By Bernama,
London : The United Kingdom has called for India to be given greater say on the global stage, including at forums like World Bank, I.M.F. and G8, to help tame inflation in the worldwide commodity prices.
“Open and constructive dialogue is essential if the causes of high and volatile prices and their impact are to be tackled,” the U.K. Treasury Ministry was quoted by the Press Trust of India (PTI) as saying in a note analysing the trends and drivers in commodity markets that have led to recent increase in commodity prices.
“To help achieve this, the shape and role of the international institutions needs to be reformed. This should include offering countries such as China, India, South Africa, Mexico, Brazil and other emerging countries a greater role on the international stage, including with the G8, the I.M.F. and the World Bank,” the Treasury said.
The Treasury is the U.K.’s Economics and Finance Ministry and is responsible for formulating and implementing the government’s financial and economic policy.
It has also called for wider reform of the U.N., while noting that developing regional institutions have a role to play as well, including the E.U., the Association of South East Asian Nations, and the African Union.
The Treasury has also noted surge in demand from emerging nations such as China and India for commodities like oil, coal and edible commodities such as meat, dairy and vegetable oils as some key demand pressures for the global commodity markets.
“Global oil demand has been on an upward trend since the mid-1980s, and has increased by 10 per cent since 2002… unlike episodes in previous decades where demand growth in the advanced economies had driven changes in world oil demand, the emerging markets particularly China, India and the Middle East have propelled recent demand growth,” it said.
On food commodities demand side pressures, the report said: “Beyond the structural effect of population growth, a recent driver of demand has been the effect of rising per capita incomes, particularly in China and India, which tend to shift consumer preferences towards more protein products such as meat, dairy and vegetable oils.”
Besides, it has also taken note of export restrictions in India amogst the policy-driven developments contributing to the recent surge in global commodity prices.
On coal, the Treasury said that the demand-supply balance within the coal market is expected to improve by around 2010, putting downward pressure on coal prices, but in the longer term, the strength of Chinese and Indian coal demand will add increasing pressure on producers to increase supply.
The document outlines the UK’s long-term vision for ensuring efficient and effective global commodity markets, the Treasury said.
In a foreword for the paper, U.K.’s Chancellor of Exchequer Alistar Darling said that recent rises in the commodity prices and their volatility has therefore had an impact across the world, affecting almost all people and presenting a challenge to the international community.
“The implications of continuing instability and uncertainty are wide ranging and far reaching: economic, social, political and environmental. Ensuring stable, secure and sustainable global commodity markets is therefore an urgent international priority.
It requires action in the short, medium and long term; and it requires action at the national, regional and international level,” Darling noted.
Over the past six months significant increases in global oil and food prices have led higher fuel and supermarket bills, driving inflation around the world, the Treasury said.
While noting that for most of past 50 years, commodity prices have fallen in real terms with demand and supply rising in tandem, the paper said this “this trend has been punctuated by a number of significant supply side shocks.”
“In recent years, most prices have risen sharply… the expert views and market expectations reviewed here suggest that prices are likely to remain higher than their historical averages, if lower than todays levels, with continuing and perhaps more frequent shocks, driven by continuing strong demand and a continuing slow supply response.
“This demands a strong response at a national and international level to protect the poor and continue sustainable economic growth,” the report said.
Taking note of World Bank predictions about world grain production needed to rise by 50 per cent to meet demand by 2030 and the oil demand projections by International Energy Agency, the Treasury said that supply will face continued pressure to keep up.
“As the impacts of climate change increase, volatility and supply shocks will continue in the coming years and decades, most likely with increased frequency,” the report said.
The Treasury has sought action by the international community at national, regional and international level based on six principles of Economic stability, Openness, Cooperation, Innovation and investment, Fairness and Climate change.
The paper has advocated for allowing markets to function effectively, removing tariff barriers and export subsidies and restrictions, promoting structural reform and allowing all countries to trade.