists
from TCA, develops a set of research themes that anticipates the demands from the field, perhaps
there will be better cooperation. Economists from the two divisions could cooperate in analysis of
issues arising within these themes, and yet have sufficient flexibility to work on other issues brought
to their attention by member countries - a form of partial cooperation with both sides knowing the
specific areas in which they could expect cooperation.
65. During the field visits and in the new reform documents of FAO there was talk of merging the
two divisions in some form. The ET does not recommend merger with ESC. Among the reasons is
that TCA intends to have policy specialists in several other areas besides trade. Separation of TCA
from the Economic and Social Department which is now the locus of most policy work should
however be examined and instead of merging, TCA will have to develop arrangements that will
generate closer working relationships with other technical divisions.
66. In summary, regarding incentives and collaboration: first, ESC should define themes for its
research, making it easier for the regional specialists in TCA to know where they can obtain effective
support for their work. Second, ESC could involve the trade economists in TCA in the selection of
these themes, providing joint ownership. Third, ESC could involve TCA trade economists in the
projects that they supervise for the Common Fund for Commodities (CFC), perhaps even assigning
supervision responsibilities to them (with resource reallocation as appropriate). Finally, the trade
economists in both divisions could work together to identify and secure donor funding for projects
that are of common interest.
67. The FAO Liaison Office in Geneva also has one senior professional working in support of
developing countries in understanding implications for their trade negotiations. The ET found his
work was highly appreciated by the developing country groups working in the WTO. He draws upon
ESC for some analytical support, but here also relations could be improved.
3. Statistics Division (ESS)
68. During interviews in member countries, FAO's databases were frequently mentioned as key to
commodity and trade policy. Many of the countries and organizations had difficulties using
FAOSTAT. Generally, they used and appreciated the data provided but at the same time thought that
there should be concerted efforts to improve the data and access. These improvements could follow
two approaches. First, FAO could do more to assist the national statistics offices of its developing
country members (preferably not agricultural statistics units in ministries of agriculture) in collecting
and preparing the data. Efforts are reportedly already underway in this area.
69. Second, FAO could improve the data by looking to other sources to verify and add to it. GIS
and remote sensing were mentioned as technologies that might be used more fully. There are other
data sources that could be used to verify FAO data. All people interviewed liked what they knew of
the plans for the new design for the FAOSTAT system and the more easily accessible Web site. (Note
- Links between FAOSTAT and search engines such as EARTH LINK of the World Resources
Institute and Google will make the FAOSTAT data more accessible.)
14
70. ESS is implementing a plan to improve the quality and timeliness of FAOSTAT. This plan
appears excellent but will need a substantial increase in resources in order to put it into effect quickly
- which is what is needed. If the plan is fully implemented, FAOSTAT will have statistics that are at
most one year old, increasing the time of availability by about two years. It will have three sets of
statistics, instead of one. The first will be a compilation of the statistics reported by member countries.
There will be two additional sets of statistics: one with the gaps filled in the country data, the other
with adjustments to country data made after cross-checking with other sources. In addition,
FAOSTAT is assembling other data sets that will be used to verify the FAO statistics. There are a
number of these and, if the FAOSTAT is to continue to be the home of the most complete database on
agricultural and food statistics, they will have to be used extensively to verify FAO statistics.
71. The ET is convinced that the global databases provided by FAOSTAT on food production
and availability are one of the most important activities of FAO. It is most unfortunate that the quality
of the FAOSTAT data has been allowed to deteriorate over the past two decades. Therefore, the work
that has been carried out in recent years to improve data quality is most encouraging. However, more
resources should be provided to this activity on a sustainable basis.
72. An interesting question is whether these more current and more comprehensive statistics can
reduce the burden on ESC in assembling and distributing commodity information. The ET believes
that there could be a reduction in the requests for commodity information when the improved datasets
become available, relieving the commodity analysts of some of the work of collecting and managing
special data sets. Also, training could be provided to countries in use of the data.
4. The Global Perspectives Studies Unit
73. The Global Perspective Studies Unit was merged into ESA at the beginning of 2007. It is
rather small, with only four professionals. Nonetheless, it has a major responsibility: developing long-
term outlooks for the world agricultural and food systems. The Unit looks for major issues that will be
the focus of agricultural and food systems policy more than 20 years in the future. Starting with
projections on population and technology, the unit factors in issues such as changes in incomes and
population dynamics, e.g. population aging and the alterations in diets that these changes may imply.
The process is eclectic, with the staff in ESC making suggestions about the evolution of commodity
markets. With the recommended emphasis on longer-term commodity market analysis, ESC may be
better able to assist in developing these long-term outlooks.
74. One possible area for joint work with ESC is the future of bio-fuels and energy and materials
produced from agricultural products, and the possibility of a global economy dependent upon
agricultural energy inputs instead of petroleum. Such a prospect could radically change the world
agricultural and food economy. Another possible area for collaboration is analysis of the long-term
implications for agriculture of continued rapid growth in the Chinese and Indian economies.
E. Interaction with Other Institutions Working in Commodities and Trade
75. Several other international organizations undertake analysis of commodity markets and the
international trade in agricultural products. These can be either competitors (e.g. for donor funding) or
partners, and sometimes both at different times. In the area of trade policy analysis and advice, a
diversity of research institutions is active, including UN system organizations such as UNCTAD, the
UN Regional Economic Commissions, and the World Bank, as well as OECD, many large
universities, institutes such as IFPRI and ODI (the UK Overseas Development Institute), and the
WTO itself. In the area of commodity market information and prospects analysis, the most frequently
cited alternative source (often rated better) was the USDA. OECD also provides such information and
analysis, as do several of the International Commodity Bodies (ICBs) and universities, as well as
private sector companies (who do so for a price). In the area of technical assistance to develop
production, processing and marketing of export commodities, the ITC is very active, and several of
the ICBs have begun providing assistance in project formulation and preparation of programmes in
their particular commodities, generally under the umbrella of the CFC.
15
76. FAO's work in commodities and trade brings it into more or less direct contact with a wide
range of these institutions. The ET was able to meet with over 25 of them in various parts of the
world, some of which are already partnering with the Division and others that are potential partners.
1. International Commodity Bodies (ICBs)
77. ICBs are heavily involved in data collection and analysis of commodity production and trade,
as well as in other aspects of the agricultural policy work of ESC and related divisions. The ICBs met
by the ET included the International Coffee Organization (ICO), the International Cocoa Organization
(ICCO), the International Cotton Advisory Committee (ICAC), and the International Grains Council
(IGC), as well as the funding institution for ICBs, the CFC. All of these organizations expressed a
desire for a closer affiliation with FAO and with ESC and related divisions. Some have in fact
negotiated memoranda of understanding (MOU) with FAO or are doing so: for example, a MOU is in
place with ICO, and the IGC and FAO are discussing a MOU as the basis for working together on the
collection of grains and oil seeds prices. Others have long standing relationships, as is the case with
the CFC. The ICCO said that it was somewhat wary of a closer association with FAO because it was
fearful of being taken over by the larger body. The difference in the approach to cooperation with
FAO between the ICO and the ICCO is marked, with the ICO being very keen on cooperation. The
difference may result from the fact that the members of the ICO are countries, while the members of
the ICCO are firms.
78. One place where these cooperative efforts could yield value to both organizations would be in
commodity outlook activities. The ICBs have good understanding of the short-run behaviour of
commodity markets. Developing a cooperative arrangement, with the ICBs supplying most of the
information and analysis of the short-run behaviour of commodity markets and ESC supplying longer-
run information and analysis, could improve the flow of information to member countries and reduce
the resources devoted to commodity analysis in ESC, particularly to short-run analysis.
79. Most of the ICBs are now essentially development agencies rather than acting in their
previous function of price stabilization agencies. The preferred way to intervene to manage
commodity price risk or the impact of price instability is now through the application of some type of
risk management tool. The ICBs would like to see the private sector involved in this activity -
directly. FAO could play an important role in involving the ICBs, the private sector, and the producer
organizations in risk management. This is true for both imports and exports of developing nations and
for production and price risks. The ICBs are ready, but it will take an organization like FAO to
catalyze involvement and help develop the mechanisms on the producer side to make this type of risk
management function effective.
80. The CFC has a long term relationship with ESC. The CFC acts as a source of funding for
projects sponsored by the ICBs for a variety of commodities of importance to developing countries,
and several of the FAO IGGs have been designated as the ICB for their commodity where an
independent ICB does not exist for that commodity. Projects funded by the CFC are proposed through
the ICBs/IGGs and then supervised, in the case of the IGG commodities, by ESC. The Division also
has a role in the development of proposals put to the CFC for funding and in involving FAO technical
staff in the development of proposals and in project supervision where this is necessary - although at
CFC headquarters the ET heard complaints that the supervision was not being done sufficiently nor
making efficient use of FAO technical resources. The CFC recognizes that the private sector is more
important in trade and commodity issues than in the past. They indicated to the ET that they would
welcome private sector involvement in the projects that they sponsor, and encouraged FAO to make
arrangements for their participation as full members of the project determination, funding and
management process.
2. Non-governmental Organizations (NGOs)
81. The international NGOs met by the ET (Oxfam, South Centre, IFAP and CSA) have high
respect for FAO, and indicated that they felt this was generally the case among development NGOs.
These organizations are increasingly influential in the development assistance provided by the
16
developed countries. NGOs have an important advocacy role in the formation of development policy
and in developed country assistance decisions. This is both an opportunity for and a challenge to
FAO. However, currently recognition of NGOs is limited.
3. Other Inter-governmental Organizations (IGOs)
82. Organizations such as IFPRI, the World Bank, OECD, WTO and UNCTAD were also visited
by the ET. The commodity market analysis functions of the World Bank, UNCTAD, the OECD, and
IMF have been substantially reduced, especially those of the World Bank, which devoted considerable
resources to short- and long-term commodity market prospects analysis until the mid-1990s. Now,
only three staff work directly in this area; although there are staff in other areas of the World Bank
researching commodity trade and risk management issues.
83. The analytical work programmes of UNCTAD and ESC look very similar in terms of topics
covered and both are engaged in similar kinds of training. When questioned, UNCTAD staff said that
there was no unnecessary duplication. As they saw it, UNCTAD analysis is more region and policy
oriented, while ESC's work is more country and implementation oriented. This categorisation of the
two organizations' work programmes does not appear to the ET to be a fair assessment, especially
given the comments from the in-country discussions to the effect that they would like to see much
more country- and region-specific analysis from ESC. While there is some similarity in the work
programmes of UNCTAD and ESC with respect to work in areas such as trade policy analysis and
commodity risk analysis, and training in these areas, UNCTAD’s commodity market and trade
analysis is very limited. As noted elsewhere in this report, FAO/ESC is the only international
organization capable of undertaking this analysis at the level of commodity/country coverage needed
for the kinds of analysis now carried out within the COSIMO model. The main difference between the
analyses of the two organizations is that FAO/ESC limits its work to trade in agricultural
commodities, while UNCTAD is more general and gives greater focus to trade in non-agricultural
goods, as well as having a stronger developing country bias. The origins of the two organizations are
probably largely responsible for this difference. In the interest of a better allocation of resources it
would appear that there is at least scope for rationalisation of the workloads of the two bodies.
84. Here again there are opportunities for partnerships. The obvious partnerships are already
underway. For example, the forecasting work of OECD and FAO is a natural partnership and one that
should be expanded. The development of short-term outlook analysis with the ICBs is another
example. IFPRI may well be interested in joining such partnerships, as would the World Bank.
85. As already mentioned, the potential for cooperation with UNCTAD and ITC is through the
development of themes for the work of ESC. By making decisions on areas of responsibility and
collaboration, the organizations could work together much more efficiently. Also, there would be
increased possibilities for attracting donor funds to accomplish the joint work.
4. Regional Economic Bodies
86. The ET also met with several regional economic institutions, including IICA, ECLAC, ECA,
AU, UEMOA, and the Caribbean Regional Negotiating Machinery (CRNM) of CARICOM. There
was a disappointingly low level of collaboration between IICA and FAO in Chile, even though both
are working on many of the same trade issues (e.g., commodity risk management, technical barriers to
trade, WTO/PTA interrelationships, and involvement of small farmers in commodity marketing
chains). By contrast, in the Caribbean the relationship between the two organizations was very close,
with meetings held twice a year. The difference may be due to the different levels of involvement of
the country offices. The CRNM said that they had received excellent assistance from ESC in the
provision of training in trade policy analysis and in assisting countries in the Caribbean region in
developing their strategies for negotiating trade agreements. UEMOA in West Africa was also
benefiting from direct interaction with ESC in the context of a regional project on harmonising trade
legislation.
17
5. Academic institutions
87. The ET met with academics (members of universities and research institutes) in several of the
countries visited. Most recognized the limitations of their ministries of agriculture in marketing and
trade. They were also well informed about the increasing role of the private sector in commodity
trade. Perhaps academics could be an increasing source of analytical capability and data gathering
(from unusual places and agencies as well as the private sector), until the agricultural ministries can
make the necessary adjustments. Some pilot programmes might be tried, with FAO sanctioning the
activities and being a part of them, as well as the ministries. It could be a way of preparing the
agricultural ministries for the changed environment in which they are operating.
F. Regular Programme Resources
1. Diminishing Human Resources
88. Table 4 below indicates the trend of diminishing staff resources in ESC (a trend taking place
throughout FAO). Unfortunately, for reasons related to personnel policies of the Organization, posts
are generally eliminated inefficiently by abolishing those vacated through retirement.
Table 4: Evolution of ESC posts by service 2003-2006
Posts in 2003
Professionals Gen. Service Total
ESCB 13 12 25
ESCR 11 10 21
ESCP 9 4 13
ESCG 12 8 20
ESCD 1 6 7
Outposted 1 - 1
Total 47 40 87
Current Post Distribution (mid-2006)
ESCB 11 10 21
ESCR 10 7 17
ESCP 9 3 12
ESCG 11 8 19
ESCD 1 5 6
Outposted 1 - 1
Total 43 33 76
Expected distribution of posts under the new Services
ESTM 16 12 28
ESTT 12 4 16
ESTG (no change) 11 8 19
ESTD (no change) 1 5 6
Outposted 2 - 2
Total 42 29 71
89. In the current 2006-07 biennium, the Programme of Work and Budget had reduced the
number of posts by 11, and under the restructuring proposal outlined below (Sec. IV.C.4) another one
professional (D1) and four general service posts will be abolished, reducing the total to 71 posts. This
is down nearly 20% from the 87 posts in the Division only three years ago. Table 5 shows the current
numbers of posts in mid 2006. One additional officer will also be decentralised to the Regional Office
for Africa. It should be kept in mind that these figures do not accurately reflect the true human
resource situation of the Division at any given time, since some of these posts may be vacant, and
staff may be supplemented by up to ten temporary staff, consultants, Associate Professional Officers
or volunteers.
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2. Shrinking Financial Resources
90. Tables 5 and 6 show the Division's allotment of financial resources from the regular
programme (RP) by Programme Entities for the biennia 2000-01, 2002-03, 2004-05 and the latest
revised 2006-07 budget with the new entities. Activities and costs related to the organization and
servicing of the CCP and its IGGs have moved from sub-programme 224P4 to a separate entity,
3CP08.
91. The Division had to absorb substantial budget cuts (over 20% in real terms) over the past
three biennia. This has necessitated several adjustments to the latest revised PWB 2006-07, with
further abolition of posts and curtailment or elimination of several divisional outputs.
