The price of a cup of coffee, the sugar that sweetens it, the tin that encases the powdered kind and prices of more than a dozen other vital commodities are at stake in totuous and virtually unnoticed global negotiations here.
The outcome of this diplomatic jamboree could have a decisive effect on the household budgets of everyone, and the income of the Third World in particular.
At first glance, the bargaining between the rich countries, led by the United States, and 114 so-called developing nations looks like just another in the endless series of North-South talkathons.
But this round is different. The dipomats in the sprawling Palais des Nations on the tranquil shores of Lac Leman are bargaining about real money and the prices of real goods that all the world buys.
The affair goes by the impossible name of United Nations Negotiating Conference on a Common Fund Under the Integrated Program for Commodities. It is conducted under the auspices of another tongue twister, the United Nations Conference on Trade and Development, or UNCTAD.
Over lunch in the agreeable and expensive eighth-floor restaurant of the Palais at austere office and missions, in Geneva's night spots, the diplomats talk an almost impenetrable Newspeak - "buffer stocks," "source fund," "pool fund," "MFR," "drawing rights."
But behind these abstractions lies a crucial reality. In effect, the diplomats are deciding who shall be in charge of rigging markets for rubber, copper, cocoa and much more. Shall it be the Third World countries that produce and live by their exports of raw materials? Shall it be the rich like the United States who are the biggest consumers of these commodities? Shall it be both?
The affair lies at the heart of the running complaint from the Third World - the nations of Asia, Africa and Latin America - that the world's trading rules, with prices more or less set by the free play of supply and demand, are rigged against them. They complain that pices of the tea, sisal, jute and other raw materials they sell are set indeed in free markets that lead to wild ups and downs. Even worse, they insist that the manufactured goods they buy from the rich are controlled mostly by a handful of large corporations who can and do push prices up and up.So, the Third Worlders argue, "We can't plan, we can't invest and the wealth gap between us and the rich widens each year."
So far, there is no convincing statistical proof of this argument. Neither is there convincing disproof. The statistics can be manipulated to demonstrate almost anything. It is, however, an article of faith in the Third World, the core of its demand for a new international economic order.
The Third World's answer largely is copied from the old New Deal notion of an "ever-normal granary." For each commodity, let producer and consumer nations agree on a band within which market prices shall be allowed to move.
When the market price threatens to fall through the agreed-upon floor, the pact managers shall buy up and stick in warehouses enough of the raw material to prop the price. When the market price threatens to go through the agreed-upon roof, the pact, managers will dip into the warehouse and sell enough of their "buffer stock" to push the price back down.
The United States, for example, recently signed on for a sugar price-propping plan that will come into being next year. It would fix prices between 11 and 21 cents a pound. But in what critics of such a deal regard as typical, the lowest, or floor, price is a whopping 57 per cent above the rate at which sugar now sells in the free markets. In this case, the U.S. diplomats simply ignore consumers to help protect the sugar cane and beet growers of Louisiana and Colorado.
For a long time, the United States, Germany and Japan - the world's biggest consumers - strenously resisted these deals. Official Washington policy was to "examine them pragmatically on a case-by-case basis." In fact, as one diplomatic wag here put it, "Policy was to reject them pragmatically on a case-by-case basis."
So today there are only four in existence. Apart from sugar, they try to rig prices for coffee, tin and cocoa.
The Third World, frustrated, came up with a plan it thinks will spur more deals to rig prices for as many as 18 other raw and semi-processed materials - tea, rubber, jute fiber, jute manufacturers, hard fibers like sisal, hard fiber manufactures, cotton fiber, cotton yarn, copper, manganese, rock phosphates, iron ore, bauxite, tropical timber, vegetable oils, vegetable oilseeds, meat and bananas.
The heart of this plan is a common fund, to start with $6 billion in government cash and loans to pay for the buffer stocks. The common fund would lend its money to producer-consumer price-rigging pacts so they could buy the raw materials or buffer stocks to fill the warehouses. The Third World argues that, with all this money up front, lots of price-propping plans that can't get off the ground then will be set in motion.
Just as important, the Third World wants the producers - themselves - to have the "devisive voice" in managing the fund. The rich world, of course, would put up the bulk of the money, but the Asians, Africans and Latin Americans would have the votes.
Until the Carter administration, the United States, backed by Germany, Japan and a few others, resolutely opposed any common fund. Last spring, in a gesture of solidarity with the Third World, Washington shifted dramatically. Secretary of State Cyrus Vance announced at Paris that "we must work together . . . to create a common fund."
Washington has developed an economic as well as a political argument to back its shift. Through Fred Bergsten, Assistant Secretary of the Treasury, and others, it contends that free market prices for commodities feed inflation. When prices of raw materials go down, the manufacturers cheerfully pocket the windfall. So there is a ratchet effect, all of it upwards.
Some economists outside government would buy the ratchet argument.
But the hidden assumption in Washington's pitch is much more dubious. If consumers are really to gain from price-rigging deals, then the ceilings they establish must climb more gently and occur less frequently than the peak prices in free markets. So far as is known, there is no convincing demonstration that this is the case.
