GAFTA strives for global presence
November 01, 1993
by Teresa Acklin
Association sees services expanding as agricultural trade is liberalized.
For Aat Braakenburg, a Dutch grain and feed merchant, being the first non-United Kingdom president of the Grain and Feed Trade Association makes him more than a symbol of new-found internationalism at the London-based association.
His appointment also gives him the opportunity to assure that GAFTA carries out specific programs aimed at expanding its membership around the world. This is primarily being done by increasing awareness of the association's services and its commitment to the liberalization of trade in cereal grains and other diverse commodities that come under its broad umbrella.
Trade policy issues associated with minimizing governmental interference with trade in grains, feedstuffs, oilseed cake and meals, and rice the major commodities GAFTA members deal in provide much of the focus for enlarging the association's membership and global influence. But its basic work in contracts and arbitration, as well as in trade-related education, continues to receive active attention.
In an interview at GAFTA House on the eastern edge of London, Mr. Braakenburg, joined by Pamela Kirby Johnson, director general, said that, at the mid-point in his year's term as GAFTA president, he believed the organization was well on its way toward shedding any parochial British image it might have had. Indeed, he and Mrs. Kirby Johnson looked to the hoped-for completion of the Uruguay Round negotiations under the General Agreement on Tariffs and Trade, with its focus on reforming and liberalizing trade in agricultural products, as opening new vistas for GAFTA growth and services.
“We are committed to free trade,” Mrs. Kirby Johnson declared. She acknowledged that “this realistically means the freest possible trade, conducted without unduly complicated restrictions imposed by governments.”
Expanding role in E.C. issues.
She and Mr. Braakenburg expressed pleasure with the expanding role of GAFTA in dealing with specific problems raised by the start of the Single European Market at the beginning of 1993. This has involved considerable work with the European Commission and its “expert committees.” They pointed out that GAFTA recently was asked to present a viewpoint on proposed E.C. regulations regarding the labeling and analysis of feed ingredients, as well as environmental regulations that would have classified some feed ingredients as “waste.”
As a result of a highly professional approach to these matters, they were cautiously optimistic that the Commission would rule in a way that would facilitate, rather than hinder, international trade in feedstuffs.
GAFTA has worked with the Commission in Brussels on matters having to do with the value-added tax collected at national borders, as well as the handling of tenders in E.C. purchases of food aid supplies. They noted that GAFTA, even though it is not one of the traditional bodies dealing with the Commission, was selected for this advisory role because of appreciation at the Brussels headquarters of the Commission for the expertise of its membership and its ability to present a convincing case.
An important step to facilitate this role occurred in April, when GAFTA officially took over the secretariat of the Federation of Commodity Associations, an E.C.-recognized group. The aim is to develop the federation's activities for the benefit of its member commodity groups while allowing increased coordination of activities among various trade associations.
A proactive approach.
Mr. Braakenburg and Mrs. Kirby Johnson pointed to this relatively new role in dealing directly with the Commission as evidence of a decision by GAFTA to become “proactive,” which they described as quite different from the “reactive” process of the past.
“We see our task as one of being alert to and aware of the issues that are likely to affect our membership around the world, of quickly moving to address and to seek to correct problems,” Mrs. Kirby Johnson said. “We are trying to show leadership in such areas as sampling and analysis, where the trade has an interest in the harmonization of rules and regulations as well as in the licensing of laboratories.
“We need to stay one step ahead of the government regulators, to drive for quality, efficiency and transparency in international trade and to take the wind out of the sails of those who would expand regulation. One of my main goals is to get there a little quicker with the right answers.”
Mr. Braakenburg noted that the first six months of his term as GAFTA president turned out to be much busier than he had anticipated. But he obviously delights in his ability to spur on the association, through its staff and its membership, not only in building an international reputation, but also in reaching out to existing and potentially new member companies around the world.
In emphasizing GAFTA's potential as trade is liberalized, he noted his recent participation as GAFTA president in the Chicago Board of Trade's start of early trading, which was designed to capture an increasing share of global trade in grains and other agricultural commodities.
“I made it clear to exchange officials that GAFTA can be of service to the exchange in helping to adapt its own rules to fit in with a liberalized world trading system,” Mr. Braakenburg explained.
GAFTA has 510 members in 50 countries. Contrary to the experience of other associations with members drawn from the grain and feed trade, where consolidation has been the order of the day for many years, the membership numbers actually have increased.
Mrs. Kirby Johnson attributed this growth to a very active marketing program launched two years ago to attract new members, in contrast to previous policy that at times seemed not to seek to expand membership. She explained how growth in membership is important to allowing GAFTA to perform the services essential to assuring the liberalization of trade. The membership campaign involves the development of mail promotional material, an expanded public relations drive managed by Sandra Black, public relations executive, and frequent appearances at Bourses and exhibitions around the world.
Committees reflect diverse sectors.