92. The largest allocation in past years was to the activities under 224P4, "Analysis and
consensus-building on emerging commodity and trade issues", which covers much of the Division's
studies, working papers and other publications on various commodity market related topics, as well as
meetings of various kinds to promote consensus on issues around trade in agricultural commodities.
The entity also funds the maintenance of databases and development of methodologies to assess
factors such as the impact of new technologies on trade, eco-labelling and fair trade, organic
agricultural development and competitiveness of agricultural commodities. The research and
preparation of certain documents for the CCP and IGGs also comes under this entity.
93. The other large group is made up of the PEs supporting the commodity market data
management, analysis and publishing work. This includes 223P3, 223P5, and for the modelling and
projections work, 223P4. Together, these PEs accounted for 38% of the budget in 2004-05, and will
increase to 41% under the new PE 3CP06 for the 2006-07 biennium.
Table 5: Extract from Previous Programmes of Work and Budget (PWB) 2000-01, 2002-03 and
2004-05:
ESC part of Programmes 2.2.3: Food and Agricultural Monitoring, Assessments and Outlooks
(excluding GIEWS) and 2.2.4: Agriculture, Food Security and Trade Policy
(All amounts in US$ 000)
Programme Entity 2000-01 2002-03 ZRG 2004-05 % of
Programme of Programme Programme of 2004-05
Work of Work Work budget
2.2.3.P3 Market Assessments for Basic Food Commodities and 1,290 1,458 1,391 12%
Impact on Global Food Security
2.2.3.P4 Projections and Global Commodity Market 1,097 986 948 9%
Assessments
2.2.3.P5 Market Assessments of Tropical, Horticultural and Raw 1,707 1,976 1,929 17%
Material Commodities and Impact on Food Security
2.2.3.S1 Technical Support Services to Member Nations and the 522 532 758 7%
Field Programme
2.2.4.A2 Commodity and Trade Policy Support to Developing - 941 1,363 12%
Countries for Trade Negotiations
2.2.4.P4 Analysis and Consensus-Building on Emerging 6,112 4,983 3,686 33%
Commodity and Trade Issues (included A2)
2.2.4.P5 Enhancing Diversification and Competitiveness of 1,622 1,132 1,064 10%
Agricultural Commodities
TOTAL for ESC excl. GIEWS 12,350 12,008 11,139 100%
19
Table 6: Extract from the Revised Programme of Work and Budget (PWB) 2006-07 with New
Programme Entities
Programme 3C: "Trade and Marketing" (covering ESC, but excluding GIEWS)
(all amounts in US$ 000)
Programme New Programme Entity Title Prog. of % of of which Non Staff
Entity Work budget Staff budget
2006-07 Costs
3CA02 Support to the Multilateral Trade Negotiations and 1,656 15% 1,249 407
support for Implementation of Multi-Lateral Trade
Negotiations
3CP06 Global socioeconomic analysis and market 4,497 41% 4,283 214
assessment of agricultural products and impact on
food security
3CP07 Analysis of globalization and trade issues relevant to 2,404 22% 2,317 87
agricultural markets
3CP08 Support to CCP 1,481 14% 978 503
3CS01 Technical Support Services to Members and the 926 8% 820 106
Field Programme
Total 10,964 100% 9,647 1,317
94. According to this breakdown, 63% of resources are devoted to the analysis and information
activities of the Division, including applied research, projections, publications and meetings on
commodity and trade issues. That leaves 37% which are used for direct support to member countries
including in multilateral trade negotiations and the CCP and IGGs. While this is in line with the
mandate of the ESC, there is pressure from some quarters, including many of the countries visited by
the ET, to shift the balance more toward direct country assistance activities. The anticipated EU
funding (see next section) may contribute to that shift in balance toward technical support to
countries.
95. Of the above 2006-07 budget, staff costs represent 88% of the total (and rise to 95 and 96% in
the case of the two largest PEs), a percentage that has been increasing over the past biennia as budgets
have been squeezed. In 2002-03, staff costs accounted for about 80% of the expenditures, which was
already a very high figure as it leaves little operating budget for staff to work with. Much of the non-
staff budget is accounted for by publications, including the periodical commodities publications and
printing and translations of publications of the IGGs and CCPs. Some form of incentive-based system
is needed within the Division to accelerate the generation of extra-budgetary funds to replace the
staffing cuts and provide for non-salary expenses.
G. Extra-budgetary Resources for Headquarters Programmes
96. The headquarters work of ESC has benefited over the past three biennia from about US$ 7.3
million of extra-budgetary funds from various sources. This compares with an estimated US$ 6
million of Regular Programme non-staff resources for the same period. In addition, another US$ 1.9
million has gone to three commodities and trade projects under the leadership of other FAO units
(TCAS, AGSF) in which ESC has also participated. Nearly all of this funding was either for the
production of trade policy or commodity market studies, or for global or regional training
programmes, e.g. on WTO negotiations.
97. This funding has been in the form of 14 projects of which the largest – US$ 2.2 million - is
the UK-funded support for the production of information materials to assist negotiating countries to
better understand potential impacts of OECD trade policy on developing countries. The UK has been
the largest donor to the normative programme, also funding another project (US$ 0.65 million) to
study the impact of food import surges in several countries. Japan is not far behind, having provided
nearly US$ 2 million for three projects to assist developing countries understand and implement
GATT outcomes and participate in WTO negotiations, and assist ESC to develop commodity market
20
modelling tools for use in South East Asian countries. France and the EU, supplemented by FAO's
Technical Cooperation Programme, provided funds for training programmes, in particular for ACP
countries. These latter training projects are under the leadership of TCA.
98. A very large EU contribution (€ 10 million) is currently under discussion. This is part of a
€ 45 million programme entitled "EU Commodities Action Plan", and FAO's role in it is reportedly
confirmed, together with the CFC and the World Bank. The EU would also like to involve the ITC.
Precise activities to be taken up by FAO (e.g. country strategy development and production-related
work) are being discussed, and no starting date has yet been set.
H. Extra-Budgetary Resources for Field Activities
99. Most of the projects classed as under ESC responsibility are funded by the Common Fund for
Commodities (CFC), for which the Division provides supervisory and management support. These
projects (35 of a total of 50 ESC field projects during 2000-06) are mainly technical assistance
projects relating to improving production, processing or marketing of agricultural products4. Most are
more related to the expertise of FAO's technical divisions in the Agriculture Department. Of the 35
CFC projects, only six were found to be somewhat linked to the technical area of ESC, though even
those were mainly related to improving internal marketing channels for export commodities.
100. They are under the responsibility of ESC because of long-standing arrangements between
FAO and the CFC whereby FAO IGGs take responsibility for CFC assistance to commodities not
coming under other ICBs. ESC staff has the responsibility for supervising these CFC projects.
101. However, the projects generally bear little or no relation to the expertise and work of these
staff; they are not managed or operated by them; and although the projects themselves are usually for
several million dollars, they bring only very limited funds to the Division: only US$ 15,000 per
project per year for supervisory services.
102. This is an area where there may be fewer opportunities for funding in future if the
recommendations of the ET are accepted. The ET recommends that the management of CFC-funded
technical projects be allocated to other divisions of FAO, where there is expertise in the area.
103. The remaining 15 field projects5 under ESC represent funding totalling about US$ 5.9
million. There are another 27 projects with activities relating to commodities and trade under the
responsibility of other FAO divisions, mainly the Policy Assistance Division (TCA) and its Policy
Assistance Branches in the Regional Offices (see Table 7 below). Total funding for the relevant
components of these projects is about another US$ 6 million.
4
Typical examples of this kind of project include: Reviving Banana Cultivation in the Republic of Guinea; Coir
Based Building and Packing Materials; Adding Value to African Leather; Raw Hides and Skins Grading and
Pricing Systems in Eastern and Southern Africa; Development of Sustainable Groundnut Seed Systems in West
Africa; Coconut Integrated Pest Management; Bridging the Yield Gap in Irrigated Rice in Brazil and Venezuela;
etc.
5
Multiple phase projects are counted as a single project here, as are different versions of projects which have
been recoded.
21
Table 7: Commodities and Trade Field Projects Operational during 2000-2006
Type of project Training and Studies and Policy Technology Value of
capacity building assessments support, transfer TOTAL projects from
Funding source in trade market dev't this source
Technical Cooperation
13 3 9 1 26 $5.53 m
Programme (TCP)
Donor Funded (GCP) 4 - 3 1 8 $5.14 m
UNDP Funded - 2 4 - 6 $0.46 m
Funded by recipient
1 1 - - 2 $0.77 m
(UTF)
CFC (ESC supervisory ? - supervision
- - 6 29 35
services only) costs only
TOTALS 18 6 22 31 77 $11.9 m
104. The extra-budgetary funding for field operations (as opposed to headquarters projects) in
commodities and trade is limited by the non-country-specific nature of the work carried out under this
programme. Nearly all the projects are related to activities such as development of policy options and
advice and trade related capacity building. Less than half were country-specific (only 21), with most
being regional in nature.
105. As can be seen from Table 7, 22 projects (including the six CFC projects on marketing)
support development of trade policy, preparation for WTO access, and commodity sector policy. This
includes support to development of national trade policies and also regional trade policies, for
example with COMESA in East Africa and UEMOA in West Africa. Several of these projects provide
support to reviving, rehabilitating or strengthening a particular export commodity sub-sector, such as
sugar.
106. The other large group - besides the CFC technology projects - is made up of the 18 projects in
capacity building and training related to trade negotiations and trade policy. Ten of these training
projects were under the technical oversight of the Agricultural Policy Support Service (TCAS -
responsible for most economic policy related training activities in FAO) and its regional branches.
107. Six of the remaining projects are relatively small projects to fund a study or assessment of an
issue of interest in the area of trade and market policy. Examples are demand for household
commodity risk insurance, costs and benefits of WTO membership, or assessment of competitiveness
of a particular sector.
108. The distribution of project type corresponds well to the role of FAO in commodities and trade
(again, other than the CFC projects), focussing largely on capacity building for participation in
international markets and on policy advice and assistance to member countries. However, the source
of funding appears too heavily dependent of FAO's own limited TCP funds, as opposed to donor
funds.
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V. ASSESSMENT OF IMPLEMENTATION
OF FAO COMMODITIES AND TRADE WORK
A. Clients and Target Audience of FAO's Commodities and Trade Work
109. The users of FAO's commodities and trade work are internal and external. Internally, ESC
plays an important role for other FAO technical divisions as a source of information and expertise on
export commodity markets and policy issues.
110. The primary clients of FAO's commodities and trade activities are, of course, governments of
member countries; though where these target policy makers sit (ministries of agriculture or ministries
of trade, etc) emerged as a central issue in the course of this evaluation, since the ministries of
agriculture through which FAO normally works are often not the most appropriate for trade work. The
affiliation of the respondents to the evaluation questionnaire provides an indication of the problem:
87% of the replies were from ministries of agriculture. The 13% that were not came from trade-related
ministries such as commerce, business or international trade and, in one case, a ministry of planning.
Of the questionnaires completed by agriculture ministries, 13% were from marketing or trade units
and 9% were from statistics offices. The remaining 78% were from production related units in the
ministries or offices dealing with relations with UN agencies, none of which had much knowledge of
trade issues.
111. There is also a broad set of private and public agents who regularly use the outputs of the
Division. These include non-governmental organizations, academic and other research institutions,
producer organizations, private traders involved as agents in global commodity markets, and other UN
and non-UN international organizations.
1. Main Concerns of Member Countries
112. A surprisingly small number of issues were the main focus of the discussions in most
countries visited, both developing and developed. These were the related issues of:
• the setting and meeting of health and quality standards;
• market reforms including management of private sector participation in the market;
• the development of marketing chains or integrated marketing systems; and
• product differentiation, in order to move into higher price markets.
Standards as trade barriers
113. A major concern in many countries was that as market access, export subsidies, and producer
support schemes are removed through the WTO, non-tariff barriers - and in particular health and
quality standards - will become the key battleground for agricultural trade. It was found that both
developed and developing countries are using product standards as technical barriers to trade (TBTs).
114. There was fairly widespread agreement that the private sector, in particular the large retail
chains, will set international product standards; although there was some pressure from the lower-
income developing countries for FAO to play a strong role in establishing internationally-agreed
standards. Most countries that believed that the private sector will be the main driving force in the
setting of standards believed that FAO's role should be to help developing countries meet these
standards rather than trying to have agreement on standards, which tend, through compromise, to
become the lowest common denominator and would not be used by the developed country private
sector anyway. However, it may also be noted that the diversity of private standards in place imposes
very significant transaction costs on producers and to some extent retailers. There is thus some need
for harmonisation and FAO and governments could play a catalytic role in this.
115. As noted many times in this report, the general tendency of declining influence of ministries
of agriculture (especially in trade) was well illustrated by those encountered by the ET on its country
visits, with the notable exception of some of the large agricultural exporting countries. The weakening
23
of agriculture ministries was found not to be confined to developing countries. In developed countries
this is often linked to the increasing power of consumers, which is generally related to the
disproportionate focus on product standards and trade, as well as on the environment.
Market reforms
116. Market reforms are underway for many of the major cash crops in many of the countries
visited. Coffee, tea, sugar and other crops have boards that are in the process of changing from
marketing to the regulation of markets dominated by the private sector. In some cases these boards
have migrated to be a part of the ministries of agriculture. In others the boards are still stand-alone
organizations that are finding their way to a new role in the sector. Often, the stand-alone boards are
having a difficult time not intervening in the sectors that they used to manage. This process of
transition represents an opportunity for ESC to work with the ICBs and support these efforts. The
transitions should be monitored closely by the FAO country representatives.
Marketing and value chains
117. Recent developments in marketing chains for agricultural commodities have raised several
questions. First, there is the question of whether there is an increasing concentration of buyers of
agricultural commodities and, if so, how this is affecting the returns to farmers? Second, how is it
possible to ensure that smallholders participate effectively in marketing chains? The participation of
smallholders can have high transaction costs and a challenge is to reduce these costs to ensure access.
The ET heard of interesting attempts to reduce transaction costs in developing countries. It was
pointed out by private sector interviewees that agriculture ministries are not concerned with major
parts of the value chain; claiming that this is the realm of the industry or commerce departments.
Therefore, there is generally limited knowledge about value chains in agricultural ministries.
118. The ability of smallholders and smaller commercial producers to become part of the
marketing chain and to meet the health and quality standards being established in international trade
are thus key concerns for both agriculture and trade policy. As noted in Section IV.D.1, this
interrelationship between agricultural and trade policy illustrates the overlap between ESA and ESC
Divisions in FAO, and raises the issue of the appropriate relationship between them. The dichotomy
as it stands poses problems, as often the main agricultural policy issues are those of trade and
marketing policy.
119. Analysis of marketing or value chains is important for several reasons relevant to ESC's work.
However, the detailed data about marketing chains are often not in the public arena but are held
privately. Therefore, if ESC is to pursue commodity market analysis at this level rather than at an
aggregate level, which seems essential for a good understanding of what is happening in commodity
markets, it will have to form partnerships with the private sector.
Product Differentiation and 'Niche Markets'
120. In a majority of the countries visited, producers, exporters and government staff were paying
great attention to the potential to add value to export products through product differentiation. This
includes such distinctions as certification of origin or of production, processing or marketing systems
(e.g. in 'fair trade' products), special characteristics of products and in particular claimed or real health
benefits, environmental characteristics of production or processing, and more refined grading and
differentiation of quality. In many cases this effort is supported by NGOs, as well as by large
integrated import and marketing companies such as the large supermarket chains. The developed
country (but gradually also developing country) consumer markets are becoming increasingly
fragmented into 'niches' willing to pay a premium for specific differentiated characteristics of
imported commodities.
