De Maria -- A legacy of change

by Emily Wilson
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In the new round of World Trade Organization talks in Doha at the end of last year, agriculture and the developing countries played a key part in the negotiations.

This is in stark contrast to the talks in the early years of the General Agreement on Tariffs and Trade when, 30 years ago, agriculture was considered too important to individual nations to permit any interference with protective trade measures. At that time, developing countries, on their part, were largely expected to sit on the sidelines while the leading industrial nations took the decisions.

The contrast is particularly marked for Bill De Maria, a former executive of the International Grains Council, who has been part of the international trade scene for much of his working life.

Delegates to the annual conference of the International Grains Council have become familiar with the friendly face of De Maria, who was deputy executive director of the Council until his retirement last autumn.

The conference was one of De Maria’s solutions for improving the finances and raising awareness of the organization at what was then the International Wheat Council. He proposed the idea in 1990, and the first conference was held in 1992.

In addition to staging an annual international conference, De Maria also suggested cutting down the number of meetings, expanding the distribution of the Council’s statistical information and developing contacts with the press.

The conference has become a major event on the international grain scene and has done much to bring together government-controlled trade organizations and the commercial sector. It has also attracted interest from newly emerging grain exporting countries. It is through the increased involvement of the commercial trade that De Maria believes the future of the Council will lie.

The importance of building contact points for people with widely different priorities has, for De Maria, come from a lifetime’s experience in agriculture, both at the practical farming level and in the apparently remote stratum of international trade negotiations.

A lifelong passion

Born in London, one generation removed from the rural Swiss region where his father was born, De Maria always felt his rural background was still very close to the surface. He grew up with a romantic view of farming and the countryside.

When De Maria began to work on farms in England, he quickly realized that there was no future without money to buy land. He moved to Switzerland and got a job with the Swiss advisory service, which was just starting to introduce farmers to the principles of business management.

In the late 1960s, by then with a young family, he decided to apply for a job with the GATT in Geneva. The General Agreement on Tariffs and Trade was formed in 1948 to encourage free trade by reducing protective mechanisms such as tariffs, quotas and subsidies. In the 1960s and ‘70s, it was mainly involved in trade negotiations between industrialized countries over manufactured products. With the food shortages of two world wars still fresh in their memories, many participating countries considered agriculture too important to be put at risk by removing tariffs and subsidies.

It was with De Maria’s early work at GATT on studies into preferential trade and the preparations for the Tokyo Round of trade talks, that he began to realize how much the developing countries were marginalized in the negotiations. The delegates had very little experience of international trade and little support from their governments.

"There was a huge gulf in negotiating expertise between the big industrial nations and the developing countries," he said.

The changing attitudes to agriculture in international trade negotiations did not begin to emerge, De Maria said, until the 1980s when the impact of the surpluses produced by the roller coaster of the European common agricultural policy began to be felt on world commodity markets — markets traditionally dominated by North American, Australian and New Zealand producers.

There was much criticism of each other’s systems of agricultural support. "But in reality," he said, "when it came to subsidies, everyone was a sinner."

New trading patterns began to emerge in the 1980s and prompted the long haul to the Uruguay Round talks that finally resulted in agreement in 1993 to reduce export support and production subsidies to farmers over a period of six years.

The Uruguay Round was not only the first time that agricultural products formed an important part of the negotiations, it was also the first time that developing countries took a more prominent part and began to be heard.

"Until then," he said," they had been operating at a disadvantage and they were right to wake up the industrialized world."

Founded on wheat

Long before this, however, De Maria left the GATT in the mid-1970s to join the International Wheat Council after having come across one of the Council’s reports in the GATT library.

The International Grains Council, as it is now called, has its origins in the depressions of the 1920s and ‘30s. The agricultural industry around the world was facing ruin from over-production and rock-bottom prices. A Wheat Advisory Committee was set up as a forum between leading exporting and importing countries to discuss the problems.

An International Wheat Agreement came into operation in 1949, becoming the first in an ongoing series of intergovernmental cooperation arrangements. Its aim was to create stable prices for producers and assured supplies for importing countries. In the same year, the Committee was reformed as the International Wheat Council and set up headquarters in London.

