UBC Theses and Dissertations

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UBC Theses and Dissertations

A study of international commodity agreements Roberts, Thomas Jones 1951

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A STUDY OF INTERNATIONAL COMMODITY AGREEMENTS by THOMAS JONES ROBERTS A Thesis Submitted i n Par t i a l Fulfilment of the Requirements for the Degree of MASTER OF THE SCIENCE OF AGRICULTURE in the Department of AGRICULTURAL ECONOMICS We accept th i s Thesis as conforming to the standard required for the degree of MASTER OF THE. -SSJ.ENCE OF AGRICULTURE. Member>~$>f the Department of THE UNIVERSITY OF BRITISH COLUMBIA August, 1951 ABSTRACT The f o l l o w i n g s t u d y o f i n t e r n a t i o n a l commodi ty a g r e e m e n t s , b e g i n s w i t h a r e v i e w o f t h e i n h e r e n t m a r k e t and p r o d u c t i v e c h a r a c t e r i s -t i c s ! o f p r i m a r y c o m m o d i t i e s and p a r t i c u l a r l y f o o d s t a p l e s . I n e l a s t i c i t y o f t h e i r demand a n d s u p p l y , c o u p l e d w i t h t h e dynamic e f f e c t s o f t e c h n o -l i g i c a l a d v a n c e , b u s i n e s s c y c l e s a n d w a r s , l e a d t o two p r i n c i p a l d i f f i c u l -t i e s , w h i c h a r e e x c e s s i v e i n s t a b i l i t y o f p r i c e s a n d a t e n d e n c y t o w a r d s t h e d e v e l o p m e n t a n d p e r s i s t e n c e o f s u r p l u s p r o d u c t i v e c a p a c i t y . T h e s e c o n d i t i o n s c a u s e much h a r d s h i p amongst t h e p r i m a r y p r o d u c e r s c o n c e r n e d who a r e g e n e r a l l y u n a b l e t o h e l p t h e m s e l v e s , and c a l l upon t h e i r g o v e r n -m e n t s f o r s u p p o r t . S u c h s u p p o r t i s r e a d i l y f o r t h c o m i n g i n t h o s e p r i m a r y p r o d u c i n g c o u n t r i e s w h i c h a r e p a r t i c u l a r l y dependent upon an e x p o r t t r a d e i n a few s t a p l e c o m m o d i t i e s . I n t h e l i g h t o f t h e s e d i f f i c u l t i e s t h e p r o b a b l e o b j e c t i v e s o f i n t e r n a t i o n a l commodi ty a g r e e m e n t s i s a l s o b r i e f l y d i s c u s s e d . A d e t a i l e d c a s e s t u d y o f c e r t a i n c o m m o d i t i e s w i t h w h i c h i n t e r -n a t i o n a l a g r e e m e n t s h a v e been c o n c e r n e d , t h e n f o l l o w s . The m a r k e t c h a r -a c t e r i s t i c s , s p e c i a l d i f f i c u l t i e s , t h e h i s t o r y o f p a s t a g r e e m e n t s , and a n e v a l u a t i o n o f t h e i r e f f e c t s , i s made f o r r u b b e r , c o f f e e , t e a , wheat a n d s u g a r - I n c o n c l u d i n g , b e e f , t i n and o t h e r i n t e r n a t i o n a l r e g u l a t o r y a g r e e m e n t s a r e m e n t i o n e d . The o p i n i o n s o f v a r i o u s i n t e r n a t i o n a l b o d i e s a r e t h e n s t u d i e d t o i n d i c a t e t h e d i r e c t i o n o f c u r r e n t t h i n k i n g and t h e p o s s i b l e f o r m o f s u c h r e g u l a t o r y a g r e e m e n t s i n t h e f u t u r e . The v i e w p o i n t s o f v a r i o u s c r i t i c s a r e a l s o d i s c u s s e d i n o r d e r t o i n d i c a t e t h e c o m p l e x i t y o f t h e i s s u e s i n v o l v e d a n d t h e d i v e r g e n c i e s o f o p i n i o n w h i c h c h a r a c t e r i s e t h i s p r o b l e m . A d e t a i l e d r e v i e w i s made o f p r o p o s a l s f o r b u f f e r s t o c k schemes s i n c e t h e i d e a h a s o n l y l a t e l y r e c e i v e d a t t e n t i o n a n d seems t o b e t h e o n l y f e a s i b l e a p p r o a c h t o t h e p r o b l e m o f p r i c e i n s t a b i l i t y . I n c o n c l u s i o n , i t i s p o i n t e d o u t , t h a t r e a l p r o b l e m s e x i s t amongst c e r t a i n p r i m a r y p r o d u c i n g i n d u s t r i e s , and t h a t i n t e r n a t i o n a l commodi ty a g r e e m e n t s c o u l d make some c o n t r i b u t i o n t o t h e i r s o l u t i o n . The c h i e f w e a k n e s s e s o f p a s t a g r e e m e n t s h a v e l a i n i n t h e i r p r i c e r a i s -i n g o b j e c t i v e s a n d u s e o f e x p o r t q u o t a s . I n d i v i d u a l commodi ty ag reement s on a s h o r t r u n b a s i s , t o g e t h e r w i t h permanent b u f f e r s t o c k schemes a r e a d v o c a t e d as a d e s i r a b l e s u p p l e -ment t o f u t u r e a n t i - c y c l i c a l p o l i c i e s . The s h o r t r u n r o l e o f commodity a g r e e m e n t s i s e m p h a s i z e d b e c a u s e o f t h e d a n g e r s o f e x p o r t q u o t a s . B u f f e r s t o c k s a r e a d v o c a t e d b e c a u s e t h e p r o b l e m o f p r i c e i n s t a b i l i t y i s a c o n -s t a n t l y r e c u r r i n g o n e . S t r i c t a d h e r e n c e t o t h e p r o v i s i o n s o f t h e ITO c h a r t e r f o r s u c h a g r e e m e n t s w i l l l a r g e l y o b v i a t e t h e r e c u r r e n c e o f t h e i r p a s t m i s t a k e s . These c o n c l u s i o n s a r e n o t f i n a l i n t h a t many p r o b l e m s s u c h as t h e e f f e c t i v e e l i m i n a t i o n o f e x c e s s c a p a c i t y y e t r e m a i n t o be s o l v e d . M o r e o v e r , i t i s p o i n t e d o u t s h a t t h e u l t i m a t e c o n t r o l o f t h e b u s i n e s s c y c l e , and i n d u s t r i a l i z a t i o n o f c e r t a i n p r i m a r y p r o d u c i n g n a t i o n s w o u l d l a r g e l y e l i m i n a t e t h e p r o b l e m s b e s e t t i n g p r o d u c e r s w h i c h h a v e g i v e n r i s e t o t h e n e e d f o r I n t e r n a t i o n a l Commodity A g r e e m e n t s . B e c a u a e o f t h e i n s t i t u t i o n a l n a t u r e o f t h i s p r o b l e m l i t t l e a t t e m p t h a s been made a t a s t a t i s t i c a l a n a l y s i s o f i n t e r n a t i o n a l t r a d e p r o b l e m s . The m e t h o d o l o g y h a s b e e n b a s e d on a t h e o r e t i c a l a n a l y s i s o f u n d e r l y i n g p r o b l e m s , f o l l o w e d b y a p r a g m a t i c a l a p p r o a c h t o p r e v i o u s a g r e e m e n t s and a n i n v e s t i g a t i o n o f t h e w r i t i n g s o f t h e many a u t h o r i t i e s who h a v e s t u d i e d t h e s u b j e c t . PREFACE This study centres around e very controversial subject, involv-ing many complex issues. This preface is therefore written with the object of indicating something