121. This particular issue was often pointed to as an opportunity for assisting poorer producers to
gain export market access, by finding the suitable label under which to sell their products. However
this is a double-edged sword, as highly differentiated and specialised products are often more difficult
to produce, leading to exclusion effects similar to the case of standards. FAO needs to master this
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aspect of commodity production and trade in terms of information, statistics and trade issues if it is to
provide its members with the best possible assistance.
B. Review of Implementation of the "Old" Programme Entities
122. This evaluation was conducted at a time of significant change in the structure of the ESC
Division and in the organization of its work. In reviewing the work programme, the ET necessarily
had to make judgements based on objectives and targets presented in the work programmes of past
years, the "old" programme entities (PEs). It should be stressed that there has been substantial but
very recent adjustment in the work programme, as described in Section IV.C.4 above. Some aspects
of certain old PEs have been assessed quite critically in the review below, but it is important to point
out that in the "new" PEs the Division has responded to some of the problem areas identified. Further
detail regarding these Programme Entities can be found in Annex IV.
1. PROGRAMME 2.2.3: Food and Agricultural Monitoring, Assessments and Outlooks
123. This programme included four Programme Entities under ESC responsibility:
• 223P3. Market Assessments for Basic Food Commodities and Impact on Global Food Security
• 223P4. Projections and Global Commodity Market Assessments
• 223P5. Market Assessments of Tropical Horticultural and Raw Material Commodities and
Impacts on Food Security
• 223S1. Technical Support Services to the Member Nations and the Field Programme.
124. These were the "Commodities" part of the Commodities and Trade Division's work
programme, covering the basic foodstuffs (ESCB Service) and the 'minor' commodities (ESCR
Service). The objective given for Programme Entities 223P3 and 223P5 was identical, the difference
being only in the type of commodity. The objective was to assist the key actors in food and
agricultural commodity markets to make better decisions in adapting to changing market conditions.
In particular, the assistance was designed to help decision makers in governments promote
appropriate programmes or policies to enable the private sector to seize emerging commodity market
opportunities. The difference between the two was that focus in 223P5 was on many products that are
specific to developing countries, which are often becoming involved in integrated marketing networks
developed by the private sector (supply or value chains).
125. These PEs have been carried out through extensive publications, conferences and briefings on
essentially all significant commodity crops. The outlook and monitoring results have been released
through FAO publications, media, and press briefings, and the outputs generally appeared to be of
good quality. However, as discussed elsewhere, the ET finds that there is reason to reduce reporting
on short-term movements in commodity markets while strengthening in-depth analysis of longer-term
trends.
126. The two major obstacles to this work having maximum impact are that (i) the locus of
agricultural trade decisions has shifted from agricultural ministries to ministries of finance, trade and
commerce while FAO continues to work in many cases exclusively with ministries of agriculture, and
(ii) the importing, exporting, and storage of food products take place largely in the private sector,
which an intergovernmental organization like FAO still has some trouble reaching. This is especially
important in the case of the 'minor' commodities under 223P5, where private sector domination of
marketing and distribution chains has created specific issues for small farmers, such as the necessity
for standards certification.
127. With the removal of international and national price stabilisation measures price risks are now
primarily borne by smallholders, and there is a need to develop price and production risk management
systems for these producers. The fact that ESC output has been primarily targeting agriculture
ministries, which no longer control these markets, has meant that the work of the Division in
influencing the involvement of the private sector in these markets has not been nearly as effective as it
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could have been. It is for this reason that in Table 8 below, these entities have lower scores for
formulation and design, process and impact than for other areas.
128. Three points follow from the above comments. First, FAO and particularly the country
representatives must broaden their circle of regular contacts in countries if the data and information
produced by ESC is to get to the right hands on a timely basis. Second, the capacity of ESC to do in-
depth market outlook and food commodity impact assessments is dependent on access to up-to-date
information that relates to the segmentation that is taking place in most agricultural product markets.
Without it, the commodity analysts cannot be expected to provide in-depth understanding of what is
happening in these markets. Thirdly, for many of the horticultural and raw material commodities,
FAO is the only international organization producing public good types of information for these
industries. This makes it especially important for ESC to be at the forefront in terms of analytical
techniques and coverage of issues.
129. Programme Entity 223P4 Projections and Global Commodity Market Assessments is an area
where ESC has rapidly evolved a new strategy with the development of the COSIMO model with
OECD (see Section V.C.3 below). This is having and will have an important impact on the projections
made by commodity analysts. The limitations of the projections relate to the use of the FAOSTAT
database for the projections and the needed updating of the FAOSTAT system. An important issue is
the institutionalisation of partnerships with the ICBs and other organizations, like the partnership with
OECD.
130. It is clear from the field visits that some developing member countries have adjusted their
policies to seize trading opportunities, though it is difficult to attribute these changes to information
and analysis provided by FAO. The private sector is largely driving exports and imports and plays a
substantial role in getting governments to put in place more appropriate policies. ESC publications
and technical assistance have been relevant and technically of good quality, but from the ET's country
visits it was apparent that the outputs could have been better targeted. For this reason, the scoring in
Table 8 of this PE on process and on impacts is low. The current way in which the information and
analysis generated by ESC is provided to member countries is through ministries of agriculture, and
this must be changed. One of the methods recommended for linking with the private sector is to
involve the ICBs in the short-term modelling exercises, thereby developing contacts that can assist in
disseminating the medium-term projections as well as the shorter-term information and analysis.
131. Programme Entity 223S1 was for the servicing of the Committee on Commodity Problems
(CCP) and its Intergovernmental Commodity Groups (IGGs) and for providing information and
technical assistance to member countries. The technical assistance covered by this PE was mainly
related to that provided by the outposted officer in Latin America.
132. There were 3 meetings of the CCP and 18 meetings of the IGGs in the period 2000-06. These
meetings require much planning and the preparation of numerous background or issues papers,
making heavy demands on the resources of the Division. The budget of this entity in fact covered only
the direct costs of the meetings (about US$ 400,000 for document and translation, interpreters,
conference staff, etc.), and did not cover staff time. This has been changed in the new structure, and
there is now a PE, 3CP08, which covers all costs, direct and indirect, of these meetings. It was
allocated US$ 1.48 million for the biennium. The quality of the reports to the CCP and the IGGs is
seen as being high. With respect to the changing circumstances of commodity markets and what this
has meant for the CCP and particularly the IGGs, this is discussed in Section V.D below.
2. PROGRAMME 2.2.4: Agriculture, Food and Trade Policy
133. This programme included three Programme Entities under ESC responsibility:
• 224A2. Commodity and Trade Policy Support to Developing Countries for Trade Negotiations
• 224P4. Analysis and Consensus-Building on Emerging Commodity and Trade Issues
• 224P5. Enhancing Diversification and Competitiveness of Agricultural Commodities
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134. The first of these, Programme Entity 224A2, was the main "Trade" entity of ESC, though
224P4 also covered a certain amount of trade work. The objective of 224A2 was to assist countries,
especially developing countries, to participate effectively in trade negotiations affecting the
international regulatory framework for agriculture. Although representing only about 12% of the
overall commodities and trade budget of ESC (it is a less resource-intensive area of work than data
gathering or major meetings), this PE has been a key activity of the Division due to the strategic
importance of trade negotiations and trade policy for member countries.
135. Under this PE, several studies on various trade and policy topics were carried out, and
guidelines and manuals were produced. The peer reviewers gave very favourable reviews on the
relevance, appropriateness, readability and technical quality of sample material produced under this
PE. Training workshops on trade negotiations and implementation were conducted in all FAO
regions, some jointly with other UN organizations such as UNCTAD, or with other FAO divisions
such as TCA. These workshops were commented on very favourably by participants in all the
developing countries visited by the ET. The most frequent criticism of this training was that at times it
was not coordinated with the Regional Offices to permit follow through.
136. These programmes must also shift over time to embrace the trade and marketing issues of the
countries. Several developing member countries commented that they would like to see ESC do more
analysis on bilateral and regional preferential trade arrangements and the interrelationships between
these and the WTO agreements. To date its focus has been primarily on the WTO agreements and
negotiations, though support in this area is foreseen under the Division's new PE 3CA02.
137. Programme Entity 224P4 Analysis and consensus-building on emerging commodity trade
issues had the highest budget allocation of all those examined, almost US$ 3.7 million for 2004-05,
one third of the commodities and trade budget of ESC. This covered much of the analytical work done
by the commodities Services (ESCB and ESCR), including maintenance of databases and preparation
of studies and methodologies on such topics as the assessment of the impact of new technologies on
trade, eco-labelling and fair trade, organic agricultural development and competitiveness of
agricultural commodities. This entity funded a good part of the staff time for preparation of
documents for some of the IGGs and the CCP. It also covered a range of consultative mechanisms
such as inter-governmental consultations, multi-commodity and multi-disciplinary outlook
conferences, networking and multi-media communications, and inter-disciplinary linkages with
government, non-governmental, academic and private sector stakeholders.
138. It is very difficult to evaluate the benefits of these kinds of analysis. It does appear, however,
that there has been a reasonable amount of analytical output from the programme. In the questionnaire
to member countries, respondents were asked about their awareness and opinions of FAO work in ten
applied research topics which come under this Programme Entity, from analysis of WTO or FTA
issues to market chain work to trade and household food security. For 6 of the 10 topics, over half the
respondents were unaware that FAO was working in that area. Only concerning work in the areas of
domestic policy, WTO negotiations and trade agreements was there a reasonable level of awareness.
For all the topic areas, FAO's work was rated by those who knew of it as only satisfactory (6 to 7 out
of 10). Looking at the regions, Latin America had rated the work most highly, most likely because of
the specific regional work being done by the Regional Office. All developing regions considered the
work on impacts of trade at household level to be good, but the OECD countries rated that lowest.
Asia and the Near East gave a low score to the work on impacts of trade on LIFDCs.
139. In general, it would appear that much of the research work being done by ESC is not well
known to many member countries. This ties into the ET's observation that there is a need to tie ESC
research work more closely to the needs and issues important to FAO members.
140. Given the private sector's heavy involvement in supply and/or value chains, the major concern
of governments should be to provide the kind of investment and regulatory environment in which
efficient private sector activity will flourish. Therefore, there should be concern about the poor supply
response in developing countries to the opening of export markets. Many of the value added
opportunities available to developing countries are in the marketing area. There is much for ESC and
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other divisions to do in this area. The ET encourages the pursuit of these efforts and notes with
approval the organizational change that, at least in name, has brought marketing into the trade issues
(ESC's new name: Trade and Markets Division).
141. The last Programme Entity 224P5 Enhancing diversification and competitiveness of
agricultural commodities was mainly concerned with FAO's role in support of the Common Fund for
Commodities (CFC), involving support to countries to develop and implement projects aimed at
improving production, processing and marketing of agricultural export commodities. It also included
activities of assistance in development of strategies addressing supply-side issues including vertical
and horizontal diversification.
142. The ET could find only a few outputs that related to this area of work. This is an area that has
been underdeveloped in ESC, which is likely due to the fact that competitiveness is a particularly
difficult issue to attach meaning to. The ET understands it to mean the opportunity to develop new
products and commodities (or old commodities in different wrappers) that can compete in the
international market. This is an important area for work in ESC, and one which the changes in the
divisional structure and work programme will equip it better to address. The ET supports ESC and
FAO more generally in working to help countries overcome the obstacles to improved supply
response. However, the output from this programme entity appeared to have suffered from the
Division's necessary commitments to other projects. The design of the PE was also not clear and well
directed and as a result the process of the PE and its sustainable impacts suffered. Hence, the scoring
in Table 8 of the PE in these areas is low.
3. Overall scoring of the Programme Entities
Table 8. Scoring of Programme Entities against Evaluation Criteria
(on a scale of 1-10 where 1 is 'completely unsatisfactory' and 10 is 'far exceeds expectations')
Criteria 223P3 223P4 223P5 223S1 224A2 224P4 224P5 Avg.
Does the entity correspond to
Relevance FAO priorities in the SF and
8 8 8 8 8 8 9 8.1
those emerging from the HQs
review and the field missions?
Clarity of Is the desired outcome (effect of
objective the outputs) of the entity clearly 8 8 8 9 8 7 7 7.9
specified?
Are target beneficiaries, outputs
and indicators clearly defined?
Formulation How clear are linkages between
and design 6 6 8 6 8 6 5 6.4
the activities, outputs and
objectives, and will the indicators
measure them?
What is the quality and quantity
Outputs of outputs produced, compared to 7 7 8 6 8 7 5 6.9
expectations?
Is the entity being implemented
Process in the best way to produce the
3 3 7 7 7 7 3 5.3
desired results, in terms of
outputs and objectives?
Is there an expectation of lasting
Effects and change and continued action that
lasting corresponds to what was 2 2 7 5 7 7 3 4.7
impact envisaged when the entity was
designed?
Average 5.7 5.7 7.7 6.8 7.7 7 5.3
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LEGEND:
223P3 Market assessments for basic food commodities and impact on global food security
223P4 Projections and global commodity market assessments
223P5 Market assessments of tropical, horticultural and raw material commodities and impact on food security
223S1 Technical support services to member nations and the field programme, including servicing of the
committee on commodity problems and the inter-governmental commodity groups
224A2 Commodity and trade policy support to developing countries for trade negotiations
224P4 Analysis and consensus-building on emerging commodity and trade issues
224P5 Enhancing diversification and competitiveness of agricultural commodities
4. Notes on the scoring
143. In general, the lower scores reflect the fact that the Division is no longer focusing on the "old"
programme entities. The fact that the Division is not working as well as it could with the Policy
Assistance Division (TCA) also tended to depress ratings in some cases, especially on Process.
Another factor is that FAO Country Representatives, who work mainly with the Ministry of
Agriculture, do not get the results of the ESC Division in front of the people who are making the
decisions since trade is generally the responsibility of the ministries of trade or commerce. This also
means that the training offered by ESC - with participants often selected by FAO Representatives -
goes mainly to ministry of agriculture staff, again not the people who are making the trade
decisions. Of course, as observed by the ET in the field, governments themselves tend to underrate the
importance of the private sector for trade and standard setting, another factor leading to poor targeting
of ESC's outreach activities. These factors lower chances (and scores) for Sustainability.
144. Some notes on scoring for the different criteria are given below:
Relevance
145. Generally the work of the Division was found to be highly relevant to member countries as
well as to partners, though this did not necessarily translate into good design, implementation or
impact. For example, enhancing diversification and competitiveness (224P5) is a particularly relevant
topic for most of FAO's developing country members, but the PE scored poorly in other areas because
of unclear design.
Clarity of Objective
146. PEs 224P4 and 224P5 were assessed slightly lower on this criterion because it was felt that in
the work undertaken there could have been more recognition of the poor supply response to domestic
economic reform and the opening of export markets.
Formulation and Design
147. Commodities work is rated lower given the lack of interest in the IGGs on the part of many
countries. However, the horticulture, tropical products and raw materials entity, 223P5, rates higher
because it is an area where FAO dominates the subject as it does not for the other commodities. The
result for the trade entity 224A2 is marked higher because the problems of linkages and design are not
all the fault of the ESC Division. The diversification and competitiveness entity 224P5 is not
formulated to clearly include the private sector in policy development, which is an important
weakness. The same is true of 224P4, although to a lesser extent.