A series of wheat agreements were made in the 1950s and early ‘60s until crop failures in India in the ‘60s cut world stocks of grain and raised fears of food shortages. The old-style wheat agreement collapsed but was replaced with a new International Grains Arrangement in 1967 that had two arms — a Wheat Trade Convention and a new Food Aid Convention, under which 17 developed countries and Argentina undertook to provide specified amounts of grain each year to developing countries as donations or on concessional terms.

The Wheat Trade Convention collapsed under pressure of more surpluses, but the Food Aid Convention continued, providing a crucial link in the transfer of grain surpluses to areas of greatest need.

In the early 1970s, huge and unexpected purchases of grain by the Soviet Union slashed world grain stocks and raised prices to unforeseen levels. Amid concern about the security of world food supplies, the United Nations organized a World Food Conference in 1974 at which it was agreed that at least 10 million tonnes of grain should be provided annually as food aid. Governments were encouraged to look at ways of setting up grain reserves situated at strategic points.

In 1978-79, the IWC tried to negotiate a new wheat agreement with economic provisions for international grain reserves, which would be held nationally but controlled internationally. The project did not succeed. This was partly due to changing attitudes in the US. It also foundered on the difficulty of deciding the size of the stocks, the price ranges and how stocks were supervised.

Above all, De Maria said, there was the problem of setting up a system that could not be exploited by the powerful international grain traders. As one trader told him at the time, "You make the rules and we’ll find ways to work within them."

Despite the failure to reach a new agreement, work continued through successive extensions of the Wheat Trade Convention and the Food Aid Convention. In 1995, a new International Grains Arrangement came into operation and the Council’s name was changed to the International Grains Council.

A greater scope

The International Grains Arrangement incorporated a Grain Trades Convention and a closely linked Food Aid Convention. A new Food Aid Convention was agreed on in 1999 that aims to improve the efficiency of food aid operations. The Convention has also been extended to cover, in addition to grains and pulses, edible oils, skim milk powder, sugar, seeds and other products forming essential parts of traditional diets in developing countries. Food aid continues to be a major part of the Council’s work.

Meanwhile as grain production and marketing began to move away from state regulation, the need for formal agreements decreased. However, requirements for statistical information on production, stocks and trade increased.

Until the early 1970s, only very limited independent market information was available. The main source of statistics on world production and stocks was the U.S. Department of Agriculture. With its international membership, the IWC was in an ideal position to collect and distribute the relevant data, so it began to produce a regular market report with up-to-date statistical information.

Since then, the market information service has been expanded and its scope widened — helped by the enthusiasm of De Maria, who was responsible for editing the market report for most of his 25 years with the organization. In the last few years, with the help of new technology, additional weekly and daily bulletins have been provided for IGC members while the distribution of the monthly statistics has been widened.

De Maria believes the market information and the annual conference have played an important part in making the work of the Council more widely known. At the same time the availability of independent statistics — information once jealously regarded as exclusive to the secretive world of the international grain companies — has become a key factor in the relative stability of world grain markets.

In the 1960s and ‘70s, the Council and world trade was dominated by the big importing and exporting countries, some operating through official agencies like the Australian and Canadian Wheat Boards. The Soviet Union was the world’s largest grain buyer, and most people thought the Soviet market would continue indefinitely, De Maria said. Then the USSR collapsed, and its livestock industry shrank. Imports plummeted producing a fundamental change in the world’s grain trade.

Looking forward

At the beginning of the 21st century, De Maria foresees major changes in some areas but believes there will remain more of the same disagreements that have dominated the scene in the last 40 years.

One of the biggest changes will be the opening up of China to world markets following its membership to the World Trade Organization in 2001. If, as seems likely, Chinese food consumption patterns evolve as people move away from the land into the towns and cities, China could become a major importer of wheat. At the same time access to more realistic information on China’s own grain production as a result of WTO membership could require a fundamental review of most existing statistics.

Developing countries will, De Maria believes, become bigger buyers on world markets. The major problem will be establishing prices at levels that they can afford to pay and at which farmers in the developed world can afford to produce. But they will also need to develop their own agriculture. Unlike the prosperous, over-supplied industrial countries, they really need the benefits becoming available from genetically modified crops to enable them to produce crops with fewer pesticides and in inhospitable areas, he says.