of the writer's interests and values, in order that, any inherent biases which must inevitably be present in a work of this nature, may be more apparent to the reader, and help him in an objective evaluation of this study. World War II has marked the beginning of a new era, and there are several facts which stand out in the writer's mind as milestones in this new epoch of mankind's history, and which though not necessarily of primary consideration in the writer's set of values at least have bearing on this particular study. The first is embraced in a l l the thinking and the hopes for the future, embodied in the formation of the United Nations Organization and its ancillary specialized agencies. Much of this has been considered almost premature in its idealism and Utopian planning, yet i t represents a very definite advance from post-World War I thinking and i s a manifest-ation of the growing awareness of our international inter-dependence. The second 'milestone' which is sharply focused through the writer's personal background, lies in the^political revolution which has taken placs amongst the economically backward nations, centred mainly in the far East. One could recall the independence of Burma, India and Pakis-tan in 1947. Indonesia's a year later, and even the first rumbles of polit-ical unrest in French Morocco. An economic or industrial revolution seems almost inevitable in the wake of this moral and political metamorphosis. One of the greatest problems of these countries lies in their dependence on a raw material economy and an income from the export of only one or two raw materials. Such countries entirely dependent on international trade ( i i ) a r e o f t e n s e v e r e l y d i s a d v a n t a g e d . A w i d e r i n t e g r a t i o n o f t h e i r e c o n o -m i e s and a p r o g r a m o f i n d u s t r i a l d e v e l o p m e n t seem v i t a l s t e p s i n t h e i r p r o g r e s s and d e v e l o p m e n t . Demograph ic a r g u m e n t s i n p a r t i c u l a r c an be m a r s h a l l e d t o add s t r e n g t h t o t h e n e e d a n d u r g e n c y f o r r a i s i n g t h e i r l i v i n g s t a n d a r d s . The t h i r d f a c t o r , w h i c h i s p e r h a p s i n t h e n a t u r e o f a v a l u e p r e m i s e and does n o t c l o s e l y f i t i n w i t h t h e p r e s e n t p e r i o d o f m a n k i n d ' s d e v e l o p m e n t , l i e s i n t h e g r o w i n g a p p l i c a t i o n o f p l a n n i n g a n d c o n t r o l i n t h e v a r i o u s f i e l d s o f human e n t e r p r i s e and e n d e a v o u r . I f t h e w r i t e r w e r e t o t r y and c l a s s i f y s t u d e n t s i n t o two t y p e s , h e w o u l d be t e m p t e d t o see i f t h e y f i t t e d i n t o a d i c h o t o m y o f "makers 1 1 and " u s e r s " o f idea s ; a n d t o o l s . The "makers; 1 1 a r e t h e t h e o r e t i c i a n s and t h e t r u e s e a r c h e r s a f t e r k n o w l e d g e . The " u s e r s ; " a r e t h e e x p e r i m e n t e r s , a n d p l a n n e r s , o f t e n l i a b l e t o a c c e p t dogma w i t h o u t c h a l l e n g e . O b v i o u s l y , s u c h a d i v i s i o n i s somewhat a r b i -t r a r y and t h e r e may be no v e r y c l e a r d i v i d i n g l i n e . The w r i t e r w o u l d c l a s s i f y h i m s e l f a s a " u s e r " 1 . N e o - c l a s s i c a l e conomic t h e o r i e s w i t h t h e i r modern addendums o f i m p e r f e c t c o m p e t i t i o n and m a c r o - c o n c e p t s , , g i v e t h e t h e o r y and t o o l s o f a n a l y s i s w h i c h a r e u s e d t o u n d e r s t a n d c e r t a i n p r o b l e m s o f w e l f a r e . A " u s e r " i s * d e d i c a t e d t o t h e i d e a o f t r y i n g t o p l a n a n d m a n i p u l a t e . The n a t u r a l o r d e r o f t h i n g s i s i n l a r g e p a r t a p r e - s u p p o s i t i o n and a s i m p l i -f i e d h y p o t h e s i s ' , a s t o how t h e m a c h i n e c o u l d o r s h o u l d w o r k . The " u s e r s " a r e i n t e r e s t e d i n t h a t p a r t o f e c o n o m i c s w h i c h t e l l s u s how we m i g h t a p p l y t h e t h e o r y and k n o w l e d g e t o s o c i e t y i n o r d e r t o make i t a c t u a l l y w o r k i n t h e most d e s i r a b l e f a s h i o n . The w r i t e r ' s p a r t i c u l a r s e t o f v a l u e s a r e s u c h t h a t t h i s a s p e c t a p p e a r s as t h e s i g n i f i c e n t p a r t o f e c o n o m i e s . I f t h i s r e a s o n i n g i s n o t f a l s e , , t h e "user " ' i n e c o n o m i c s may be a n a l o g o u s ; t o t h e m a t h e m a t i c i a n who i s w o r k i n g as a s t a t i s t i c i a n , o r t h e o r g a n i c c h e m i s t ( i i i ) who i s w o r k i n g as a n u t r i t i o n i s t . T h e s e t h r e e f a c t s o r i d e a s h a v e been woven i n t o a b a s k e t w h i c h h a s c a r r i e d t h e w r i t e r ' s t h i n k i n g a n d r e t a i n e d h i s a t t e n t i o n i n t h i s p a r t i c u l a r s t u d y . I n t e r n a t i o n a l Commodity A g r e e m e n t s have i n t h e p a s t b e e n s h r o u d e d by a mia sma o f e x p l o i t a t i o n a n d i n e f f e c t i v e n e s s . The p r o b -l e m s o f b a c k w a r d c o u n t r i e s o f t h e f a r E a s t a r e n o t e x a c t l y w i t h o u t t h e s t i g m a o f ' I m p e r i a l i s t i c E x p l o i t a t i o n ' . I s i t n o t t r u e t o d a y t h a t we a r e m a k i n g a n h o n e s t a t t e m p t t o c o o p e r a t e i n t e r n a t i o n a l l y i n t h e economic s p h e r e a s w e l l a s i n o t h e r s ; a n d a r e we n o t a n x i o u s p a r t i c u l a r l y t o h e l p t h o s e c o u n t r i e s w h i c h h a v e commonly been c l o s e l y c o n n e c t e d w i t h s u c h i n t e r -n a t i o n a l commodi ty ag reement s i n t h e p a s t ? A s a p l a n n e r , t h e w r i t e r h a s t r i e d t o f i n d o u t w h e t h e r t h e n e e d f o r s u c h i n t e r n a t i o n a l a g r e e m e n t s h a v e t h e i r o r i g i n i n any v a l i d p r e m i s e s , and w h e t h e r s u c h a r r a n g e m e n t s c a n b e o f any u s e i n t h e f u t u r e . I s h o u l d p a r t i c u l a r l y l i k e t o e x p r e s s my g r a t i t u d e t o P r o f e s s o r W . J . A n d e r s o n f o r h i s h e l p and g u i d a n c e d u r i n g t h e p r e p a r a t i o n o f t h i s t h e s i s . S u c h h e l p i s p a r t i c u l a r l y a p p r e c i a t