Outputs
148. The quantity and quality of outputs are rated good to very good (223P5 and 224A2), except
for 223S1 and 224P5. PE 224A2 was rated highly because the quality of the training appears to have
been of a high level and widely appreciated. PE 224P5 was rated as only average on this criterion as
there has been relatively little output. As explained above, this appears to have been because of the
diversion of resources to training on WTO negotiation and implementation issues.
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Process
149. The first entities are rated poorly because they should have different processes, focused more
on longer run market developments, directed more towards ministries that actually deal with policies
affecting the private sector, and with outputs made more widely available to the private sector. The
new work programme recognises some of these problems. The trade policy entities seemed to be
doing well in terms of process. 224P5 was again rated low because there was not much to report on.
Effects and Lasting Impact
150. The sustainability of the basic food commodities work is difficult to see unless there is a
major effort to link with the international commodity bodies (ICBs) and the private sector. The good
work on the COSIMO model with OECD still holds risks in terms of sustainability unless it is taken
into the IGGs and other international commodity organizations more aggressively and ways are found
to make the information more easily and widely available to the private sector. The Division's
recognition of these problems is illustrated by its recent involvement of private sector and other non-
government personnel in informal parallel sessions held in conjunction with the IGG meetings. The
low rating for 224P5 was again based on the fact that there has been little output from this entity.
5. Impact of Extra-Budgetary Support to the Headquarters Programme
151. Overall, the ET found the outcomes of the headquarters extra budgetary projects to be of
generally high quality. The trade policy technical notes and briefs produced under the larger UK
project (GCP/INT/915/UK) were among the ESC documents most often cited by interviewees in the
country and institutional visits, and assessments of their quality and relevance by both users and peer
reviewers were very positive. Likewise, the ET field missions found that training under the inter-
regional training projects had been highly appreciated and judged to be of good quality, though as
stated elsewhere, there was an issue with follow-up. The Swedish-funded Commodity Study on
Tobacco was one of the publications peer-reviewed for this evaluation, and again, the assessment was
very positive.
152. The issue ultimately with extra-budgetary funding for the headquarters programme is not one
of quality or positive outcomes, but of the amount of funding. It is clear that extra-budgetary
resources for normative work have increased slowly and are now more than the (very tight) Regular
Programme operating budget; but in the view of this evaluation, that is still not sufficient. The ET
calls strongly for partnerships that would generate both in-kind and financial resources for the
Division and related work on commodities and trade. Moreover, the ET recommends seeking extra
budgetary resources to support the work on commodity market analysis. These resources should come
from donors who are interested in supporting the work of the Division on the themes selected for
emphasis. The practical aspect of this will be for the Director and staff to formulate projects that are
more effective in drawing the attention of donors.
153. In the commodity analysis and projections area, the ET identified what appeared to be
opportunities for extra budgetary funds and partnerships that can yield in-kind resources. In particular
there are potential partnerships with the ICBs in producing a new kind of short-term outlook that
combines the breadth of FAO and its intermediate forecasting or projections analysis with the short-
term information and data sources of the ICBs. This joint work could be accomplished on a yearly or
bi-yearly basis. The results could be presented to an insiders' conference to assure participants that the
information is credible. The results could be made public through meetings of the IGGs or the ICBs
themselves that are organized for members of the private and public sectors. The private sector
representatives could be charged a significant registration or participation fee and the funds used to
support participation of FAO staff and split with the participating commodity associations. The results
could be jointly published by FAO and the ICBs that decide to participate. There may well be
opportunities to include others interested in commodity projections, such as the OECD, USDA and
non-governmental groups such as FAPRI.
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C. Analytical Capabilities, Modelling and Data Management by ESC
154. In the transition that it is going through there is perhaps a tendency for ESC to hold on to
analytical capabilities that served the past focus of the Division and to embrace new capacities in an
eclectic way - assembling models and analytical methods from the profession with little attention to
how they will be integrated into the work programme. This is not a bad feature of organizations in
transition, but as the transition is being completed there should be priority setting on the modelling
and analytical capabilities that will best serve the Division's functions. The ET comments below on
how this process appears to be taking place and the necessity of making some corporate decisions on
this issue.
1. Data Needs for Commodity Analysis and Collaboration with the Statistics Division (ESS)
155. It appears that the commodity analysis is going on much as before, with Divisional databases
different from the FAOSTAT data series that are supposed to reflect the same market features. As
FAOSTAT transitions to its new data system, there should be less need for ESC to maintain
independent data sets. At least one of the reasons for the maintenance of independent databases will
be eliminated - if all goes according to plan, the FAOSTAT data should become more current in terms
of reports from countries.
156. This report recommends less of a focus in the Division's work programme on short-term
commodity analysis. Here again there may be opportunities to work with ESS to reduce duplication.
We recommend that the ESC commodity market analysts collaborate with ESS to determine the
independent databases that will need to be continued. Among other things, this will give more
congruence to the FAO information programme and reduce costs. In short, with the focus shifting to
medium-term analysis in FAO commodity market analysis work, it is an appropriate time to examine
the data requirements for the new areas of emphasis and reduce duplication and cost.
2. Usefulness of Commodity and Trade Data to External Users
157. The importance of FAO data on trade and agricultural commodities, whether from FAOSTAT
of from ESC, was reiterated repeatedly during ET country visits. In the same breath however, many
interviewees pointed out weaknesses in the data produced, going from the quality of the data, to
timeliness, to access (difficulty of using the website). The ET was told again and again that for many
types of data and many commodities, FAO was the only source of information available.
158. Interestingly, there were opposing views on the neutrality of the data which FAO produces.
Several interviewees in developed countries complained that FAO is receiving "politicised" data from
some developing countries and that FAO is giving legitimacy to this data by publishing it. On the
other hand, several developing countries expressed the opposite view, noting that the value of FAO
data was that it is more neutral than that coming from private sources or government sources such as
the USDA, the major supplier of publicly accessible data on commodities.
159. In addition, if and when implemented, FAOSTAT's plan to publish three sets of commodity
data - "official" country data, country-supplied data with the gaps filled, and an "academic" data set in
which the official country data has been cross-checked with other sources - should help to overcome
the objections heard in developed countries. The concern expressed by some that FAOSTAT was not
linking its data set to other data that are highly relevant to assessments of food security should also be
addressed by the planned changes in FAOSTAT.
160. The delays in the publication of FAO data were universally criticized. Again, FAOSTAT's
planned developments should lead to production of up-to-date data sets, which should improve
matters. All of these latter issues of course are dependent on the ability of FAOSTAT to carry out its
proposed reforms, which is going to require resources which were only partly available at the time of
this evaluation.
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3. Economic Models and Modelling: the Case for COSIMO
161. There is the issue of the large number of economic models that the Division seems to be
working with. The ET recommends that some of these modelling capabilities be acquired by
developing partnerships with the institutions that are now major users of them. The cost of keeping
models updated is high. The Division should be careful in selecting the models that will be associated
with its signature work outputs. As was noted also by the Expert Panel, the Division cannot be a
gathering place for all of the major models related to marketing and trade work. If a particular model
is needed for a project, they could consider arranging a short-term posting of ESC staff to an
institution that is actively using it, or invite staff from the institution to ESC.
162. The ET has not had time to review all of the models now being used in the Division, but
encourages a review and the development of a plan regarding which models to keep in-house and
which ones to use in partnership with other institutions. The ET believes that the OECD/FAO
"COSIMO" medium-term commodity policy model and collaborative modelling activity should be
one of those maintained within the Division. The COSIMO model may offer an opportunity to take
advantage of projections and new information based on the FAOSTAT data to augment the
commodity analysis work. COSIMO can be an integral part of the tool kit of the commodity analysts
and can serve as a platform for much of the trade and marketing analysis.
163. The OECD group collaborating with ESC reported being very pleased with the collaborative
effort. The OECD group has expertise in modelling and knowledge of agricultural activities and
policies in developed countries, plus knowledge of the more important developing country exporters
such as Brazil and Argentina; while ESC has modelling expertise, in-depth knowledge of individual
global commodity markets, and an understanding of agricultural activities and policies in the smaller
developing countries. The OECD group has moved completely away from the individual, short-term
commodity analysis that they had once done but realized that they needed to be able to access such
expertise. ESC was a natural partner. The OECD team believes that there needs to be one
international agency having expertise in individual commodity market analysis and FAO/ESC
appeared to fill this role.
164. The ET considers that there should be an effort to build capacity in the use of COSIMO
within the Division. It should not be a model that only one person can maintain. It should become one
of the signature analytical tools of the Division, and should be widely used within the Division. In
addition, the arrangement with OECD for developing the model and the related cooperation should be
made more concrete. This could be done through a memorandum of understanding and with an
explicit acknowledgement of the collaboration in the work programme of the Division. The model can
also become a platform for collaborative work with other divisions, e.g. in examining the impacts of
environmental or disease shocks.
165. The OECD is committed to this partnership; indeed, it is written into the OECD Secretariat's
work programme. There is a concern within the OECD, however, that while ESC is committed to the
partnership, FAO as an organization is not yet committed. (An agreement document correcting this
situation is apparently in process at FAO, which is applauded.) OECD would also like to see ESC's
involvement in the collaboration written into FAO's work Programme.
4. Impact of FAO's Commodity Market Analysis and Modelling
166. With respect to the commodity market analysis of the Commodities and Trade Division, a
wide variety of opinions was expressed to the ET during interviews both inside and outside of FAO.
There is little interest in the reporting of short-term commodity market behaviour for the major
commodities on the part of the developed countries and the more advanced developing countries. This
information was said to be readily available for the major crops from their own sources or from
industry associations and private specialists. There was a view expressed by the developed countries
that FAO should concentrate any such work on minor crops and what is happening in small countries.
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167. However, there was seen to be a need for longer-term, in-depth analysis of major trends in
commodity markets and that this should be emphasised in ESC's commodity analysis. The COSIMO
model being used by ESC in collaboration with OECD (see previous section above) provides a
possible platform for this type of analysis, and could form the basis for meeting this demand. The ET
discussed this issue in many of the countries visited during the field work.
168. It was widely agreed that FAO has a comparative advantage in commodity market analysis
relative to the OECD, World Bank and UNCTAD. However, there were equally strongly held but
opposing views from different audiences either that ESC work on commodity markets and trade was
becoming "too academic", or instead that the greater depth of analysis of the Division was very
welcome.
169. There were also contrasting views about the Division's collaboration with the OECD
Secretariat in the development of the COSIMO model. On the one hand, this collaboration was seen
by some developing countries as the Division moving too close to the OECD in its focus on
commodity markets in the developed countries. Others saw the collaboration in a positive light as it
brings together the OECD expertise on developed country markets and the ESC expertise on
developing country markets. In an example of the latter viewpoint, the modelling staff in the US
Economic Research Service viewed this joint work between the OECD Secretariat and ESC as a good
example of synergy between complementary groups.
170. Countries such as Argentina, Brazil, Chile, and China have strong capacities in the analysis of
commodity markets and trade policy. However, because they have become such important traders of
agricultural products - which have been a driving force in their recent economic performance - they
have a keen interest in longer-run prospects for commodity markets and are interested in further
developing their analytical capacity in this area. Thus, they are natural partners for ESC in medium-
term commodity market analysis and could become an integral part of a COSIMO "network". For
example, the Brazilian Ministry of Agriculture, Livestock and Food Supply has recently set up a unit
to study longer-term commodity market trends which could clearly be a useful partner for ESC in this
area.
171. The outcome of the visits to countries was the general view that the direction the Division is
taking in longer term commodity market analysis is the correct one, and the ET therefore recommends
that the COSIMO project should be enhanced and continued.
5. Partnerships for Data Management and Analysis
172. The ET has recommended that the commodity market analysis work be undertaken in
collaboration with the ICBs through the formation of partnerships. A major issue is whether ESC is
going to expand and institutionalize its partnerships with the ICBs and other organizations as it has
with OECD. Such partnerships will provide an opportunity for the commodity market analysts to
review the data that are maintained by the ICBs and that can be shared. These arrangements could
also reduce the need to maintain data sets different from those available in the FAOSTAT system.
Also, they may reduce the demands on the commodity market analysts for short-term analysis. One
way to proceed would be to post commodity market analysts with ICBs or conversely invite selected
ICB staff to ESC for short periods to plan the joint work, decide on the data sets to be maintained, and
assign responsibility for keeping them current. Partnerships should also be developed or strengthened
with other large-scale forecasting modelling systems, such as those maintained by FAPRI, IFPRI, the
US Economic Research Service and others.
33
D. The Committee on Commodity Problems and the Intergovernmental Groups
1. Relevance, Participation and Outcomes of the CCP and the IGGs, 2000-2006
173. During the period reviewed, three meetings of the CCP were held, in 2001, 2003 and 2005.
Between them, the eight IGGs and four Sub-Groups met 18 times during the period; five of these
meetings included more than one IGG or Sub-Group. Table 9 below summarises the attendance and
costs of these meetings. Costs include publications, translation and interpretation, travel of FAO staff,
and conference services. ESC staff time is not included as a cost.
174. Perhaps the most visible trend in this table is increasing attendance at the meetings. In spite of
criticism from some countries on the usefulness of the CCP and the IGGs, it would appear that there is
a growing interest in some of them. Overall direct costs have been relatively contained given the size
of the meetings and the need for translation and interpretation, by far the highest direct cost. However
it should be considered that staff costs for the work related to these meetings was estimated at about
US$ 1 million for the biennium 2006-07. This may include some work (studies, etc.) which would be
done even if the meetings were not held, but it nonetheless represents 10% of the total staff budget.
175. Across the ET's in-country discussions and meetings with organizations there were wide
differences in views regarding the usefulness of the CCP and the IGGs. Generally, however, it was
clear that with the reduction of government involvement in the production, pricing, marketing, trade,
and distribution of agricultural commodities around the world, the CCP and the IGGs, which are
forums for government officials, have become much less relevant to international commodity
markets. Therefore, the initiative of ESC to expand the IGG meetings to include an informal session
for the participation of the private sector and other stakeholders has been welcomed in some quarters
(including certain developed as well as developing countries, as well as NGOs).