Indeed, even the ratchet argument won't hold for all commodities. Without the coffee pact, it is possible that consumers would enjoy some relief from the sky-high prices they now pay for what was their favorite morning drink.
The United States and the other rich countries are struggling here against the Third World's common fund.Despite they new Carteresque argument about breaking the ratchet, they are not eager to contribute money that would promote many more commodity price-rigging deals.
Moreover - and this is the gut issue from the Western point of view - the United States and the rich are dead set against a fund dominated by the Third World producers.
The reason is simple. Money talks. A monopoly banker has a controlling say in the price and output policies of his clients. The Third World has discovered this every time it goes to the Western-dominated International Monetary Fund. Small-town merchants forced to deal with a single bank know it. So do French and German industrialists who rely on a handful of banks - state-controlled in France - for their investment funds.
The United States and the other rich fear that if the price-rigging pacts depend on a fund controlled by the Third World to finance the buffer stocks, the Third World producers will encourage these pacts to push their floor and ceiling prices higher and higher.
The poorer nations insist this fear is unrealistic. Their most articulate spokesman is Gamani Corea, an excellent Ceylonese economist who is the general director of UNCTAS. In his ninth-floor office with its commanding view of the lake and the Alps, Corea insists that the price bands will "be settled pragmatically in negotiations" between consuming and producing countries. The fund will simply help "stabilize" prices and not put them on one-way up escalators.
Even if the commodity pacts go to the fund for their money, it will be the pact members who will fix the price bands. Typically, the pacts are run by equal votes of producers and consumers, poor and rich.
But then Corea adds: "It would not be wrong to arrest the trend of weak commodities like jute and tea." This is an acknowledgement that at least some of the commodity prices would be pushed up if the Third World gets its way.
Corea warns that if the rich do not "respond," then "you may drive the producers into international cartels."
This, indeed, was a widespread fear when the world thought the Organization of Petroleum Exporting Countries alone had quintupled the price of oil. But now many economists understand that OPEC is a special case because it success depends upon the collaboration of the cartel that transports, processes and sells its raw materials: the great international oil companies, mostly American.
Corea was asked if such a twin cartel was not a necessary condition for effective price rigging. He replied only with a smile which could be taken for assent.
The rich have come up with a rival fund plan and there the issue is joined.
They cal for a common fund dominated by the managers of the price-fixing pacts. Each pact would toss into a pool 75 per cent of the money it has collected to pay for buffer stocks. Any existing pact could draw on the pool up to 125 per cent of the money it had raised.
The central point is that the fund would be a creature of the pacts - not the reverse - and there would be no big bank loaded with cash to lure the promoters of new commodity deals.
Other issues are being negotiated here, but they are secondary to the central one of who shall have power over prices.
The Third World, inevitably, also wants some of its fund money doled out to the poorest African and Asian states in what amounts to an extra chunk of foreign aid. These countries, from Afhanistan to the two Yemens, don't produce enough of anything to care much about rigging [WORD ILLEGIBLE] prices. The aid plan keeps them in line with the [WORD ILLEGIBLE].
The rich so far have opposed this. But in [WORD ILLEGIBLE] make it clear that they would put up a modest new in order to make a deal.
Even the issue of how votes are distributed in [WORD ILLEGIBLE] would disappear if their "pool" plan is adopted. We diplomats say.
So long as the commodity pacts controlled the [WORD ILLEGIBLE] ducers and consumers would be represented equal the criteria for making loans would be automatic. [WORD ILLEGIBLE] in a pool fund would not matter.
In the end, there is one issue: a fund financed chief governments and controlled by the Third World or a financed by commodity pacts with divided control.
The bargaining here is supposed to end on Dec. 2 [WORD ILLEGIBLE] one expects an agreement by then. Indeed, the whole [WORD ILLEGIBLE] could collapse although the prevailing view in both [WORD ILLEGBLE] that a bargain will be struck at another marathon [WORD ILLEGIBLE] next spring.
A compromise of sorts is conceivable: a fund that get money both from governments and from pacts. But the [WORD ILLEGIBLE] cial question then would be how much from each. [WORD ILLEGIBLE] of the fund, the pricing powers the West believes it [WORD ILLEGIBLE] contain, remains the key issue.
Even if a deal is stuck here, that is not the last word. Congress would have to approve it and Congress could [WORD ILLEGIBLE] the whole exercise as perilous for consumers.
Allan Wendt, who heads the U.S. negotiating team, [WORD ILLEGIBLE] tried in his discussions to avoid invoking the threat of a congressional veto. But the leading Third World ambassador Herbie Walker of Jamaica, is well aware of U.S. political realities.
In the end, the Third World negotiators are confident that events are moving their way. They have seen and rejoiced in the remarkable shift in the U.S. stance towards commodity pacts and some sort of common fund to pay for their buffers. On political, economic and even moral grounds, they believe that eventually the world's trading rules will be rewritten in their favor.