e d i n v i e w o f h i s absence i n O t t a w a d u r i n g t h i s p e r i o d and a l s o t h e l e n g t h y n a t u r e o f t h i s s t u d y . I s h o u l d a l s o l i k e t o t h a n k p a r t i c u l a r l y , M i s s F r a n c e s Wat t a n d t h e many o t h e r f r i e n d s who h e l p e d w i t h t h e t e d i o u s w o r k o f p r e l i m -i n a r y t y p i n g , p r e p a r i n g c h a r t s a n d p r o o f r e a d i n g . TABLE OF CONTENTS CHAPTER PAGE I INTRODUCTION ••• I Underlying Problems -(i) Supply Factors (ii) Demand Factors - income elasticity ( i i i ) Price Instability - cyclical price fluctuations (iv) Secular Forces (v) Excess Capacity Summary Objectives of International Commodity Agreements II INDIVIDUAL COMMODITY STUDIES 31 The Economic Nature of Production together with an account and evaluation of Control Measures in the rubber, coffee and tea industries* (i) Rubber - Market characteristics - History of Control Schemes The International Rubber Regulation Agreement - Summary and Conclusions (ii ) Coffee - Market Characteristics - History of Control Schemes - The Inter-American Coffee Agreements - Summary and Conclusions ( i i i ) Tea - Market Characteristics - History of Control Schemes - Summary and Conclusions III CONTINUING INDIVIDUAL COMMODITY STUDIES 86 (iv) Wheat - Market Characteristics - A History of International Wheat Agreements - International Wheat Agree-ment 1933 - The 1949 Wheat Agreement - Summary and Conclusions (VI) CHAPTER PAGE i n (cont»d) (v) Sugar - Market Characteristics - A History of International Sugar Agreements - The International Sugar Agreement of 1951 - 55 - The 1957 International Sugar Agreement - Summary and Conclusions (vi) Beef Miscellaneous ICA's (vii) Tin (viii) Miscellaneous Agreements IV THE POSITION TODAY 133 Opinions of international bodies and current thinking as to the potential contribution of ICA's. (i) Opinions of International Bodies (i i ) National Attitudes and Opinions of Various Experts ( i i i ) Buffer Stock Proposals (iv) Summary and Conclusions V THE PLACE FOR COMMODITY AGREEMENTS IN WORLD TRADE x71 (i) Existence of Real Problems in certain primary industries (ii) Weakness of Past Agreements ( i i i ) Use of Export Quotas (iv) High Price Objectives (v) Provisions of the International Trade Charter (vi) Suggested form of International Regulation in the future (vii) Permanent Buffer Stock Schemes (viii) Significance of the Business Cycle APPENDIX 183 Extracts from International Conferences detailing principles and provisions relating to International Commodity Agreements (VII) PAGE BIBLIOGRAPHY 188 TABLES NUMBER 1 . D e c l i n e o f Volume o f T r a d e i n Raw M a t e r i a l s and F i n -i s h e d Goods d u r i n g the D e p r e s s i o n Y e a r s 8 2 . Income E x p e n d i t u r e E l a s t i c i t i e s 1 ° 3 . E x p a n s i o n o f O r i e n t a l P l a n t a t i o n P r o d u c t i o n 32 4 . A n n u a l R u b b e r A b s o r p t i o n i n s e l e c t e d r e g i o n s d u r i n g i n t e r - w a r y e a r s 35 5. New R u b b e r P l a n t i n g and New Y o r k Crude R u b b e r P r i c e s , A v e r a g e s 1900 - 1933 » • 37 6 . P r i c e s a n d E x p o r t P e r c e n t a g e s d u r i n g O p e r a t i o n o f t h e S t e v e n s o n Scheme 39 7 . D i v i d e n d s o f B r i t i s h R u b b e r G r o w i n g Companies 41 8 . New R u b b e r E x p o r t Quotas ( i n t o n s ) u n d e r I n t e r n a t i o n a l R u b b e r R e g u l a t i o n A g r e e m e n t 1934 - 1938 • 44 9 . E x t e n t o f P r i c e Movements f o r Raw R u b b e r i n L o n d o n d u r i n g O p e r a t i o n o f I n t e r n a t i o n a l R u b b e r R e g u l a t i o n A g r e e m e n t . 4& 1 0 . B r i t i s h R u b b e r Company E a r n i n g s and D i v i d e n d s A n n u a l l y 1924 - 1940 48 1 1 . E x p o r t s f r o m t h e N e t h e r l a n d s E a s t I n d i e s 1 9 2 9 - 1 9 3 3 (1000 t o n s ) 50 1 2 . W o r l d C o f f e e P r o d u c t i o n 1929 - 1940 5& 1 3 . Range i n S i z e o f the B r a z i l i a n C o f f e e C r o p b y Decades s i n c e t h e 1890 « s 58 1 4 . ( a ) N e t i m p o r t s o f G r e e n C o f f e e i n t o W o r l d M a r k e t s 59 ( b ) A n n u a l p e r c a p i t a C o f f e e C o n s u m p t i o n i n Pounds d u r i n g decade 1929 - 1938 59 1 5 . W o r l d C o f f e e E x p o r t s , S u r p l u s e s a n d P r i c e s b y F i v e Y e a r A v e r a g e s , 1919 - 1939 • ^2 1 6 . T e a E x p o r t s f r o m M a j o r E x p o r t i n g C o u n t r i e s , P r e - W a r a n d 1946 - 1949 ( I n t h o u s a n d s o f m e t r i c t o n s ) 71 1 7 • P e r C a p i t a Tea C o n s u m p t i o n i n P r i n c i p a l I m p o r t M a r k e t s 1930 - 1939 72 1 8 . T e a I m p o r t s o f S e l e c t e d C o u n t r i e s . . 73 1 9 . S t a n d a r d E x p o r t s s e t f o r t h e f i r s t P e r i o d o f R e g u l -a t i o n (1933 - 1938 ) 78 2 0 . W o r l d T e a P r i c e s a n d P e r c e n t a g e o f S t a n d a r d (Quotas a l l o w e d f r o m 1932 - 1933 t o 1939 - 1940 79 2 1 . E a r n i n g s o f s i x s e l e c t e d Tea Companies i n I n d i a a n d C e y l o n 1924 - 1939 80 2 2 . P r i c e Ranges i n A l l T e a S o l d a t London A u c t i o n s b e t w e e n 1922 - 1939 81 23© E x p o r t s o f Tea f r o m C o u n t r i e s n o t a d h e r i n g t o t h e I n t -e r n a t i o n a l T e a A g r e e m e n t , 1932 - 1933 t o 1939 - 1 9 4 0 . . . . 81 2 4 . P r i c e Changes i n D i f f e r e n t Tea Q u a l i t i e s b e t w e e n 1926 - 1928 and 1939 - 1940 82 (VIII) TABLES (cont'd) PAGE NUMBER 25. Production increases and Import decreases between 1924 - 1928 and 1933 92 26• Wheat Carry-over in the Four Chief Exporting Countries Compared with Standards specified in the Draft Con-vention (in millions of bushels) •... 100 27« Output of Leading Sugar Producing Areas 1939 - 1940 .... 112 28* Sugar Consumption Levels* 113 29* Sugar Export Quotas under International Sugar Agreement... 119 CHARTS 1* "One-way" Supply Curve...... • 8* 2, Agricultural and Non-Agricultural Products: Indexes of Volume and Gold Value of World Exports 1929 - 1937 11 3» Supply and Demand Schedules for a Primary Commodity..... 