34
Table 9: CCP and IGG meetings 2000-2006
Costs
Year Meetings held Location Participants
(US$)
Joint meeting of IGG on Jute, Rome 43 participants from 23 member countries, UNIDO, 47,917
Kenaf and Allied Fibres, IGG on CFC, Int. Jute Org., and 1 INGO
2000
Hard Fibres, and Sub-Group on
Sisal and Henequen
63rd Session of the CCP Rome 78 out of the 98 CCP member countries, 8 other 132,730
FAO members, the Holy See, the Sovereign Order of
Malta, 6 int'l. organizations and 6 INGOs
Sub-Group on Hides and Skins Rome 42 participants from 25 member countries, EU, 43,170
UNCTAD/ITC, UNIDO, CFC, and 2 INGOs
IGG on Bananas and Tropical Fruit San José, 55 participants from 23 member countries, the EU, 102,462
2001 Costa Rica IAEA, WHO, ICIPE, and 6 INGOs
IGG on Tea New Delhi, 48 participants from 13 member countries and the 47,579
India EU
Joint meeting of IGG on Grains, Rome Participants from 35 member countries and 6 29,969
IGG on Rice, IGG on Meat and international organizations
Dairy Products, and IGG on
Oilseeds, Oils and Fats
IGG on Meat and Dairy Products Rome 78 participants from 45 member countries and the 53,249
2002
EU
64th Session of the CCP Rome 76 out of 108 CCP member countries, 3 additional 97,280
FAO members, the Holy See, 6 int'l. organizations
and 9 INGOs
Joint meeting of IGG on Jute, Salvador, 37 participants from 10 member countries, UNIDO, 44,863
Kenaf and Allied Fibres, IGG on Brazil Int. Jute Study Group, and 2 INGOs
Hard Fibres, and Sub-Group on
Sisal and Henequen
2003
Sub-Group on Hides and Skins Rome 30 participants from 16 member countries, EU, 42,295
UNCTAD/ITC, UNIDO, CFC, COMESA, and 3
INGOs
IGG on Citrus Havana, 76 participants from 20 member countries, CFC, and 65,465
Cuba 5 INGOs
IGG on Tea Colombo, 63 participants from 17 member countries, the CFC 48,654
Sri Lanka and the International Tea Committee
Joint meeting of IGG on Jute, Rome 26 participants from 16 member countries, UNIDO, 44,815
Kenaf and Allied Fibres, IGG on CFC, Int. Jute Study Group and 1 INGO
Hard Fibres, and Sub-Group on
Sisal and Henequen
IGG on Bananas and Tropical Fruit Puerto de la 113 participants from 23 member countries, EU, 52,020
2004 Cruz, Spain CFC, and 6 INGOs
Joint meeting of IGG on Grains Rome 113 participants from 76 member countries and EU, 32,202
and IGG on Rice World Bank, OECD, Common Fund for
Commodities and International Grains Council
IGG on Meat and Dairy Products Winnipeg, 45 participants from 27 member countries, EU, CFC, 77,686
Canada OECD, and 3 INGOs
65th Session of the CCP Rome 92 out of 110 member countries of the CCP, 11 146,670
additional FAO member nations, the Holy See, 7
2005 international organizations and 7 INGOs
IGG on Tea Bali, 95 participants from 21 member countries, the CFC 43,860
Indonesia and the International Tea Committee
Sub-Group on Hides and Skins Arusha, 89 participants from 11 member countries (58 from 18,528
Tanzania Tanzania), UNCTAD/ITC, UNIDO, CFC,
COMESA, ECOWAS, and 4 INGOs
IGG on Tea Nairobi, 113 participants from 24 member countries, the 31,900
2006 Kenya CFC, the Int. Tea Committee, the European Tea
Committee, and 2 INGOs.
IGG on Meat and Dairy Products Rome 94 participants from 46 member countries and 1 non 59,621
member, EU, WFP, WHO, CFC, OECD, ILRI, and
4 INGOs
35
176. In some country discussions it was noted that these meetings and related activities are less
important currently, given the available communication technologies and the provision of similar
information by other sources. Private sector views expressed were generally to the effect that IGGs
were "outdated"; that they made more sense when governments were involved in the marketing of
commodities and the use of price support/stabilisation schemes. Further, the IGGs were seen to be
poorly attended by government officials, though this is not evident on examination of the participants'
lists, where instead it is clear that many of the countries most closely concerned with the
commodity(ies) being discussed send high level officials to the meetings. It was also noted that there
was little feedback from the IGGs to the private sector.
177. An alternative view was expressed in Chile, which noted that these meetings provide a forum
in which small countries can discuss commodity and trade matters with large countries on an equal
footing, reflecting FAO's important "neutral forum" function. This was an observation echoed by
other developing countries as well. There was support from several developing countries and NGOs
for the idea of holding regional meetings including producers and consumers and importers and
exporters (in effect, 'regionalised' IGGs), with the aim of discussing issues of common interest. This
view ties in with the demand for more focus from ESC and other divisions on country studies rather
than regional studies and on regional studies rather than global studies (e.g., Caribbean). The holding
of some recent IGG meetings in member countries rather than in Rome was seen as a positive step in
this direction. However, the question remains as to what this would mean for ESC; in particular,
whether it would have the resources to develop the needed regional expertise and to run more frequent
regional meetings.
178. Frequently, private sector groups stated that they had problems in "accessing FAO", and felt
that the Organization was too focused on government officials. With the substantial shift that has
taken place in the marketing and distribution of commodities, in the not too distant future it will
become difficult for FAO to remain relevant in trade matters if it does not deal more directly with the
private sector.
179. The demand for IGG meetings varies across commodities. For major commodities where
there are robust industry associations and lots of private sector provision of information, the demand
for IGG meetings was not strong. However, it is a different matter for minor commodities,
particularly commodities primarily produced in developing countries, such as for example the IGGs
on Hard Fibres or on Tea. These meetings were found by several participating countries to be useful
discussion forums. The IGG on Hard Fibres was said to be the only international forum for discussion
of trade issues and the exchange of information with respect to these particular commodities.
However, there were complaints expressed that there was little or no follow up on recommendations
made at the IGGs. It was recognized that recommendations made at IGGs were not binding. But more
progress could be made in achieving these consensus recommendations if there were a mechanism
developed for generating follow-up action.
180. Persons interviewed in certain European governments took a strong stand against the CCP
and the IGGs. Some said that they had lost interest in the CCP and the IGGs because they had become
irrelevant, given the shift to the private sector in commodity markets. Moreover, commodity
organizations do a good job of following what's going on in markets. It was suggested that it would be
a good idea to merge the Committee on Agriculture and the CCP. Though not merging them for now,
FAO will in fact be holding the next meeting of the these two Committees in 2007 back-to-back the
same week.
181. Some countries noted that officials attending the CCP mainly wished to discuss trade issues
and that commodity market issues are being neglected. There was concern in some quarters that the
FAO meetings should not be discussing trade issues and that these should be left to the WTO.
Concern was expressed in Europe that in the discussion of trade matters the developing countries only
wished to discuss market access into developed countries and refused to discuss their own high trade
barriers and supply response issues.
36
182. A comment was made that involving the private sector in the IGGs through an additional
informal meeting (as is done with a few IGGs) was not a positive approach, as this was the standard
way for government officials to keep the private sector on the sidelines. A joint meeting with the
private sector representatives as full participants would be more effective.
183. Some NGOs were pleased with being allowed to be observers at these official FAO meetings.
However, others saw FAO as being one of the most difficult international organizations to access;
although it should be noted that ESC was considered to be one of the more easily accessible areas
within FAO.
2. Future of the CCP and the IGGs
184. With the greatly reduced involvement of governments in agricultural markets there appears to
be much less government interest in the CCP and the IGGs. This applies particularly to the major
crops where private sector activity is dominant and industry associations have the most up-to-date
data and provide a considerable amount of analysis of short-term market movements. The same
cannot be said for minor commodities such as hard fibres.
185. Given the limited involvement of government in most commodity markets, the official nature
of the CCP and IGG meetings mean that they have clear limitations in terms of relevance. Running
parallel informal meetings to involve the private sector, NGOs, and other stakeholders seems an
expensive way to get around this problem. The inclusion of non-official observers at the official
meetings offers only limited scope for their involvement because their participation would have to be
restricted.
186. It would appear useful, therefore, to examine closely the value of the present arrangements
and commodity coverage, paying particular attention to the extent of private sector activity in the
market for each commodity, the degree of official interest in the meetings, and the topics in which
there is interest. The cost of these meetings should also be considered, especially in the light of the
Organization's budget constraints. Following the review, it may be decided that a reduced number of
commodities could be covered by IGGs. This would free up resources to fund a greater involvement
of non-official stakeholders in official meetings and fund parallel informal meetings.
187. The listing of publications in Annex 5 shows the papers presented to the CCP and IGG
meetings over a period of approximately 12 years. The list demonstrates the effort the Division has
devoted to these meetings and the issues that have been seen to be important. These analyse the
impact of multilateral trade negotiations on commodity markets, changes and trends in major
exporting countries (often China or India), sanitary and phytosanitary issues and emerging issues such
as value chains, genetically modified foods, niche markets, and so on.
188. In countries and institutions visited, the ET encountered wide support for the idea of regional
commodities meetings, with a focus on matters of interest to commodity producers in the region, and
presentation of analytical papers on longer-term trends in commodity markets. Programming meetings
of this kind has obvious resource implications; however, the Division is encouraged to continue to
move in these directions.
189. A further alternative for the future of the CCP and the IGGs was suggested during discussions
with members of the ongoing Independent External Evaluation of FAO: the meetings of the CCP and
the IGGs could be held jointly in Geneva with UNCTAD and WTO, seeking to take advantage of the
country trade representatives in Geneva rather than the non-specialised representatives to FAO in
Rome. A week of meetings and events could combine the CCP with short meetings of the IGGs.
Informal sessions including private sector and industry representatives could focus on emerging issues
for commodities and trade and inform trade negotiators and lobbyists of particular interests of the
sector, while formal sessions would permit discussion of markets, trade and commodities outside the
strict negotiating framework of the WTO. Even better would be to include representatives of the
private sector in the formal meetings through some agreed mechanism, such as possibly including
them in government delegations.
37
E. Periodicals, Publications, the Internet, and Communicating FAO's Message
190. This review of communications quality and communications capacity of ESC and related
divisions in work on commodities and trade examines ESC publications, based on the peer review of a
selection of documents by the Expert Panel and the ET and on a summary citations analysis, as well
as reviewing the commodities and trade Web presence and related internet traffic, and a proposal for a
new Web site.
1. Peer Reviews by the Expert Panel and the ET
191. Annex V contains a list of the publications of ESC. A sample of 20 publications was selected
to be representative of the publication categories listed and reviewed by the Expert Panel and the ET -
these are shaded in the publications list. A summary of the reviewers' reports is presented in the
following paragraphs.
192. Generally, the reviews were positive about the relevance, quality and appearance of the
publications and their fit with the perceived mission of FAO. In most cases the technical quality of the
papers was judged to be reasonably good. Some of the publications were judged to contain original
work that contributed to the commodity analysis and trade issues that the reviewers felt were the
responsibility of ESC.
193. The categories of publications include Series and Major Studies, Background Documents of
FAO Meetings, Trade and the WTO Negotiations, Market Analysis and Outlook, Environment, ESC
Papers in the FAO Economic and Social Development Papers Series, and Miscellaneous Publications
and Discontinued Series. From the Series and Major Studies group six papers were reviewed. All
were judged as "very good". The only criticism was that some of the data and tables could have been
made available on the Web to save time and funds.
194. Three of these publications deserve special attention. "The State of Agricultural Commodity
Markets 2004" is a new biennial publication and is one of the "flagship" publications of FAO. It is
assessed as being relevant and technically very good. The report's focus on the impact of commodity
market developments on income and food security was seen to be highly appropriate. The reviewer
noted that FAO/ESC is the only organization that has the capacity to produce such a publication on a
regular basis as it brings together available expertise on agricultural production, trade and food
security.
195. The "Issues in the Global Tobacco Economy" study was very controversial when published.
The study was carried out jointly with WHO, which looked at the consumer side. The issue addressed
by FAO and WHO was how to reduce the health hazards from smoking. The controversy arose from
the fact that tobacco is a major export of some developing countries. The study did a good job of
laying out the alternatives for limiting supply to acting on the demand side to reduce the health
hazards. The conclusions of the study were that there should be a focus on the demand side but with
efforts to develop alternative cash crops for the developing economies hardest hit by the coming
reductions in demand.
196. The other paper of note in the Series and Major Studies group is actually two papers on the
"OECD/FAO Agricultural Outlook" for years 2004/05 and 2005/06. This publication represents the
output from the new modelling and analytical capacity that ESC has developed together with OECD
to do projections and policy analysis, and is a good example of the cooperation or partnering efforts
that have been stressed in this evaluation report. We recommend that this publication become the
flagship of the commodity market analysis work of ESC. It can also serve as an inducement for the
ICBs to join with ESC in improving the short-term commodity outlook information and analysis.
197. The FAO Commodity and Trade Policy Research Working Papers and the FAO Trade Policy
Briefs reviewed were also rated well in terms of relevance, targeting, and technical quality.
Production of the Trade Policy Briefs has been supported by DFID. They are designed to give a
38
straightforward overview of trade policy issues relating to particular agricultural products. This is an
example of how FAO might be able to raise funds to support its work, and an example of studies that
are designed for educated but not technically expert readers. The ET found that policy briefs like
these, produced on a timely basis on topical issues can be very useful particularly to developing
countries.
198. A review was also carried out of the Rice Market Monitor, a bi-monthly publication that
received a reasonably good evaluation, although it was noted that the analytical content was at times
fairly shallow. This is an example of a major commodity that does not have an active ICB and for
which FAO delivers a service by providing short-term outlook and analysis. The added value of the
publication was assessed to be in the bringing together of a large amount of relevant material. The
Rice Market Monitor is an example of where ESC should continue doing the short-term outlook
analysis but perhaps less frequently.
199. Finally, mention must be made of the FAO flagship publication The State of Food and
Agriculture (SOFA - prepared by ESA). The 2005 edition of SOFA was on "Agricultural Trade and
Poverty – Can trade work for the poor?" As this publication was not produced by ESC, it was not
reviewed in detail for this evaluation. However it was cited to the ET more than once as an example
of the poor interaction between the two divisions, since in spite of the direct relevance of its subject
matter to ESC, this division was only involved when asked for comments on a finished draft of the
document.
2. Views from Member Countries on the Focus of Analytical Studies
200. The issues that most of the member countries visited see as needing better understanding are
those on which the Division is already working or has indicated that it would like to work. Besides the
issues of product differentiation, standards (including use of standards as TBTs) and marketing
chains, topics suggested include tariff escalation facing processed products (likely to become more of
an issue with attempts at product differentiation), the interrelationships between regional and bilateral
trading agreements and WTO negotiations, bio-fuels, "fair trade", impacts of animal rights groups'
activities on commodity markets, and the impact of China's economic growth and the development of
its agricultural sector on the rest of the world. This is a large list and, as recommended, ESC should
focus on only a few topics and develop its reputation for work in these areas.
201. However, points that came through clearly from the in-country interviews, as well as the
questionnaire, were that the Divisions' research is not well known and among those who are familiar
with its research there is a feeling that the research programme is not well organized. For example,
among the ministries of agriculture in the Caribbean, ESC was not seen as being prominent among
organizations doing research on marketing and trade policy. Clearly, more needs to be done by the
Division to raise its profile.
202. Experts at the Overseas Development Institute (ODI) in the UK as well as Oxfam's head of
research said that the quality of ESC research was "excellent" but that it could be better focused and
concentrated on themes so that the Division would be known world-wide for its work in certain areas.
It appeared to them that the Division's research tends to be opportunistic and driven by individual
interests. As these interviewees saw it, the research agenda of ESC is difficult to perceive, and if there
is one, not well communicated.
203. As regards the role of research within ESC, it was noted that while the Division should not be
principally a "research" body, it should aim to have credibility for its work within academic circles.
Generally, however, the analytical work of the Division should address the practical concerns of
member countries. Further, it was suggested on several occasions that the Division could play a role
as a "broker" of research output on commodities and trade issues: making the research and the
applications available to policy makers, and where needed doing applied research on key issues.
204. There were a variety of views about "bias" in ESC's analysis of important issues. For instance,
among NGOs a commonly held view is that ESC is too sympathetic to the positions of the World
39
Bank, WTO and IMF on trade policy. On the other hand, within many developing country
governments and academia there is suspicion of the trade policy modelling undertaken by the OECD
and the World Bank while FAO is seen as more "neutral".