In Europe, De Maria believes the Eastern European countries will be accepted into the European Union for political rather than economic reasons. How much their grain production expands depends very much on future developments in land ownership, farm structures and access to good business management, he suggests. They have huge production potential, he said, but lack resources to buy inputs such as fertilizers, which they manufacture in large quantities but export to Western countries in exchange for their strong currencies.

In the west, he believes farm support will be re-targeted. He is philosophical about agreements and undertakings to cut back production grants that frequently re-emerge as export subsidies. "It could be argued that any kind of support is, after all, a subsidy," he said.

Despite attempts by some politicians to marginalize agriculture, De Maria believes passionately in its importance.

"Agriculture is special," he said, "because so many other industries depend on it. It just depends how special you can afford to be."

"In any case," he said, "it’s no longer just about food production. At the regional level it is not only about ensuring that farmers maintain food output but also about fulfilling social and environmental requirements."

As one of the early exponents of supporting specialist local enterprises, he believes that countries should be given some discretion to spend agricultural funds on supporting production in particular areas.

"The old idea of competitive advantage has been redefined by technology," De Maria said. "In effect you can now grow anything anywhere. The only limitation is the cost of production. The important thing is to underpin the rural economy. For instance, reindeer farming in Finland is a viable part of their culture."

The role of the IGC

As world trade has changed, the IGC has also changed markedly over the years. It is still tiny with a staff of 17 and an annual budget of just over $2 million. Yet it plays a pivotal role in the international grain trade and maintains a unique position through its operation of the Food Aid Convention. It is now more widely known thanks to the high quality of information it publishes and a more open relationship with the press. The annual conference, which will mark its 10th anniversary this year has also been an important factor in widening an understanding of the Council and what it does.

Above all it has brought together government representatives and commercial companies. De Maria believes that this relationship is crucial as international trade moves further into the hands of commercial organizations. At the moment, the Council is funded by governments according to their share in international trade, but he believes this will have to change with commercial companies being granted some form of membership of the Council and contributing to its costs.

Other international trade organizations could also become affiliated to the Council, he thinks. More countries should be attracted to join as they become involved in international trade. China, he said, could be a prime candidate now that she is a member of the World Trade Organization.

De Maria takes a pragmatic view of the changes that he believes will only come about if people want them. This comes from his years of experience in agriculture at farm level and in international negotiations. He believes it is especially difficult to force cultural changes that go against a nation’s philosophy.

He describes as an example a conversation with a Japanese delegate during a session of trade negotiations in which Japan was criticized for the level of protection given to its rice farmers. "We know this distorts the market," said the delegate, "but have you ever seen moonlight on a paddy field?"

Such views, De Maria said, could continue to influence government decisions on systems of agricultural support.

IGC Members

Exporters:

Argentina

Kazakhstan

Australia

Turkey

Canada

Ukraine

European

UnitedStates

Union

Hungary

Importers:

Algeria

Korea

Cuba

Ivory Coast

Malta

Tunisia

Ecuador

Morocco

Egypt

Norway

India

Pakistan

Iran

Panama

Japan

Russian Federation

Kenya

South Africa

Switzerland

Vatican City

Food Aid Committee Members:

Argentina

Norway

Australia

E.U. and member states

Canada

Switzerland

Japan

United States

Conference targets trade opportunities

This year’s IGC Confer-ence will take place June 20, at the Queen Elizabeth II Conference Centre, London. Under the theme "New Milling Markets – Opportunities for Trade," the conference will focus on the implications for grain markets of the rapid changes in the industries which process wheat and coarse grains.

Grain processing industries worldwide generate over $30 billion worth of international trade in grain annually. As the pace of change in the industry accelerates, grain producers and traders will face new competitive challenges and opportunities.

Speakers at the 2002 Conference represent: China; European Commission; National Milling Federation, Morocco; Seberang Flour Mill, Malaysia; AWB Ltd., Australia; Barilla, Italy; Bunge, Brazil; GAFTA; NABIM, U.K.; U.S. Grains Council and the U.S.D.A.

A full report on the meeting will appear in a subsequent issue of World Grain.

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