12 4. Chart Illustrating Cobweb Theorem 17 5* Estate and Native Rubber Production in Maylaya and the Netherlands Indies and Crude Rubber Price at Singapore Annually 1929 - 1934 35 6. Demand Schedule for Wheat • • 90 CHAPTER I INTRODUCTION A student of International Commodity Agreements (hereinafter referred to as ICA's) wil l at once be struck by several things. In the f i r s t place* the extent to which such agreements have developed during the past three decades* indicates that there must be a serious underlying trade problem. Secondly, he will notice that such agreements are closely bound up with numerous perplexing issues a l l of which may not be readily apparent. Furthermore he probably wi l l conclude that there is no clear out issue as to whether ICA's are beneficial or harmful. It is hoped* therefore* in this study to substantiate some of the above introductory remarks by showing the very real nature and extent of the problems with which ICA's attempt to grapple. By considering subsequently, the record of success of such agreements in the past and by reviewing some of the current thinking and suggested plans for tackling these problems, i t may be possible in conclusion to indicate the most significant conflicts which have yet to be resolved and the form in which i t is believed that such international economic co-operation might best contribute to this problem. A preliminary description of the nature, causes and objectives of ICA's is therefore made before considering some of the underlying problems. Although the writings of a dozen or more experts or the resolu-tions of many international, national political and institutional organizat-ions might be referred to at this stage, i t would be difficult to find a more succint definition of ICA's than that given by Joseph Davis the director of the Food Research Institute at California, and one of the l e a d i n g a u t h o r i t i e s o n t h e s u b j e c t . He d e f i n e s a n I C A a s : " a n a g r e e m e n t on a s p e c i f i c commodi ty o r c l o s e l y r e l a t e d g r o u p o f c o m m o d i t i e s , c h i e f l y f o o d s t u f f s a n d p r i m a r y m a t e r i a l s , made b y two o r more p a r -t i c i p a t i n g governments o r w i t h t h e i r a p p r o v a l a n d c o - o p e r a t i o n , i n v o l v i n g a s t u d y o f the i n t e r n a -t i o n a l a s p e c t s o f t h e commodi ty a n d / o r some f o r m . o f r e g u l a t i o n o f i t s t r a d e , p r o d u c t i o n a n d / o r p r i c e s . " 1 D a v i s f u r t h e r c o n t i n u e s t o d i s t i n g u i s h I C A ' s f r o m ( a ) U n i l a -t e r a l n a t i o n a l c o m m o d i t y c o n t r o l s o f g r e a t v a r i e t y ; ( b ) H i g h l y s p e c i a l i z e d b i l a t e r a l i n t e r - g o v e r n m e n t a l a g r e e m e n t s , i n v o l v i n g one o r a few s p e c i f i c c o m m o d i t i e s j ( c ) B i l a t e r a l o r m u l t i l a t e r a l i n t e r - g o v e r n m e n t a l ag reement s c o v e r i n g s e v e r a l c o m m o d i t i e s a n d / o r c o m m e r c i a l p o l i c y and p r a c t i c e ; ( d ) 2 I n t e r n a t i o n a l c a r t e l ag reement s among t w o o r more b u s i n e s s c o n c e r n s . A g a i n , f o r c e s w h i c h g i v e r i s e t o t h e f o r m a t i o n o f s u c h i n t e r n a t i o n -a l ag reement s h a v e b e e n o u t l i n e d w i t h v a r y i n g emphas i s b y a number o f w r i t e r s a n d i m p o r t a n t c o m m i t t e e r e s o l u t i o n s . Thus t h e f o l l o w i n g q u o t a t i o n has b e e n c h o s e n n o t o n l y f o r i t s a d e q u a c y b u t a l s o b e c a u s e o f i t s p a r t i c u l a r e m p h a s i s . " I t i s w i d e l y r e c o g n i z e d t h a t s u p p l y a n d demand c o n d i t i o n s f o r many b a s i c a g r i c u l t u r e s t a p l e s a r e s u c h as t o c r e a t e a s p e c i a l n e e d f o r i n t e r -g o v e r n m e n t a l a c t i o n t o d e a l w i t h burdensome s u r p l u s e s . A l t h o u g h p r o d u c t i o n t e n d s t o e x p a n d r a p i d l y i n r e s p o n s e t o p r i c e i n c r e a s e s , i t s r e s p o n s e t o p r i c e d e c l i n e s i s s l u g g i s h a n d somet imes p e r v e r s e . I n a d d i t i o n , t h e demand f o r c o m m o d i t i e s o f t h i s t y p e i s i n most c a s e s r e l a -t i v e l y i n e l a s t i c . Hence a r i s e s t h e f a m i l i a r 1 D a v i s , J o s e p h S . , " E x p e r i e n c e u n d e r I n t e r g o v e r n m e n t a l Commodi ty A g r e e m e n t s " The J . o f P o l i t i c a l Economy, June 1 9 4 6 , V o l . L I V , N o . 3 , p . 194 2 I b i d . , p . 1 9 4 . - 3 -phenomenon o f a b n o r m a l l y l o w a g r i c u l t u r a l p r i c e s a n d l a r g e s u r p l u s e s w h i c h i s s o c h a r a c t e r i s t i c o f p e r i o d s o f s e v e r e d e p r e s s i o n . The p r o b l e m i s t h e more s e r i o u s b e c a u s e o f a n a p p a r e n t l o n g r u n t e n d -e n c y f o r t h e s u p p l y o f a g r i c u l t u r a l p r o d u c t s t o i n c r e a s e more r a p i d l y t h a n t h e demand. Thus t h e r e has b e e n a p r o n o u n c e d t e n d e n c y f o r governments t o s t e p i n t o p r o t e c t t h e d i s t r e s s e d p r o d u c e r s , f r e -q u e n t l y t h r o u g h measures t o s u p p o r t p r i c e s . These a t t e m p t s have g e n e r a l l y b e e n u n i l a t e r a l , a n d t h e i r n e t a f f e c t o n i n t e r n a t i o n a l t r a d e has b e e n h i g h l y r e s t r i c t i v e . " 3 I n c o n s i d e r i n g t h e o b j e c t i v e s o f - I C A ' s t h e emphasis m i g h t v a r y v e r y c o n s i d e r a b l y a c c o r d i n g t o t h e p a r t i c u l a r v i e w - p o i n t p r e s e n t e d . 4 The a l t r u i s t i c and l o n g r u n o b j e c t i v e s o f i n t e r n a t i o n a l b o d i e s e m p h a s i z e s u c h o b j e c t i v e s a s a w i d e r d i s t r i b u t i o n o f f o o d , e n h a n c e d and e q u a l a c c e s s f o r c o n s u m i n g n a t i o n s t o v i t a l raw m a t e r i a l s , d i s s i p a t i o n o f c h r o n i c s u r p l u s e s and a d j u s t m e n t s i n t h e d i r e c t i o n o f a b e t t e r o r d e r e d p r o d u c t i v e s y s t e m . A t t h e o t h e r e x t r e m e , some ICA p r o t a g o n i s t s f o r f a r m p r o d u c t s have q u i t e f r a n k l y s t a t e d t h a t t h e y a r e " m o n o p o l i s t i c government s u p p o r t e d c a r t e l s , i n t e n d e d t o r e d u c e p r o d u c t i o n and r a i s e p r i c e s i n a n a t t e m p t t o s t r e n g t h e n t h e weak c o m p e t i t i v e p o s i t i o n o f f a r m -e r s a n d g i v e them t h e m o n o p o l i s t i c powers a s c r i b e d t o i n d u s t r i a l p r o d u c e r s " . 