205. The NGOs believe that FAO should try to see trade liberalisation more from the point of view
of farmers' organizations and produce more "independent" analysis (there is a tendency to seek a more
sympathetic treatment of government intervention in trade as a means of protecting "family farms").
ESC, and FAO more generally, should treat the views of these representatives of smallholder
agricultural producers more seriously. This is not to say that their viewpoints should be necessarily
adopted but that they must be recognised as widely held views and discussed fully.
206. The focus of FAO studies on "the impact of trade liberalization on the poor" (the subject of
ESA's State of Food and Agriculture 2005 edition) was seen by some Latin American commentators
as not appropriate for that region. Rather, it was suggested that FAO's focus should be on how to help
poor smallholder farmers become part of the market supply chain and benefit from trade
liberalisation.
207. The ET noted that in Brazil, Egypt and Chile there is a strong focus on primary commodity
production and exports as drivers of growth - in fact, much stronger than appears to be the case in
ESC. Moreover, that there is very little work being done in these areas by other international agencies.
Hence, there is potentially a very large role here for ESC.
208. The impact of agricultural trade liberalization on the general farming sector in developing
countries is an area of both donor and developing country interest. Some commentators felt that
analysis in ESC and ESA is not going sufficiently in depth into this issue.
3. Summary Review of Citations
209. The Citations Index Review is an alternative method of assessing the quality of ESC
publications. The Thompson ISI Citation Index, which is the most comprehensive of the citation
indices, was used for this evaluation. Its results were supplemented by searches through "GOOGLE
Scholar". We took the names of the professionals in ESC listed as authors in the "Publications of the
FAO Commodities and Trade Division" and made an inquiry about the citations reported in the index.
There are various ways to classify the citations. We used papers cited and the number of cites as the
simplest criteria. These criteria were used since the number of citations was limited. The citations
were from 1998 to 2006, i.e., the citations to publications dated or released between 1998 and 2006.
Where it was obvious that the citation was to authors who are not full-time employees of FAO, only
the paper mentioned in the ESC Publications List was listed and searched for citations. The results of
this search of the index by authors of the main ESC papers and books are summarized in Table 10
below.
40
Table 10: Citations of Commodities and Trade
Division Staff and Consultants, 1998-2006
FAO author no. of no. of
papers cited cites
Sarris AH 8 30
Hallam D 1 1
Liu P 0 0
Mikkel Andersen 0 0
Pazderka C 0 0
Lavers G 0 0
Pilkauskas P 0 0
Claro J 0 0
Dankers C 1 1
Conforti P 0 0
Prakash A 0 0
Josling T & Valdes A 0 0
Morgan N 0 0
Mantzou E 0 0
Zant W 2 3
Ramesh Sharma 4 18
Nyange D 0 0
Duteutre G 0 0
Salvate L 0 0
Poonyth D 0 1
Karagiannis G 0 1
Shui S 0 0
Koizumi T 0 0
Cited Reference Search, Thompson ISI Web of Knowledge
http://portal.isiknowledge.com/portal.cgi; GOOGLE Scholar
210. It should be noted that this is a partial citation listing. It is possible to obtain citations for
publications that are not authored and that are listed under "FAO", as is the case for many of ESC's
publications. A sample search from the publications citations was made and there were some, but not
as many as might be thought. Still, this would be a good exercise for the staff to undertake
periodically to determine the use patterns of their publications. It could be a feature of the new Web
page design for the Division and in fact, could be done automatically.
211. Other means of showing the qualifications of the staff and consultants would be to provide
their CVs on the Web page. This would give outsiders a feel for the competencies of the staff. It
would also give staff incentives to publish in refereed journals. Not that their work should be intended
for refereed journals, but it is good to report on work already done to obtain a professional assessment
of the approaches used and results of the research, as a way of vetting the substance of the FAO work
and giving the profession an opportunity to review the results of the work. As the trend in funding
mechanisms evolves towards seeking a larger proportion of extra-budgetary resources, it will be more
important for FAO and in particular the ESC staff to be published in credible journals. The objection
that this takes time is not necessarily valid, as researchers and analysts are close to their work and can
usually publish with little added effort. This will be more important as ESC puts greater effort into
developing serious partnerships.
4. Web Presence and Internet Usage
212. The main FAO portal for commodities and trade related information is the ESC website
"Commodities and Trade" (http://www.fao.org/es/esc/en/index.html). In addition, there is a site
specifically on trade and trade policy issues, in particular related to WTO, entitled "Trade in
Agriculture, Forestry and Fisheries" (http://www.fao.org/trade/index_en.asp), and maintained by the
PAIA ("priority area for interdisciplinary action") on Assistance for WTO Negotiations. In addition,
the ESC maintains a "Prices" site giving latest market prices for all important agricultural
41
commodities, generally updated to within one to two weeks. Another very important source of
information on commodities and trade is the FAO Statistics Division (ESS) database FAOSTAT, and
its recently redesigned Web site (http://faostat.fao.org/). FAOSTAT includes several tools for looking
at historical series on markets, prices and trade by country or region and between country pairs,
though as noted elsewhere the database is still two years out of date.
213. The Commodities and Trade Web site is organized principally by commodity, providing links
to publications and other information regarding FAO activities tied to that commodity. Links are
provided to the Trade site, to FAOSTAT, to the price database, to an out-of-date Meetings and Events
page, and to the Global Information and Early Warning System site (part of ESC but outside the
purview of this evaluation). Visually, the site is modelled on FAO's standard format and has an
institutional, rather colourless interface, with no pictures or illustrations of any kind, and with static
content, of which most is somewhat out of date. This contrasts with the Trade site, the GIEWS site,
and even the FAOSTAT site, all of which are much more lively. ESC is planning a complete update
of its Web site, and should definitely consider developing a new and more attractive user interface.
214. The Web site should be seen as the Division's main vehicle for dissemination of its
publications and data. Suggestions to improve website dissemination are: present output in "clusters";
research and present work thematically; provide a facility for people to sign up for material and to be
advised of events; and analyse Web site "hits". Also, it is important to have short pieces that
communicate the results of work in such a fashion that the major findings can be available without
reading all of the details.
215. The FAO organizational Web site is visited altogether about 3 million times each month.6 Of
these, 40-45,000 visits are to the commodities and trade related Web sites (ESC, Trade and a rough
estimate of about 10% of FAOSTAT visits). This ranks as medium traffic levels in comparison with
other FAO divisional Web sites (ranging from 1000-5000 visits per month for most divisions to a high
of over 100,000 visits for some of the more popular ones).
216. Visits to the Web site would no doubt be higher if the main FAO portal, organised according
to FAO's opaque internal structure, was itself more user friendly. A significant number of
interviewees told the ET that the FAO site was quite difficult to navigate, and in particular that it was
not easy to find the commodities and trade information. If coming through the FAO homepage, a user
must know that to get to commodities and trade information he or she must click on "Economics and
Statistics" in the side column, to arrive at the page labelled "Economic and Social Department". Again
in the side column, one must find the "Commodities and Trade Division", after which it is easier.
However the majority of visitors come through external search engines such as Google or Yahoo.
Very few of the visitors (only 5-10%) reach the pages from links on other Web sites, an indication
that FAO's commodities and trade resources are either not very well known, or not considered worth
linking to.
217. In terms of origins of users, 35-40% of pages viewed each month are by visitors coming
through the servers in the United States, while no other country even reaches 10%, including the EU
as a group (generally under 5% of page visits). Interestingly, about half of the top ten search phrases
used to reach the site every month are in Spanish, indicating strong interest from Latin America. This
is likely related both to the great importance of agricultural export commodities in the economies of
countries in that region, and to the very active and rather independent FAO Regional Office in
Santiago.
218. The search words and phrases most commonly used in reaching the site indicate that users are
much more likely to come to the site looking for information on horticultural products, both fruits and
vegetables, than any other commodity. Terms like fruits, tropical fruits, citrus, banana, and fruits and
6
Web visit statistics were available only from December 2005 when a new system for collection and analysis of
this data was introduced. Previous data made no distinction between actual visits to the sites and mechanical hits
by so-called 'crawlers' gathering web addresses. The ET was thus able to analyse data from 12-05 to 9-06.
42
vegetables are consistently in the top ten most used search terms. The only other commodities
appearing in a significant number of cases are "sugar" and "pulses", and to a lesser degree, the
Spanish word for "jute". This reflects the fact that FAO is the only global organization that collects
and disseminates information on the so-called 'minor' commodities, including horticultural products.
This supports the ET's view that ESC needs to strengthen activities in this area and be at the forefront
of issues on these types of commodities.
F. Direct Technical Assistance to Member Countries
1. General issues
219. When visiting member countries and institutions, the ET sought to elicit views on the
importance and priority of FAO's assistance and services to them in the area of commodities and
trade. This included their view of where FAO's comparative advantage lies in terms of technical
assistance, and comparing FAO's provision of support to that coming from other sources.
220. Regarding the country level services FAO provides, assistance with multilateral trade
negotiations and provision of data and market information were frequently mentioned, especially in
developing countries. Apart from a few specific cases tied to particular commodities (e.g., tea, hard
fibres), rather lower priority was given to the global intergovernmental meetings hosted by FAO such
as the CFC and the IGGs (see below).
221. Countries were also requested in the evaluation questionnaire to express their views on the
importance of FAO's commodities and trade activities, and were asked for an assessment of current
activities including information and projections, outlook work, policy advice, assistance for trade
negotiations, and the intergovernmental commodity bodies hosted by FAO (the CCP and the IGGs).
Overall, the replies attributed fairly high importance to most of these activities, averaging between 7
and 8 on a scale of 10, with slightly lower scores for the commodity bodies (6 out of 10), as in the
country visits. Direct advice on formulating and implementing commodity policies was also often
given a low score. Regionally, the highest scores were those of Latin America and the Caribbean, the
Near East and OECD countries, and the lowest those of Africa. This result would appear to be
correlated with the importance of international trade issues to the various regions. Table 11 below
gives a summary of the responses.
222. On examining the responses more carefully, two interesting observations emerged. First,
ministries of trade or commerce tended to give lower scores (between 4 and 6) than ministries of
agriculture. This outcome is consistent with the ET's findings from the country visits. That is, except
in rare cases where there was a close working relationship between the ministry of agriculture and the
trade or commerce ministry, the latter were quite uninformed about the services of FAO. Second,
almost all of the responses rated the activities related to the CCP and the IGGs lower in importance
that the other activities listed, which is again consistent with the ET's findings indicating that these
bodies are far less relevant today than when they were created and are in need of some reform.
43
Table 11: Scoring of importance of selected FAO services
(average scores by region on a scale of 1-10 where 10 is the best)
Africa Asia Latin Am. & Near OECD Average all
Caribbean East Countries countries
Information services on world agric.
6.4 7.1 8.9 8.2 7.3 7.6
commodity market situation/outlook
The FAO Committee on Commodity
5.6 6.2 6.3 6.0 6.0 6.0
Problems (CCP) and its IGGs
Advising developing countries on
6.3 7.0 7.6 7.3 7.0 7.0
national commodity policies
Providing comm/trade policy analyses
6.2 7.3 8.2 8.1 7.8 7.5
& support to trade negotiations
223. The questionnaire also sought to elicit respondents' opinions regarding the level and qualities
of FAO's commodities and trade assistance in their country, as given in Table 12 below:
Table 12: Views on FAO's commodities and trade work
Dis- No
Agree agree Res
1. FAO's work on commodities and trade is well known in your country 54% 42% 4%
2. FAO has been responsive to your country's expressed needs in
54% 29% 17%
commodities and trade
3. FAO is not presently addressing your country's needs related to
40% 40% 20%
commodities and trade
4. FAO cooperates well on matters of commodities and trade with other
62% 23% 15%
national and international partners in your country
5a. FAO's work on commodities and trade is useful to the Public
81% 8% 11%
Sector/Government
5b. FAO's work on commodities and trade is useful to the Private Sector 40% 27% 33%
224. Going from last to first we see that the observations made during country visits about the need
for better connections with the private sector are reinforced. FAO does surprisingly well on
cooperation within the country. The issue raised often during the country visits regarding the lack of
visibility of FAO's commodities and trade work is in evidence, and is a clear signal that, as was found
in many countries, FAO is seen as providing only limited country assistance in this field, and was
judged not to be very responsive to country requests when it does.
2. Information and Publications
225. The effectiveness of the dissemination of FAO's information and publications products to
member countries appears to be heavily dependent upon the FAO country and Regional Offices. A
few of the local FAO country offices visited appeared to be very helpful in informing the government
and the private sector about the information that is made available on the FAO website. Most FAO
Representatives were less involved in the dissemination efforts however.
226. The questionnaire asked respondents about familiarity with and use of FAO's commodities
and trade publications (printed or electronic) and the Web site for commodities and trade information.
Of those responding, 88% indicated that they were familiar with the FAO publications, while 73%
were familiar with the Web site (9% left this latter question blank). The perceived usefulness of these
two sources of information received average scores of 6.4 and 7.5 out of 10, respectively, indicating
the increasing appreciation of Internet as a medium for dissemination. However, as could be expected,
African countries rated Web site usefulness at only 5.9, reflecting the more limited access in that
region. On the other hand, OECD respondents averaged a low 5.3 on usefulness of publications,
possibly owing to greater availability of alternative sources in these countries.
44
227. It was clear that ESC should attempt to disseminate its output more effectively, and try to
make sure that it gets to the appropriate people. The concept of e-mail discussion groups that is
already being used by some commodity analysts in ESC is a good idea, as they could be used to raise
awareness of new information becoming available and as a forum for discussion of issues.
228. An excellent example of what FAO can do to very effectively link the policy advice side of its
work with the information side is the highly successful biennial International Cotton Conference,
jointly organized by ESC, China's Research Centre for the Rural Economy (RCRE), and the China
National Cotton Exchange. This event has been an excellent forum for the exchange of information
between producers and consumers, importers and exporters, and traders, as well as between these
audiences and knowledge and support institutions like FAO. Over the seven years that the conference
has been held, the number of participants has grown from 90 to over 700. FAO financial and other
support to the conference is limited but has been very valuable and even critical in getting the
conference started and maintaining its quality.
229. This kind of initiative, where strong interest in the sector means that the host country is
willing also to participate financially, could be pursued for other commodity areas and with other
countries. It is a highly effective (and low-cost) means through which to disseminate the work and
policy advice of ESC to the right people in the right context.
3. Advice to Governments on Trade Policy
230. ESC provides advice to governments in several ways: through direct interaction between
FAO staff and government counterparts in-country or in the context of meetings, through publications
and information materials, or through the intergovernmental fora such as the CCP and IGGs. Much
takes the form of training work, often jointly done with TCA (see section on Training below). As
noted above in Section V.A.1, the main trade policy issues of interest expressed by countries during
the ET fieldwork were (i) health and quality standards and TBTs; (ii) market reforms and private
sector market participation; (iii) marketing value chains or integrated marketing systems; and (iv)
product differentiation. ESC is involved in work on all of these policy areas, but this was often not
known to the interviewees.
231. The questionnaire also asked respondents what specific areas of trade policy that FAO is
working in were of greatest interest to them. With the lone exception of the Near East, all others give
highest priority to FAO services in the area of non-tariff trade barriers, such as sanitary and
phytosanitary (SPS) measures. The Latin American countries average 9.8/10 on this topic. This
follows expectations given FAO's global role in animal and plant health and standards, genetic
resources, and the Codex Alimentarius. There is less uniformity in the other areas, though assistance
with free trade agreements and regional trade agreements are generally assigned a higher priority than
support to WTO negotiations. These results match with responses received in the field, where
interviewees time and again stressed the growing importance of FTAs and regional arrangements.