In noting the highly diverse businesses of the GAFTA membership, Mr. Braakenburg pointed out how this has been accommodated by focusing on policies affecting specific sectors. Thus, the grain exporting membership of GAFTA has been able to draft policies that belong only to that sector.
“Rather than trying to have GAFTA speak with a single voice, which probably would be impossible or would take a terribly long time, we have encouraged programs and policies drafted to suit specific industry sectors, all operating under the sponsorship of GAFTA,” Mr. Braakenburg explained.
This has led to the establishment of a number of committees, ranging from Thai Rice Committee to Feedstuffs Labeling.
“By cutting across sectors, we have brought to GAFTA the many issues having to do with global trade in agricultural products that our members are concerned with,” Mrs. Kirby Johnson said. “Our focus is on trade-related problems, primarily with a European focus, but also looking to become increasingly international in reaching out to every part of the world.”
One important initiative to which Mr. Braakenburg has devoted considerable attention is the naming of a GAFTA consul in each of the countries where the organization has members. He wrote letters to members in each country seeking nominations for the consul position.
Mr. Braakenburg defined the consul as a senior industry executive with leadership skills and experience in dealing with trade and governmental matters. He said he envisions these consuls, the first of whom will likely be chosen in Germany, as providing advice to the organization's London headquarters on issues arising in each country, again from a proactive point of view, and also in advocating GAFTA to the trade in their own countries. The consuls would be expected to encourage companies to join GAFTA.
As of the end of its last fiscal year, on Sept. 30, 1992, GAFTA's membership was centered in Europe, including 193 in the United Kingdom, 53 in the Netherlands, 43 in Switzerland, 29 in France, 24 in Germany and 23 in Belgium. Six members were headquartered in the United States, and Mrs. Kirby Johnson said these are the leading international trading firms.
Stressing the flexibility of the consul program and also his desire not to compete with national organizations representing the trade within countries, Mr. Braakenburg said he sees the consuls as “well-placed individuals suited to be a binding force in pursuit of global trade matters.”
Their role will not only be to represent GAFTA, but also to build relations among companies and with national associations. He said that periodic meetings of consuls would be planned but that he was eager “to avoid imposing a need to meet,” especially if GAFTA achieves his goal of having 50 consuls around the world. “We're not going to be dogmatic about this,” he explained.
Educational services offered.
Mr. Braakenburg also has played an active role in GAFTA's Trade Education Course, which has now been held for 13 years at one of the Cambridge University colleges. This year's course drew 70 students from 21 countries. Reflecting GAFTA's focus, the one-week course has two days devoted to trade policy matters and three days to contracts and arbitration. The course is taught on a voluntary basis by GAFTA members who have skills as educators.
Besides the annual course in Britain, GAFTA has offered education programs in other parts of the world, as long as sponsors guarantee costs. Such programs outside Britain have been held in St. Petersburg, Russia; Bangkok, Thailand; and Budapest, Hungary. More recently, trade interests in Singapore and Ukraine have begun exploring possible GAFTA trade education courses.
GAFTA was formed in 1971 by the merger of the London Corn Trade Association and Cattle Food Trade Association. It is widely known for its contract forms used in most global transactions in grains, feedstuffs, pulses and rice. These contracts, which are copyrighted to protect their integrity, are available in 80 standard forms.
Although the share of international trade in covered commodities sold and bought on the basis of GAFTA contracts cannot be determined, Mrs. Kirby Johnson uses a figure of 80% to 90%, and most in the trade would not disagree.
In using GAFTA contracts, for which no charge is made, buyers and sellers in world trade have access to forms that were carefully drafted by GAFTA's International Contracts Policy Committee. This committee, with a membership representing a number of different countries, meets often to assure constant review of contract provisions and to make alterations as deemed desirable, but only after careful study.
Mr. Braakenburg, who began his ties with GAFTA in the early 1970s as a member of the contracts committee, and Mrs. Kirby Johnson stressed that traders using GAFTA forms were encouraged to modify the contracts in ways they deemed desirable.
“We provide a standard for people to adapt to their specific needs,” Mrs. Kirby Johnson said.
The widely respected arbitration service that GAFTA offers to resolve disputes arising from transactions made under one of its contracts is one reason its contracts are so broadly used. This arbitration service, under which about 250 disputes are handled in an “average” year, has the backing of English law and the English court system.
Another important advantage is the widespread use of the English language as the standard for transactions in agricultural commodities.
About 100 GAFTA individual members are active as arbitrators. About half are retired industry executives, and the others are active members committed to the process.
Mrs. Kirby Johnson and Mr. Braaken-burg emphasized that the disputes going to arbitration arise “99% of the time” not because of disagreements about what the contract says, but about how the contract terms have been executed by either the buyer or the seller.
Even though GAFTA's membership fees are relatively low, ranging from £500 to £1,250 a year, the organization is fiscally sound. As of Sept. 30, 1992, its investment portfolio had a value of £1.6 million, the association owned its own headquarters, and its total revenues for the year, at a little less than £1 million, exceeded expenditures by more than 10%.