5 T h e r e has b e e n a marked e v o l u t i o n i n t h i n k i n g as t o t h e o b j e c t i v e s and f u n c t i o n s o f I C A ' s s i n c e t h e e a r l y y e a r s o f t h e g r e a t d e p r e s s i o n , w h i c h has i n v o l v e d a b r o a d e n i n g o f v i e w - p o i n t a n d g r e a t e r a t t e n t i o n t o t h e g e n e r a l i n t e r e s t o f t h e communi ty as a w h o l e . P a s t e v i d e n c e o f I C A ' s G o r d o n , M a r g a r e t S . , " I n t e r n a t i o n a l A s p e c t s o f A m e r i c a n A g r i c u l t u r a l P o l i c y " , The A m e r i c a n E c o n o m i c R e v i e w , S e p t . 1 9 4 6 , V o l X X X V I , N o . 4 P a r t I , page 6 0 3 . See C h a p t e r I V , pages 133-44 > o f t h i s t h e s i s . S a e p e r d , G e o f f r e y S . , A g r i c u l t u r a l P r i c e P o l i c y , Iowa S t a t e C o l l e g e P r e s s , 1 9 4 7 , C h a p . 5 , p . 9 0 . - 4 -a c t i v i t i e s does much t o j u s t i f y a c c u s a t i o n s t h a t t h e y a r e m o n o p o l i s t i c p r i c e r a i s i n g d e v i c e s , w h i l e a l o t o f t h e i m m e d i a t e p o s t w a r t h i n k i n g has t e n d e d t o b e a l m o s t t o o e m b r a c i n g i n s cope a n d c h a r a c t e r , r e l a t i n g s e v e r a l q u i t e i n c o m p a t i b l e t h o u g h d e s i r a b l e e c o n o m i c and s o c i a l g o a l s t o t h e s i n g l e m e c h a n i s m o f i n t e r n a t i o n a l commodi ty c o n t r o l . I t i s h o p e d t o r e v e a l s u b s e q u e n t l y t h a t t h e r e a r e i n d i c a t i o n s t h a t n a t i o n a l governments have p r o f i t e d f r o m p a s t e x p e r i e n c e w i t h I C A ' s , t h a t t h e r e has b e e n r e c o g -n i t i o n o f some o f t h e p i t f a l l s , and t h a t a n h o n e s t a t t e m p t ha s b e e n made t o f r ame a r e a l i s t i c s e t o f d e s i r a b l e and r e a l i s a b l e o b j e c t i v e s t h r o u g h t h e o p e r a t i o n o f s u c h a g r e e m e n t s . UNDERLYING PR0BLEM3 The f o l l o w i n g i s a n a t t e m p t t o c r i t i c a l l y examine t h e a l l e g e d d i f f i c u l t i e s i n t h e p r o d u c t i o n a n d i n t e r n a t i o n a l t r a d e i n b a s i c commod-i t i e s , w h i c h have l e d t o t h e f o r m a t i o n o f i n t e r n a t i o n a l a g r e e m e n t s . S u c h p r o b l e m s a r e t h e r e s u l t o f t h e c o m p o s i t e i n t e r a c t i o n o f many changes a n d f o r c e s . I t w i l l s i m p l i f y o u r e x a m i n a t i o n , h o w e v e r , i f t h e s e a r e c o n s i d e r e d u n d e r t h e f o l l o w i n g h e a d i n g s : ( i ) s u p p l y f a c t o r s , ( i i ) demand f a c t o r s , ( i i i ) p r i c e i n s t a b i l i t y , ( i v ) s e c u l a r f o r c e s , ( v ) e x c e s s c a p a c i t y . The s i g n i f i c a n c e o f t h e s e v a r i o u s p r o b l e m s i n t h e p r o d u c t i o n o f r aw m a t e r i a l s w i l l be e l a b o r a t e d i n t h e s u b s e q u e n t d i s c u s s i o n o f i n d i v i d u a l commodi ty h i s t o r i e s , ( i ) . S u p p l y F a c t o r s . The s u p p l y o f raw m a t e r i a l s a n d p r i m a r y c o m m o d i t i e s c a n b e c h a r a c t e r i z e d as h i g h l y i n e l a s t i c i n r e s p o n s e t o p r i c e c h a n g e s . T h a t i s t o s a y t h a t t h e vo lume o f p r o d u c t i o n o f any p a r t i c u l a r c o m m o d i t y does ' - 5 -n o t r e a d i l y a d j u s t i t s e l f e i t h e r t o a r i s e i n i t s p r i c e b y e x p a n s i o n , o r t o a r e d u c t i o n i n p r i c e b y c o n t r a c t i o n . The m a i n r e a s o n s f o r t h i s r i g i d i t y i n t h e s u p p l y s i t u a t i o n c a n be f o u n d i n t h e t e c h n o l o g i c a l and e c o n o m i c n a t u r e o f the p r o d u c t i o n p r o c e s s o f s u c h raw m a t e r i a l s * I n t h e c a s e o f a g r i c u l t u r a l s t a p l e s i n p a r t i c u l a r , t h e p r o d u c t i o n p e r i o d may b e one o f c o n s i d e r a b l e d u r a t i o n , v a r y i n g f r o m one y e a r i n t h e c a s e o f w h e a t and c o t t o n , t o f i v e o r s i x y e a r s i n t h e c a s e o f c o f f e e a n d e v e n up t o t e n o r t w e l v e y e a r s i n t h e c a s e o f r u b b e r . P l a n s t o e x p a n d o r c o n t r a c t p r o d u c t i o n c a n t h e r e f o r e b e made o n l y a t c e r t a i n a p p r o p r i a t e t i m e s o f t h e y e a r , and e v e n t h e n s u c h p l a n s may n o t come t o f r u i t i o n u n t i l s e v e r a l y e a r s a f t e r i n i t i a t i o n . c h a r a c t e r i z e d , m o r e o v e r , b y h i g h f i x e d c o s t s a n d r e l a t i v e l y l o w v a r i a b l e c o s t s . Many o f the raw c o m m o d i t i e s mos t i m p o r t a n t i n i n t e r n a t i o n a l t r a d e , a r e grown i n t r o p i c a l r e g i o n s u n d e r c o n d i t i o n s p a r t i c u l a r l y s i i i t e d t o l a r g e s c a l e o r p l a n t a t i o n p r o d u c t i o n , w h e r e t h e c a p i t a l r e q u i r e m e n t s a r e g e n e r a l l y h i g h e r t h a n f o r o t h e r s y s t e m s o f f a r m i n g . The S u g a r C e n t r a l i n t h e West I n d i e s r e p r e s e n t s , f o r e x a m p l e , a r i g i d e c o n o m i c s y s t e m , h e a v i l y d e p e n d e n t on l a r g e vo lume a n d one t h a t p r o m o t e s r e g i o n a l c o n c e n -t r a t i o n o n a s i n g l e c r o p . 6 The f i x e d c o s t s on S o u t h A m e r i c a n c o f f e e p l a n t a t i o n s , t o u s e a n o t h e r i l l u s t r a t i o n , have been e s t i m a t e d t o c o m p r i s e 7 a r o u n d s e v e n t y - f i v e p e r c e n t o f t o t a l c o s t s , e x c l u d i n g i n t e r e s t c h a r g e s . 6 S w e r l i n g , B . C . j I n t e r n a t i o n a l C o n t r o l o f S u g a r 1 9 1 8 - 4 1 , S t a n f o r d U n i v e r s i t y P r e s s , p a g e . 