4. Training
232. ESC has carried out a considerable amount of training in trade policy in developing countries.
It was noted on several occasions that the training has raised considerably the level of discussion
about trade policy. The quality of the training was said by a wide majority of interviewees to be
"excellent". It was also noted by several commentators that the study and training on Special and
Sensitive Products was well done and was proving very useful in the WTO trade negotiations. The
FAO Geneva Office was also commended for the provision of excellent advice on trade policy and
trade negotiations. Of the countries responding to the evaluation questionnaire, 72% had participated
in FAO training activities.
233. However, within FAO Regional Offices there was concern expressed that ESC was working
directly with countries and not working through the specialised regional officers in the Policy
Assistance Branches (under TCA). As a result, the internalization of the training within the region
may not be as thorough as it might otherwise be. This comment was made both by the Regional
45
Office staff and by recipients of the training and their supervisors. It was also noted that training had
mainly involved lower-level staff in ministries and that it would be desirable to attempt to involve
top-level people. The view was also expressed that there should be a greater focus in training on trade
policy rather than only on trade negotiations.
234. In countries, comments were also made to the effect that it was preferable for training to be
undertaken at the country level, rather than at the regional level - similar comments were made with
respect to research. However, such a shift would have important resource implications for ESC and is
unlikely to be possible on a large scale in the near future.
235. ESC has received donor support to assist developing countries to understand the implications
of the Agreements on Agriculture negotiated under the WTO Uruguay Round and in developing
strategies in response to these agreements. Support has also been received for assistance to developing
countries in developing negotiating strategies for the WTO Doha Round. However, it was suggested
that the analysis undertaken in the projects could have gone more deeply into the socio-economic
implications of trade liberalization for the developing countries and their needs in terms of
mechanisms, including capacity building, for coping with the resulting structural adjustments. The
analysis carried out was too focussed on the position of exporters (border protection, SPS, TBTs, etc.)
and did not give sufficient attention to what happens behind the border.
236. While there was support for ESC work in assisting developing countries with negotiating
strategies for the Doha Round, there was concern that FAO should maintain its neutrality and not
attempt to become a part of the WTO negotiation process (a particular example was given on food
aid). For example, during interviews in developed countries the ET heard the view that ESC's
activities in this area - specifically some of the analysis it has undertaken and some of conferences and
workshops it has held - are the prerogative of the WTO, and that ESC should confine its activities to
technical assistance.
5. Results of Country Assistance and Future directions
237. FAO's role in ongoing WTO negotiations is clearly a sensitive area for the developed
countries. This view would appear to stem from a concern that ESC is biased towards the developing
countries in its work in the trade area. If ESC is to continue with its capacity building on trade
negotiations and trade policy analysis and its analysis of food aid issues, there should be an effort
made to have the developed countries understand that FAO values the respect it has earned as a
neutral commentator on these and other issues. On the other hand, while ESC should maintain
neutrality in its analysis of the various positions taken in the debate over trade liberalization, there
does not appear to be any reason for it to remove itself from analysis of priority trade issues nor to
limit its role in assisting developing countries to develop trade policy analysis and negotiation skills.
238. Some countries visited also commented on the need for a clearer strategy for ESC's work on
commodities and trade. The commodities and trade work was seen as unfocused, and seems to change
for no apparent reason. It was argued that the emphasis in the analysis should be on the intermediate
term rather than the short term and on a set of issues that make sense relative to the skills and budget
of the Division. As noted, there was considerable support for the Division's joint work with the OECD
Secretariat on the COSIMO medium-term model.
239. Of the countries responding to the evaluation questionnaire, 78% had received TCP assistance
and 72% had participated in workshops. Asked whether assistance was meeting expectations, these
two types of assistance - TCPs and training - were scored the highest: 7.5 and 7.8 out of 10,
respectively. There were some regional differences: Latin America gave the highest scores, while
African countries gave a lower score to TCP than other regions. This most probably reflects
difficulties noted in project implementation in African countries visited by the ET. When asked where
FAO had not responded to requests for assistance, only 23% of countries responded that this had
happened, and in nearly all cases they referred to requests for TCP assistance that had not led to a
project. This is a common problem, given the very large number of TCP requests received by FAO
each year, only a part of which can be covered by available resources.
46
240. Some suggestions for themes in the Division's work include commodity risk management,
certification and standards, the medium-term international situation in commodity markets, water, and
food safety. There was also an emphasis on the private sector and its increasing importance in
international commodity markets. Work on short-term movements in commodity markets should be
de-emphasised.
241. With respect to the private sector, there were issues suggested relating to supply chains. It was
noted that these mechanisms are becoming more important in trade and little is known about whether
and how to regulate them for desired outcomes, especially for the benefit of smallholders.
242. There was demand for more country-specific research and training by ESC. While this is
desirable, the extent to which it is possible is in large part a matter of resources. Where suitable in-
country research capacity is available, the possibilities for collaborative work could be explored.
Perhaps this is also an opportunity for extra-budgetary funding and cooperation with the TCP.
243. With respect to training, there was concern expressed about the lack of involvement of FAO
country and regional staff. Without their involvement the possibilities for internalizing the training
within the region would appear to be diminished. Aiming training at the highest possible level within
the public sector appears worthwhile, if changes in policies and practices are to be expected.
244. It is clear from the discussions that ESC has to find ways to raise its profile. Some of the ideas
described above could be helpful. A visible and concerted effort towards this end would be well
received by the country representatives. When asked to compare FAO as a source of assistance to
other sources in various aspects of commodities and trade, overall about two thirds of the responses
indicated that FAO's assistance was considered as good as or better than that of others, and one
quarter considered FAO to be significantly better. In two areas however, a significant number rated
FAO worse than others: in policy assistance and in analysis of emerging issues (respectively 19% and
15% of respondents gave this answer). This result is significant since the evolution of the work of
ESC is directing it more towards trade policy and emerging issues. There will be a need for ESC to
better affirm itself as a provider of services in these areas that are not already provided (better) by
others.
245. With the rapid development of product differentiation in the marketing of primary
commodities, it has become difficult to undertake useful commodity market analysis without
information about what is taking place in these fragmented markets. Clearly, therefore, ESC will have
to devise ways to gain access to this information which is mostly held within the private sector.
Partnerships with the private sector would appear to be a direction to explore in gaining such access.
246. ESC needs to make a clear distinction between the commodity market analysis that it is doing
and that of UNCTAD, although there are clearly many areas of analysis and policy in which they can
usefully collaborate.
VI. KEY RECOMMENDATIONS FOR
FAO'S WORK IN COMMODITIES AND TRADE
A. General Recommendations
247. The present mandate of the EST Division is shown in paragraph 42. The new divisional
structure that has been adopted to satisfy this mandate is described in Section IV.C.4 (paras. 48-53),
and the new programme entities for the Division are shown in Table 3.
248. It is a general recommendation of the ET that the Management of the Division continue with
the re-orientation of the Division in the directions reflected in the new divisional structure and
47
the work programme. However, there are strategic issues that the ET recommends receive further
attention. These include:
(i) the development of partnerships;
(ii) the development of incentives to stimulate collaboration within EST, between EST and
other divisions, and between EST and other organizations; and
(iii) the selection of a limited number of priority themes around which to focus the Division's
commodity market and trade analysis.
249. The directions for the evolution of EST that the ET recommends include the following:
a) Reduce the emphasis on short-term commodity market behaviour and increase the
emphasis on in-depth analysis of medium- to long-term market trends and medium-term
projections, including for example through the formation of broader partnerships with the
ICBs in developing the outlook and analysis of commodity markets. The shift towards more
in-depth analysis of commodity markets should help member countries achieve more efficient,
more equitable, and more transparent trade in agricultural products.
b) Develop partnerships with the private sector through ICBs and industry associations to
undertake analysis of supply networks and value chains. The private sector now undertakes
much of the commodity trade, and knowledge about supply networks has become much more
important in understanding commodity market behaviour.
c) Broaden cooperation between EST and other organizations that are involved in
international and domestic markets, including universities, other research organizations,
and NGOs.
d) Continue to strongly support the plans for improving the FAOSTAT system. The
demands on EST to maintain databases for short- and long-term commodity analysis can be
reduced through the planned improvements of the FAOSTAT database.
e) Design incentive systems within EST to expand extra-budgetary resources, improve
collaboration within FAO, and increase partnerships with other organizations. Successful
outcomes will require careful discussion within the Division, including examination of
successful experiences elsewhere, to identify incentives that are compatible with these various
objectives.
f) Improve management of CFC and other extra-budgetary funded projects to overcome
issues of delays and non-delivery of outputs encountered by ET.
g) Select a limited number of thematic areas around which to structure the work of the
Division, promote internal and external cooperation, and enhance dissemination. The
successful use of themes for these purposes should allow EST to become a centre of
excellence in the selected areas and raise its profile internationally.
h) Experiment with different structures for the IGGs, using FAO's convening capacity to
bring together stakeholders from the public and private sectors to improve exchange of data
and information on commodity markets.
i) Maintain the focus of the Division's analytical work on the practical concerns of member
countries. The Division should also continue to make relevant research on commodities and
trade that is produced elsewhere available to policy makers in member countries. A greater
relative proportion of the Division's work programme should be devoted to direct
technical support to member countries - as opposed to headquarters-based activities such as
research, servicing meetings, publications.
j) Given its mandate to provide assistance to individual developing countries on trade and
commodity policies (see bullets 5 and 6 in paragraph 42), EST must ensure that the
results of its analytical work are made available in easily accessible and user-friendly
48
forms (as is being done in the context of a DFID-funded project). Where requested and to the
extent that resources allow, Division staff should also provide training and capacity building
assistance on a country and regional basis.
B. Specific Recommendations
250. The detailed recommendations below expand on the general recommendations made above.
1. Relations with the Private Sector
a) Together with ministries involved in trade, develop programs with major private sector
players in commodity trade. The objective would be to determine on a pilot basis how to
procure appropriate data and undertake joint analysis in order to address trade and marketing
issues. When there is sufficient experience, expand this effort to all willing FAO countries.
b) Work closely with other relevant divisions (ESA, AGS, etc.) to develop a work
programme on selected value chains/supply networks to determine how they operate and
how FAO can work with the private sector and governments to expand marketing
opportunities for developing economies. This analysis should also yield information about
how to regulate these markets.
c) Work closely with other divisions to assist in the development of institutions that will
allow smallholders to participate in integrated marketing networks. This work will enable
countries to ensure that the benefits of trade are widely distributed.
d) Expand the work programme on certification and private specifications and standards
for agricultural products, which is aimed at evaluating their impact on the trade of
developing countries.
2. Government
e) Identify channels of communication in member governments for the discussion of
commodity trade matters and the distribution of information about commodity trade. These
links should become part of FAO's set of contacts with member governments. Ensure that
trade related materials and information are disseminated to all relevant ministries in
member countries.
f) Develop a programme of conferences or training sessions on agricultural trade for the
staff of the ministries with direct or indirect responsibility for trade (see recommendation
A(j)). These activities should be carried out with and through TCA decentralised staff. The
purpose of this training would be to build the capacities of the ministries in marketing and
trade of agricultural products. Private sector stakeholders should be included in these
training sessions. Ministries must be able to work with these agents if they are to design
effective trade and marketing programmes.
g) Give close attention to bilateral and regional trade agreements and their interaction with
multi-lateral arrangements, in addition to continuing the work being done on WTO issues.
Many countries attach great importance to the impact of these trade agreements.
h) Work with governments to increase cooperation on agriculture commodity trade between
ministries of agriculture and trade, commerce and other ministries.
i) Do further analysis of the consequences of health and safety standards for developing
country trade in agricultural products.
3. International Commodity Bodies (ICBs)
j) Develop stronger partnership arrangements with these organizations to enhance
commodity market analysis. The ET specifically noted the importance of promoting
cooperation with the International Grains Council on grains, oilseeds and rice. Elements of the
49
existing arrangements with the International Coffee Organization and the International Cotton
Advisory Committee could be used in setting up this cooperation. Other possibilities for
development of partnership arrangements are ICBs for cocoa and sugar.
4. U.N. Conference on Trade and Development
k) Coordinate work programmes more effectively with UNCTAD. The ET found the work
programmes of the two organizations appear to be dealing with similar topics, and therefore
closer collaboration to nurture complementarities would be of great benefit to member
governments.
5. The Committee on Commodity Problems (CCP)
l) Use the CCP agenda to bring key issues more effectively to the forefront, such as
mechanisms for lowering transaction costs of smallholder participation in marketing chains,
development of commodity risk management instruments, impacts of private standards and
health and safety standards on agricultural trade, and interrelationships between bilateral and
regional trade arrangement and WTO agreements. To encourage the participation of officials
from member countries with in-depth knowledge of trade issues relating to agricultural
products, the ET recommends holding occasional CCP meetings in Geneva.
6. Inter-Governmental Commodity Groups
m) Encourage involvement of the private sector and NGOs more directly in the IGGs. This
can be done, for example, through greater inclusion of these stakeholders in the government
delegations, as well as by conducting informal sessions in connection with the IGG meetings
(as is being done to some extent already). Pursue the concept of regional meetings on
commodity market and trade issues of particular interest to the region (something which the
Division has already begun) to the extent that resources allow. This could be an alternative to
the present format of some of the IGGs.
n) A further alternative for the future of the CCP and the IGGs is that meetings of the CCP and
the IGGs could be held jointly in Geneva with UNCTAD and WTO. A week of meetings and
events could combine the CCP with short meetings of the IGGs, bringing in a wider range of
participation. Informal sessions including private sector and industry representatives could
focus on emerging issues for commodities and trade and inform trade negotiators and lobbyists
of particular interests of the sector, while formal sessions would permit discussion of markets,
trade and commodities outside the strict negotiating framework of the WTO. Means to include
representatives of the private sector in the formal meetings through some agreed mechanism,
such as possibly including them in government delegations, should be a priority.
7. FAOSTAT
o) EST commodity analysts should continue to be an integral part of the planned upgrade
of FAOSTAT (see recommendation A(d)), contributing their skills and knowledge to
updating and upgrading the quality of the FAOSTAT data related to commodities and trade.
More timely and better quality commodity and trade data maintained within FAOSTAT
should reduce the demands on EST and allow more time for economic analysis and
intelligence gathering. Analysts in member countries would also be in a better position to
undertake short-term analysis.
8. NGOs
p) More effectively engage relevant NGOs in the policy dialogue, such as through convening
an annual or biannual NGO conference on commodity and trade issues. Many NGOs have
become a major force in discussions of development policy, including commodity and trade
policy.
50
9. Research Institutions
q) Increase cooperation with academic and other research organisations, in particular in
developing countries. A major focus of these cooperative efforts could be to assist in
developing data systems on private sector involvement in domestic and international markets
to increase capacities in this area. Also, they could work with the relevant ministries in
building capacity in the analysis of marketing and trade. This could be done with modest
financial support and the cooperation of the FAO Country Representative.
C. Divisional Issues
251. In addition to the recommendations on the external forces affecting the Division (section B
above), there are important issues within the Division on which the ET wishes to make
recommendations. These are listed below.