1 4 . The p r o d u c t i o n p r o c e s s f o r mos t a g r i c u l t u r a l s t a p l e s i s 7 - 6 -The h i g h f i x e d c o s t s o f a p l a n t a t i o n economy a r e n o t c o n f i n e d t o s l o w g r o w i n g h e r b a c e o u s c r o p s s u c h as c o f f e e , t e a a n d r u b b e r , b u t e x t e n d a l s o t o s u g a r c a n e . The s i t u a t i o n i s a n a l o g o u s t o t h e p r o b l e m o f t h e s p e c i a l i z e d w h e a t g r o w i n g a r e a s w h e r e t h e l a c k o f a l t e r n a t i v e c r o p s p r e v e n t s p r o d u c t i o n f r o m a d j u s t i n g t o m o d e r a t e changes i n p r i c e s . These a r e much g r e a t e r b a r r i e r s t h a n t h e a t t r a c t i v e n e s s o f a g r i c u l t u r e as a way o f l i f e w h i c h i s s o o f t e n q u o t e d b y w r i t e r s o n s u c h p r o b l e m s . I n e l a s t i c i t y o f s u p p l y i n t h e s e p r i m a r y i n d u s t r i e s i s t h e r e s u l t o f s u c h a l a c k o f a l t e r n a t i v e o p p o r t u n i t i e s f o r f a c t o r s o f p r o d u c t i o n . L a n d i s the r e s o u r c e mos t i n e l a s t i c i n s u p p l y , e s p e c i a l l y where t h e a r e a has b e e n p l a n t e d w i t h a s low m a t u r i n g c r o p s u c h as t e a . L a b o u r a l s o t e n d s t o be i n e l a s t i c i n s u p p l y . W h e t h e r i t be on a l a r g e p l a n t a t i o n e m p l o y i n g i m p o r t e d l a b o u r o n a l o n g t e r m c o n t r a c t (as i n many p a r t s o f M a l a y a ) o r o n a s m a l l f a m i l y f a r m i n t h e W e s t , t h e r e i s t h e same p r o b l e m o f a l a c k o f a l t e r n a t i v e o u t l e t s f o r e m p l o y m e n t . L a b o u r t h e r e f o r e , e v e n when s u p p l i e d b y t h e p r o p r i e t o r h i m s e l f , t e n d s t o become t h e r e s i d u a l c l a i m a n t o f a n y e a r n e d i n c o m e . L i k e w i s e t h o s e s p e c i a l i z e d r e g i o n s c h a r a c t e r i z e d b y a p l a n t a t i o n economy, commonly c o n -t i n u e t o p r o d u c e a t f o r m e r l e v e l s e v e n when t h e r e ha s b e e n a s e v e r e d r o p i n t h e p r i c e , b e c a u s e o f t h e p o s s i b i l i t y o f a d j u s t i n g wages d o w n w a r d . J o h n s o n i n a n a r t i c l e c o n t r i b u t e d t o t h e A m e r i c a n E c o n o m i c R e v i e w p o i n t s o u t t h a t t h e u s u a l a r g u m e n t s g i v e n t o e x p l a i n t h e i n -e l a s t i c i t y o f s u p p l y i n t h e a g r i c u l t u r a l i n d u s t r y a r e l a r g e l y b a s e d o n e x p e r i e n c e d u r i n g t h e a b n o r m a l c o n d i t i o n s o f a d e p r e s s i o n . He p o i n t s J o h n s o n , D . G a l e , "The M a t u r e o f t h e S u p p l y F u n c t i o n f o r A g r i c u l t u r a l P r o d u c t s " , The A m e r i c a n E c o n o m i c R e v i e w , V o l . X L , S e p t e m b e r , 1950, N o . 4, p p . 539-564. - 7 -o u t t h a t unemployment i n t h e economy as a w h o l e , makes s u p p l y i n e l a s t i c i n a number o f m a n u f a c t u r i n g i n d u s t r i e s b e s i d e s a g r i c u l t u r e , d u r i n g s u c h t i m e s . W h i l s t c e r t a i n c a p i t a l r e s o u r c e s and t h e l a n d f a c t o r a r e h i g h l y i n e l a s t i c i n s u p p l y , he p o i n t s o u t t h a t l a b o u r i s more e l a s t i c , t h e s u p p l y f u n c t i o n s h i f t i n g w i t h changes i n t h e g e n e r a l l e v e l o f b u s i n e s s a c t i v i t y . The r e l a t i v e c o n s t a n c y o f p r o d u c t i v e l e v e l s i n a g r i c u l t u r e he a t t r i b u t e s r a t h e r t o f l e x i b l e f e e d , l i v e s t o c k a n d l a b o u r c o s t s w h i c h a l l o w s u f f i c i e n t m a r g i n a l o p p o r t u n i t y f o r employment t h r o u g h o u t t h e b u s i n e s s c y c l e . S u p p l y i n e l a s t i c i t y i s a l s o due i n l a r g e measure t o t h e p a t t e r n o f s m a l l , p r o d u c t i v e u n i t s w h i c h i s a g a i n t y p i c a l o f many a g r i c u l t u r a l s t a p l e s . A l a r g e number o f s m a l l p r o d u c e r s have n o t h i n g t o g a i n f r o m r e s t r i c t i n g p r o d u c t i o n when t h e p r i c e f a l l s , a n d i n f a c t have e v e r y i n c e n t i v e t o t r y a n d i n c r e a s e p r o d u c t i o n i n o r d e r t o p r e s e r v e t h e i r i n c o m e . T h e r e i s , h o w e v e r , more e l a s t i c i t y t o s u p p l y i n r e s p o n s e t o a r i s e i n p r i c e s . I n f a c t t h e r e i s e v i d e n c e o f v e r y c o n s i d e r a b l e e l a s t i c i t y i n t h i s d i r e c t i o n i n t h e l o n g r u n . H o w e v e r , b e c a u s e o f t h e t i m e l a g b e t w e e n a c t u a l p r o d u c t i o n a n d d e v e l o p m e n t o f new c a p a c i t y , t h i s upwards e l a s t i c i t y o f t h e s u p p l y s c h e d u l e i s o n l y v e r y s l i g h t i n t h e s h o r t r u n . A more d e t a i l e d a n a l y s i s o f the s u p p l y c h a r a c t e r i s t i c s o f a g r i c u l t u r a l s t a p l e s may be f o u n d i n P r o f e s s o r S h e p h e r d ' s " A g r i c u l t u r a l P r i c e A n a l y s i s " f r o m w h i c h C h a r t I i s t a k e n . When t h e demand i n c r e a s e s f r o m D t o D-^ arid s u b s e q u e n t l y f a l l s t o D 2 , t h e p r i c e i n i t i a l l y r a i s e d t o - 8 -P f a l l s n o t t o P i as i t w o u l d i f t h e s u p p l y s c h e d u l e was e q u a l l y e l a s t i c i n c o n t r a c t i o n , b u t t o S-^ s i n c e t h e s u p p l y c u r v e i n c o n t r a c t i o n i s h i g h l y i n e l a s t i c . C h a r t I . "One-Way" S u p p l y C u r v e s S o u r c e : S h e p h e r d , G e o f f r e y S . j A g r i - c u l t u r a l P r i c e A n a - l y s i s , Iowa S t a t e C o l l e g e P r e s s , 3 r d E d i t . , 1 9 5 0 . C h a p . 6 . The e f f e c t o f t h e s u p p l y i n e l a s t i c i t y w h i c h c h a r a c t e r i z e s t h e s e c o m m o d i t i e s c a n b e s e e n i n t h e p a t t e r n o f i n t e r n a t i o n a l t r a d e i n raw m a t e r i a l s . I n t i m e s o f d e p r e s s i o n t h e v o l u m e o f t r a d e i n raw m a t e r i a l s does n o t d e c l i n e n e a r l y as s e v e r e l y a s t h e d e c l i n e i n m a n u f a c t u r e d and s e m i - m a n u f a c t u r e d p r o d u c t s . T h i s i s w e l l b r o u g h t o u t i n t h e League o f N a t i o n s R e v i e w o f 9 W o r l d Trade i n 1 9 3 6 . TABLE I . DECLINE OF VOLUME OF TRADE I N RAW MATERIALS AND FINISHED GOODS DURING THE DEPRESSION Y E A R S . YEAR 1929 1932 1933 1934 1935 1936 1937 F o o d s t u f f s 100 89 8 3 82 8 5 . 5 8 5 . 5 • M a t e r i a l s , r a w o r p a r t l y m a n u f a c t u r e d 100 8 1 . 5 8 7 . 5 8 8 9 1 . 5 9 5 . 5 M a n u f a c t u r e d a r t i c l e s 100 59 6 0 . 5 6 6 . 5 6 9 . 5 7 5 . 5 A L L COMMODITIES 100 7 4 . 5 7 5 . 5 78 82 8 5 . 5 9 7 . 5 S o u r c e : R e v i e w o f W o r l d Trade i n 1 9 3 6 . League o f N a t i o n s , G e n e v a . 1937 q F e i s , H e r b e r t : "Raw M a t e r i a l s a n d F o r e i g n P o l i c y " , F o r e i g n A f f a i r s , J u l y 1 9 3 8 , V o l . 16 .No . 4 , page 5 6 7 . - 9 -( i i ) Demand F a c t o r s : P r i c e E l a s t i c i t y * The demand f o r a g r i c u l t u r a l s t a p l e s a n d i n d e e d most raw m a t -e r i a l s c a n a l s o be c h a r a c t e r i z e d as h i g h l y i n e l a s t i c * T h e r e i s h o w e v e r some v a r i a t i o n i n t h e e l a s t i c i t y o f demand b e t w e e n d i f f e r e n t c o m m o d i t i e s a n d f u r t h e r i n v e s t i g a t i o n a n d e m p i r i c a l r e s e a r c h i n t h i s f i e l d w o u l d be u s e f u l * P i o n e e r w o r k has a l r e a d y b e e n c o n d u c t e d b y 11 12 H e n r y S c h u l t s w i t h s u g a r and E . J . B r o s t e r w i t h t e a . S u c h b a s i c k n o w l e d g e as t o t h e m a r k e t demand c h a r a c t e r i s t i c s o f d i f f e r e n t v i t a l raw m a t e r i a l s w o u l d g r e a t l y s t r e n g t h e n a n y f u t u r e a t t e m p t s t o a s s e s s t h e p o t e n t i a l w o r l d m a r k e t s i t u a t i o n and t o s t a b i l i z e p r i c e s . Income E l a s t i c i t y . I t i s i m p o r t a n t t o n o t e t h a t t h e i n c o m e e l a s t i c i t y o f demand f o r n o n - f o o d p r o d u c t s s u c h as r u b b e r o r t h e c h i e f n a t u r a l f i b r e s i s h i g h e r t h a n f o r f o o d p r o d u c t s . I t ha s b e e n s h o w n , f o r e x a m p l e , t h a t t h e demand f o r c o t t o n v a r i e s w i t h t h e l e v e l o f i n d u s t r i a l a c t i v i t y r a t h e r t h a n any changes i n t h e l e v e l o f consumers * i n c o m e s ( t h o u g h a l l t h r e e 1 3 a r e c o r r e l a t e d ) . B y c o m p a r i s o n , t h e i n c o m e e l a s t i c i t y o f t h e demand f o r f o o d s t a p l e s i s l o w e r , s h o w i n g n e g l i g i b l e i n c r e a s e i n t h e v o l u m e consumed e v e n a t t h e peak o f a b u s i n e s s boom. H a b i t f o r m i n g f o o d s s u c h as t h e b e v e r a g e s t e a and c o f f e e a r e f a c e d by e v e n more s t a b l e demand s c h e d u l e s t h a n s u c h s t a p l e s as w h e a t o r s u g a r . The t e r m e l a s t i c i t y r e f e r s t o t h e r e s p o n s e o f c o n s u m p t i o n l e v e l s t o changes i n p r i c e . S e e G . S . S h e p h e r d , Op. C i t . , p p . 5 2 - 5 3 . 1 1 S c h u l t z , H e n r y : The T h e o r y and Measurement o f Demand, C h i c a g o , 193 12 B r o s t e r , E . J . : " E l a s t i c i t i e s o f Demand f o r T e a a n d P r i c e - F i x i n g P o l i c y " , R e v i e w o f E c o n o m i c S t u d i e s , June 1 9 3 9 , V o l . 6 , page 1 7 2 . ~ 13 B l a c k , J o h n D. & K i e f e r , M a x i n e E . j F u t u r e F o o d & A g r i c u l t u r e P o l i c y , M c G r a w - H i l l B o o k C o . , 1 9 4 8 , p p . 8 6 , 87 - 10 -F o r many a g r i c u l t u r a l p r o d u c t s t h e r e f o r e income e l a s t i c i t y o f demand i s l e s s t h a n u n i t y . F o r e x a m p l e , a man w i t h t w i c e as much income as a n o t h e r does n o t e a t t w i c e as much b r e a d a n d p o t a t o e s ; he may i n f a c t e a t l e s s o f s u c h f o o d s i n w h i c h c a s e t h e i n c o m e e l a s t i c i t y o f demand w o u l d b e n e g a t i v e . The i n c o m e e l a s t i c i t y o f t h e h i g h e r q u a l i t y f o o d s s u c h as b e e f a n d f r u i t s i s , h o w e v e r , c o n s i d e r a b l y h i g h e r t h a n f o r c e r e a l s . S c h u l t z has c o n t r i b u t e d a v e r y c o m p r e h e n s i v e a c c o u n t o f t h e 14 n a t u r e and s i g n i f i c a n c e o f t h e i n c o m e e l a s t i c i t y o f s u c h c o m m o d i t i e s . The U n i t e d S t a t e s N a t i o n a l R e s o u r c e s Committee has a l s o made a v a l u a b l e s t u d y o f t h e v a r i a t i o n s i n consumer e x p e n d i t u r e f o r f o o d s t a p l e s . A g a i n i t i s o n l y p o s s i b l e i n t h i s s t u d y t o draw a t t e n t i o n t o some o f t h e more TABLE 2 INCOME EXPENDITURE E L A S T I C I T I E S New E n g l a n d S t a t e s S o u t h e a s t A r t i c l e S u g a r 0 . 1 5 P o t a t o e s 0 . 2 0 F l o u r 0 . 2 4 B r e a d 0 . 2 5 M i l k , C r e a m , I c e Cream 0 . 2 9 B u t t e r 0 . 3 6 Eggs 0 . 6 6 M e a t , P o u l t r y , F i s h 0 . 6 6 F r e s h V e g e t a b l e s . . . . . 1 . 1 6 F r u i t s 1 . 2 0 A r t i c l e M i l k , C r e a m , I c e Cream 0 . 2 0 B r e a d . . . . 0 . 3 4 Sugar . - " 0 . 3 5 P o t a t o e s . . . . 0 . 3 5 B u t t e r 0 . 4 6 0 Eggs , 55 F l o u r 0 . 5 9 F r e s h V e g e t a b l e s . 0 . 7 6 Meats 0 . 7 9 F r u i t s 1 . 1 3 S o u r c e s W a i t e , W a r r e n C. & C a s s a d y J r . , R a l p h : The Consumer a n d t h e E c o n o m i c  O r d e r , M c G r a w - H i l l , 1 9 3 9 , p . 1 5 8 . 14 S c h u l t z , T h e o d o r e - W . : A g r i c u l t u r e i n a n U n s t a b l e Economy, McGraw H i l l Book C o i , 1 9 4 5 , p p . 60 & 7 0 . 15 d e t a i l e d s t u d i e s on demand e l a s t i c i t y . T a b l e 2 , t a k e n f r o m a s t u d y b y W a i t e a n d C a s s a d y , shows t h e i n c o m e - e x p e n d i t u r e e l a s t i c i t i e s f o r a number o f f o o d p r o d u c t s , i n two d i s t r i c t s i n t h e U n i t e d S t a t e s . I t i s s i g n i f i c a n t t h a t t h e p r o d u c t s i n b o t h a r e a s w i t h t h e h i g h e s t income e l a s t i c i t y a r e o f a p e r i s h a b l e n a t u r e a n d n o t v e r y s i g n i f i c a n t i n i n t e r n a t i o n a l t r a d e , . W h i l e t h e r e l a t i v e d e c r e a s e i n t h e a c t u a l p h y s i c a l v o l u m e o f raw m a t e r i a l s , e x p o r t e d i s much l e s s t h a n f o r n o n - a g r i c u l t u r a l p r o d u c t s t h e d e c l i n e i n t h e v a l u e o f p r o d u c t s e x p o r t e d i s c o n s i d e r a b l e f o r b o t h raw m a t e r i a l a n d m a n u f a c t u r e d , p r o d u c t s . T h i s i s i l l u s t r a t e d i n C h a r t 2 . CHART 2 AGRICULTURAL & NON-AGRICULTURAL PRODUCTS: INDEXES OF VOLUME AND GOLD VALUE I o o •4-0 E .0 OF WORLD EXPORTS, 1929 - 37 (1929 - 1 0 0 ) A 6 R l l U L . - r u R A . L - P R O D U C T S 6«POf. \ • -. V O L U M E . O f W O R L O E . X P O R T & S O L O V A . L U 1 O f W O R L D E . X P O R T S H O N - A 6 M C U U T U 8 A L P R O D U C T S V O L U M E O F W O R L D E . X P O R T S . © O L D V A L U E . OT W 0 R . L t > t - V . P O R . T C , >923 L2.30 L 9 3 J 1 3 3 E | 3 3 i 133-*- I335E ) 9 B 6 X • E x c l u d e s t r a d e b e t w e e n t h e U n i t e d S t a t e s a n d H a w a i i a n d P u e r t o R i c o . . A l s o b e t w e e n J a p a n and T a i w a n (Formosa ) S o u r c e : . T a y l o r , H e n r y C : W o r l d T r a d e i n A g r i c u l t u r a l P r o d u c t s , M a c M i l l a n Company., New Y o r k , 1 9 4 3 , p p . 