1. Modelling Capabilities
a) The ET recommends that EST be careful not to over-commit to the maintenance of large
scale models. If the Division wishes to make use of large scale models that are not in-house,
they can be accessed by partnership agreements with organizations that operate them as their
speciality. The one large scale model that we see as essential to the new structure of EST is
COSIMO. This model provides the capacity to draw the ICBs into cooperative short-term
outlook work and forms the platform for the normative work on trade and marketing. It is also
a capacity that can be enhanced by partnership agreements similar to those with OECD, for
example, with the larger, more advanced developing countries.
2. Incentives within the Division
b) The Division should adopt an incentives system that is compatible with its objectives of
enhancing collaboration within and outside the Organization and raising extra-
budgetary funds (see recommendation A(e)). The incentives should be easy to understand
and communicate, enforceable, transparent and consistent, but not be so "hot" as to encourage
unproductive behaviour.
3. Communications Strategy and Dissemination of Publications
c) The Division must develop a Publications, Information and Dissemination Strategy,
possibly with the help of an external consultant. The idea of organizing the Strategy around
the key themes of the work programme should be considered. Other ideas to consider in the
development of the Strategy have been suggested in the report.
4. Thematic Research Areas
d) EST should adopt a limited set of themes for its work programme. Selection of these
themes should reflect EST's comparative advantage and be forward-looking. The objectives of
selecting the themes would be to communicate to the global research and development
community the work areas identified, and to establish the Division as the main source of
information within FAO on the topics selected. The identification of themes would also
promote the development of partnerships with other international agencies and the private
sector. An Appendix to this report contains some possible themes with suggestions for
potential partners and ideas about the way in which the work in these areas could be developed.
D. Recommendations at Corporate Level for FAO to Consider
252. In the course of the evaluation, the team came across several issues that are not within our
charge, but that should be mentioned to FAO as possibilities for change that could improve the quality
51
and productivity of FAO work on commodities and trade. In part, they are linked to the three issues
that underlie the recommendations made in this report: partnerships, incentives and themes for EST
work. These corporate level issues are listed below, with a few related comments.
1. FAO Representatives
a) The in-country FAO representatives are key to the ability of FAO to assist countries with
their commodity and trade policies. The ET encountered highly variable levels of capacity
in the FAO Representations visited. This finding is consistent with the conclusions of the
Evaluation of FAO's Decentralization conducted in 2004. If FAO's commodities and trade
work is to be effective, it is essential for these Representatives and their staff to carry out
various tasks, such as: acting as neutral convenors bringing together key agencies, ministries,
industry and traders' associations, NGOs, etc.; alerting relevant FAO technical divisions in
Rome and Regional Offices of assistance needs and issues in commodity markets and trade;
where possible, gathering key information on commodity production, marketing and trade;
ensuring effective dissemination of EST publications and information; and identifying training
needs.
2. Rationalising ESA, EST and TCA Divisions
b) The divisions undertaking activities related to commodities and trade are set up in ways that
may have been appropriate several years ago but these arrangements need reconsideration
given the current state of commodities and trade. External commodity markets and internal
markets and agricultural policy are tightly interlinked, with international trade now such a
major factor. Thus the way in which work is divided between EST and ESA (and possibly
also AGS) should be the subject of a careful examination to find the most rational
organization for FAO's work in economic analysis of agricultural production, marketing and
trade. As a corollary, the ET notes that the divisional separation of the early warning system
and the food security work appears counter-intuitive.
c) In a different way, there is an issue with TCA, which is essentially an extension division,
bridging between the normative and policy analysis work in headquarters and the needs of the
field. The ET noted inadequate linkages between the research and analysis-oriented work of
EST and the work of TCA decentralised units in the regions. The problem could be alleviated,
at least in part, if EST follows the recommendation above to focus its activities around a
limited number of selected themes.
3. FAOSTAT
d) FAO has plans that will make FAOSTAT much more useful to member countries for
commodity and policy analysis. The ET believes strongly that the upgrading of FAOSTAT
should be given the very highest priority by the Organization. The database and its
accuracy and scope are critical to the work of FAO and to the service it provides to its member
countries.
4. FAO Interaction with the Private Sector
e) FAO must find ways to increase partnerships with the private sector because of this
sector's greatly increased involvement in agricultural marketing and trade. Thus, the question
is not whether to do it, but how. EST is well placed take a leadership role in promoting this
corporate change. In establishing these relationships, the ET recognises the possibility of
conflicts of interest in private sector engagement and the difficulties posed by differences in
culture between the public and private sectors.
5. Incentives
f) Incentives are important if FAO is to become a centre of excellence for the development
and dissemination of knowledge (as suggested in the recent Director General's Reform
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Proposals). In the estimation of the Evaluation Team, the incentives of FAO are too dull for
the competition that FAO faces. This issue is related to both Agency and UN System human
resources policies, but needs to be addressed to introduce greater flexibility in human resource
management. Incentives should encourage the attraction of funding from donors, collaboration
across divisional and departmental boundaries, and collaboration with external partners.
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APPENDIX:
SUGGESTED THEMATIC AREAS FOR THE WORK OF EST DIVISION
253. EST should consider selecting a limited set of themes to provide added focus for the
Division's analysis. These themes should reflect EST's comparative advantage and be forward-looking
in the sense of giving a feeling of current relevance of the work of the Division. The objectives of the
themes would be several: to communicate more effectively with the global development community;
to establish the Division as a major source of information within FAO on the topics selected; to
promote collaboration within the Division and with other divisions: and to promote the forging of
partnerships with other international services providers and the private sector. The following list
provides examples of themes for consideration by the Division.
1. Integrated Marketing
254. Integrated marketing is increasing rapidly in international trade. Generally it takes form in
supply or value chains. Large retail grocery firms in Europe were among the first to succeed in their
implementation. The ET's field discussions indicated that this way of organizing commodity markets
and trading will only accelerate. There are many unanswered questions about the consequences of
these integrated marketing systems for economic development. How well will smallholders be able to
participate? How should these international marketing networks be regulated? What is their impact on
domestic supply and demand? What are farmers' rights in the networks and will the distribution of the
benefits and costs be equitable? Is there a question about the monopoly position of the sourcing firms?
255. These and other questions have led development agencies to begin to focus research and
analysis on these marketing systems. Work is already underway at the World Bank, IFPRI, the private
sector, and FAO. In FAO, for example, AGS, ESA, TCA and EST have undertaken projects designed
to learn about and manage these integrated marketing systems. EST could take the lead within FAO
on aspects of this work and manage the collaboration with outside groups interested in similar
activities, thus giving more coherence to the work in FAO. This will likely be an area of normative
analysis that will be of interest to developing economies for a significant period, and one in which the
development of new roles for government and the private sector will emerge.
256. This area of normative analysis has close links with other topics that the Division could adopt
as themes for its work programme. These are Standards and Certification and private sector health and
quality standards, Commodity Risk Management, and Trade and Development. Some of these
possible thematic areas are also discussed below.
2. Food Aid
257. Food Aid is gaining increased prominence as the Doha Round comes to a close. Aspects of
this issue are highly relevant to FAO, which has responsibility for the early warning and food security
work. Other international agencies and national governments are also involved. The World Food
Programme, the EU, the USA, and the NGOs are examples of countries and organizations that will
probably be forced to modify their programmes following a Doha Round agreement. About two years
ago FAO adopted a policy of developing a "suite" of food security indicators, only one of which is the
availability measure used today (the document on which the policy was based can be found at the
URL: http://www.fivims.net/static.jspx?lang=en&page=ISS). Another indicator was based on
household surveys and food intake - which is different from food availability. In addition, there was
the directive to use anthropometric measures if available - which measure longer-term effects of food
insecurity. Finally, rapid assessments - to gain rapid, on-the-ground knowledge about the scope and
magnitude of food security crises - were included in the suite.
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258. With the restructuring of FAOSTAT, FAO, in particular EST, will be in a unique position to
become the global leader in food assistance. Cooperative programmes could be set up with the
previously mentioned partners and others, to gain a good understanding of the implications of the
Doha Round agreements on food aid, and to make sure that the countries that need it are in a good
position to know the new regulations and their implications This is an area where EST could adopt a
theme that would be somewhat short-lived but gain it considerable visibility in the development
community and among the developing countries and the donors. It could also be a programme in
which FAO could work with NGOs in an effective way.
3. Trade and Development
259. Trade and Development is a useful title for a set of issues that are of enormous importance for
those developing countries that are not achieving robust economic growth and development. On the
supply side there is the critical issue of supply response in countries that are (or should be) striving to
achieve growth as trade in agricultural products is liberalized. Often, the liberalization of trade
exposes many in-country constraints to achieving potential supply responses to the new set of relative
prices.
260. Unfortunately, it is often government interventions that are at the root of the poor or slow
supply response. Possible areas for attention are: (i) political constraints, e.g. that may hold
production to plans fixed for reasons of past commitments, to processing, for example; (ii) financial
constraints due to the structure of the credit system; (iii) the land tenure system; (iv) markets that are
not developed or where instruments that are needed for the market to operate are unavailable, such as
warehouse receipts; (v) monetary and exchange rate policy; and (vi) availability and allocation
schemes for water and other resources that have a history of misallocation that is difficult to change.
261. Demand side changes are also an issue ranging from: (i) the development of integrated
marketing systems that are not available to all producers; (ii) government standards and certification
and health and quality standards set by the private sector; (iii) distribution issues; (iv) the need for
new institutions to fill gaps in the food production and distribution system; and (v) price setting and
stability for producers that are tied to trade. Problems arise in that policies in many countries are
developed without adequate attention to marketing and trade developments, because it has not been
important in the past. When trade begins to occur or for that matter fails to occur, policies have to be
implemented and institutional changes have to be fostered to take advantage of the opportunities that
the liberalization of trade presents.
262. Other divisions within FAO and other organizations are beginning to address these constraints
in one way or another. For example, within FAO there are divisions that address land tenure issues,
access to credit, agricultural policies, as well as Codex and the IPPC. EST could develop partnerships
that would provide some structure for analysis across the many issues involved.
4. Emerging countries able to change international commodity markets: Brazil, China and
India
263. The rapid evolution of agricultural and economic development in Brazil, India, China and
other major countries can present major puzzles for the development of agricultural and trade policy.
These countries are large consumers with, as of yet, untested capacities of their agricultural sectors in
deregulated systems for domestic supply. Significant questions will emerge as these countries choose
paths to growth and development, especially if they continue to grow in population and income at the
rates seen during recent years. There is need for careful analysis of the agricultural policies of these
countries and for longer-term analysis of the impact of their economic growth on world food markets.
264. EST, in partnership with other divisions and the countries themselves, is in a good position to
carry out this analysis. These countries are members of FAO and would probably welcome FAO's
collaboration in undertaking such analysis. This would also provide FAO and EST with the
opportunity to develop working relationships with the analysts and institutions in these countries. This
could be a new way of discharging the responsibilities of the economic policy divisions of FAO,
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working with, not for, the ministries and other institutions in developing good policy advice. As the
capacities of countries evolve, FAO may take a very different role in providing policy and training
services - working more with the countries in developing the policy advice than as a technical
assistance organization.
5. Production of Bio-fuels and Materials
265. Bio-fuels and materials produced from agricultural products are an increasingly topical issue
for food production and trade and for agricultural markets. Currently, prices of fossil fuels are
sufficiently high that at existing grains and oil seed prices these bio-fuels and products are
competitive, both in-country and internationally. Moreover, the technology for a bio-based versus a
petroleum-based economy world-wide is progressing fast enough that the question is really when, not
whether, the world will move to a bio-economy.
266. What would the shift in the use of agricultural products towards energy and materials use do
to the world food situation? Is there sufficient capacity to increase supplies of fuel and materials
inputs from agriculture at prices that are in the range we have come to expect for basic agricultural
products? Answers to these and other questions about the trade-off between agricultural products for
food and energy and materials need much closer analysis than they have had to date. This is a
comparatively new area for serious analysis, yet it is one that could be a signature research area for
the commodities and trade focus of EST and other divisions involved in the commodities and trade
work of FAO. It is a topic on which EST could cooperate with ESDG, for example. Organizing a
major project on the bio-economy could be a way to establish EST and FAO as an organization not
afraid to take on radical technologies and examine their impacts on the world food situation.
6. Commodity Risk Management
267. Commodity risk management through the use of derivatives has become more accepted as a
field in trade and development work. The idea is simple. Countries, individual farmers, farmer
organizations, and others up the food chain can determine the amount of risk that they want to take
and use derivatives markets to hedge the unwanted risk. This does not mean that there must be a
commodity exchange in each country. Simple exchanges that have forward contracts, for example,
can suffice to make the spreading and transfer of risk possible. In fact, these concepts are at the heart
of the derivatives approach - spreading and transferring of risk.
268. A major issue with this approach to the management of commodity price risk is with respect
to the ability of smallholders, relative to that of large farmers and other organizations, to participate in
the use of commodity risk management instruments. There are several possibilities for helping
smallholders benefit from commodity risk management. All include some type of holding
organization that can make the transactions economically feasible for the smallholders. This is
especially important now that stock holding is not fashionable and trade barriers are coming down,
exposing small and large holders to international market price risk. The same is true for governments
that may, for example, be purchasing staple commodities for distribution or receiving revenue from
export sales. The answer is to use the derivatives markets to transfer or share the risk that the
government is in position to take. Interestingly, this is an answer to the price instability problem that
was used to justify the establishment of many of the existing commodity organizations, and that is
surfacing in the current WTO discussions. As well as helping farmers manage their price risk, the use
of derivatives can also help them to access capital by becoming more creditworthy. Related measures,
such as institutionalizing part of the supply chain (such as warehouse receipts) can also provide
assistance in accessing credit. Production risk is another major risk faced by farmers. New
developments in the derivatives markets, such as weather-indexed bonds, are possibilities for
managing production risk.
7. Standards and Certification
269. Standards and certification are coming into play in world markets for two important reasons:
First, governments are adopting safety and hygiene standards to protect consumers. These are roughly
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in four categories: chemical, pesticide, microbiological and disease. However, there is a big difference
between the developed and developing nations in terms of their ability to certify that products are free
of these types of risk. Tolerances are in many cases such that highly accurate instruments are required
for testing and certification. These are not generally available in developing countries. Another
approach to certification is the use of ISO standards for production and food processing systems,
again a problem for developing countries. These problems have in many cases cut the developing
countries out of access to developing country markets. There is a claim that the developed countries
know this and set standards that make it impossible for the developing countries to access their
markets, that is, the use of technical barriers to trade (TBTs).
270. Second, the largely private standards can also become an obstacle to trade for developing
nations. These standards are more related to packaging and size and grading standards that are
designed to make products appealing to consumers. Again, there is a difficulty for the developing
countries. Producing to specifications, advanced grading and packaging systems, and other
technology requirements are not available in developing countries. These can also be major trade
barriers to the countries that wish to increase participation in international markets. Many of these
private sector trade barriers are related to the supply or value chains mentioned above.
271. At issue here is the way in which developing countries and smallholders within developing
countries can come into compliance on an economic basis. Should the approach be to use ISO
methods to achieve certification? Should countries seek to become certified as disease free? Should
countries collaborate in developing the capacity to certify by machines? These and other questions are
a concern to developing nations. In future, they will likely become even more constraining. EST is in
a good position to become a leader in this area of inquiry. Codex is situated within FAO. Other
divisions work with animal and plant pests and diseases, the IPPC and SPS-related issues. Pesticides
and chemicals are well known at FAO. A major area of service to developing nations could be
developed with significant partners within and outside of FAO.
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