8 & 9 . 15 ( a ) Consumer E x p e n d i t u r e i n the U n i t e d S t a t e s , U . S . N a t i o n a l R e s o u r c e s C o m m i t t e e , 1 9 3 9 , p p . 3 8 - 3 9 . ( b ) K a p l a n , A . D . H . : " E x p e n d i t u r e P a t t e r n s o f U r b a n F a m i l i e s " , J o u r n a l o f A m . S t a t i s t i c a l A s s n a , V o l . 23, p p . 97 & 9 8 « ( c ) C l a r k , C o l i n : The C o n d i t i o n s o f E c o n o m i c P r o g r e s s . , p p . 436 - 439 - 12 -( i i i ) P r i c e I n s t a b i l i t y ; A r i s i n g o u t o f t h e n a t u r e o f t h e demand a n d s u p p l y i s t h e p r o b l e m o f p r i c e i n s t a b i l i t y s i n c e t h e l e v e l o f p r i c e s i s t h e r e s u l t o f t h e i n t e r a c t i o n o f t h o s e f o r c e s w h i c h make u p t h e s u p p l y a n d demand c h a r a c t e r i s t i c s o f raw m a t e r i a l s . The o u t s t a n d i n g f a c t i n t h e p r i c e b e h a v i o u r o f a g r i c u l t u r a l s t a p l e s a n d o t h e r p r i m a r y c o m m o d i t i e s , i s t h a t t h e i r p r i c e l e v e l s a r e s u b j e c t t o i r r e g u l a r a n d o f t e n v i o l e n t p r i c e v a r i a t i o n s . T h i s a t t r i b u t e o f u n s t a b l e p r i c e s h a s b e e n w e l l i l l u s t r a t e d a n d d i s c u s s e d i n a number o f 16 s t a n d a r d t e x t b o o k s o n a g r i c u l t u r a l e c o n o m i c s , . s o t h a t o n l y t h e b r i e f e s t o u t l i n e mus t s u f f i c e h e r e . C h a r t 3 shows a s e r i e s o f h y p o t h e t i c a l s u p p l y a n d demand s c h e d u l e s f o r a p r i m a r y c o m m o d i t y . I n b o t h c a s e s t h e s t e e p n e s s o f t h e c u r v e s i n d i c a t e s t h e h i g h d e g r e e o f i n e l a s t i c i t y o f b o t h t h e s u p p l y ' a n d t h e demand. I f a n i n c r e a s e i n demand i s r e p r e s e n t e d b y o n l y a s l i g h t s h i f t o f t h e demand s c h e d u l e CHART 3 f r o m D t o D 2 t h e r e i s a v e r y \ \ e / 3 ' f a t c o n s i d e r a b l e r i s e i n p r i c e f r o m t h e l e v e l P-^ t o P 2 . S i m i l a r l y a n i n c r e a s e i n t h e s u p p l y f r o m S^ t o S 2 r e s u l t s i n a v e r y c o n s i d e r a b l e f a l l i n t h e p r i c e t o P ? Thus s m a l l ^ Q U ^ I T Y q u a n t i t i v e changes i n s u p p l y o r demand r e s u l t i n q u i t e c o n s i d e r a b l e changes i n p r i c e s . . V A L U E . O R P R I C E Of C O M M O D I T Y 16 See f o r example - B l a c k a n d K i e f e r , O p . C i t . , p p . 8 8 , 89 - a n d S h e p h e r d , G . S . : ( A g r i c u l t u r a l P r i c e P o l i c y ) Op. C i t . , C h a p . 1 . - 13 -B e c a u s e o f t h e i n e l a s t i c n a t u r e o f demand, s l i g h t v a r i a t i o n s i n t h e q u a n t i t y s u p p l i e d o r t h e q u a n t i t y demanded, w i l l have s e v e r e r e p e r c u s s i o n a r y e f f e c t s u p o n t h e p r i c e l e v e l . The q u a n t i t y s u p p l i e d i s h i g h l y v a r i a b l e due t o n a t u r a l f o r c e s w h i c h a r e l a r g e l y b e y o n d t h e c o n t r o l o f man. Thus t h e v a g a r i e s o f N a t u r e l e a d t o t h e u n e x p e c t e d h i g h and l o w y i e l d s . The e x t e n t o f t h i s y i e l d i n s t a b i l i t y v a r i e s b e t w e e n d i f f e r e n t c r o p s , p a r t l y b e c a u s e o f t h e i r p a r t i c u l a r g r o w t h h a b i t s . F o r e x a m p l e t h e s e v e r e d r o u t h s o f 1934 and 1935 i n t h e N o r t h A m e r i c a n c o n t i n e n t w e r e 17 v e r y s i g n i f i c a n t i n m i t i g a t i n g t h e e f f e c t s o f s u r p l u s w o r l d w h e a t s t o c k s . IB A g a i n , many t r e e c r o p s s u c h as c o f f e e have a d e f i n i t e f r u i t i n g c y c l e . A f t e r a y e a r o f good a v e r a g e y i e l d s t h e c r o p t e n d s t o f a l l o f f f o r a y e a r o r two w h i l e t h e p l a n t r e c u p e r a t e s . . T h i s c y c l e i s e x a g g e r a t e d i f a q u i e s c e n t y e a r c o i n c i d e s w i t h a d v e r s e w e a t h e r c o n d i t i o n s , when t h e y i e l d s a r e v e r y r e d u c e d © Changes i n demand as w e l l as s u p p l y o c c u r . These a r e d u e , i n t h e l o n g r u n , t o changes i n c o n s u m e r s ' h a b i t s and t a s t s , r e s u l t i n g p a r t l y f r o m t h e d e v e l o p m e n t o f new s u b s t i t u t e s o r o t h e r t e c h n o l o g i c a l a d v a n c e s . I n t h e s h o r t r u n t h e r e a r e s m a l l f l u c t u a t i o n s i n demand a r i s i n g f r o m t h e b u s i n e s s c y c l e . I t i s t h i s t y p e o f demand change w h i c h i s m o s t s i g n i f i c a n t i n c a u s i n g t h e p r i c e l e v e l t o o s c i l l a t e s i n c e t h e y o c c u r t o o r a p i d l y t o a l l o w p r o d u c e r s t o a d j u s t as t h e y a r e a b l e t o do i n m e e t i n g s e c u l a r demand c h a n g e s . T h i s e f f e c t o f t h e b u s i n e s s c y c l e i s p e r h a p s t h e mos t c r u c i a l i s s u e i n t h e w h o l e raw m a t e r i a l s p r o b l e m . The e f f e c t o f the b u s i n e s s c y c l e o n r a w m a t e r i a l p r i c e s i s v e r y much more s e v e r e i n t h e c a s e o f n o n - f o o d p r o d u c t s . The s l i g h t 17 " ' C a i r n s , A n d r e w t " C o m m e r c i a l P o l i c y a n d t h e O u t l o o k f o r I n t e r n a t i o n a l T r a d e i n A g r i c u l t u r a l P r o d u c t s , f T P r o c e e d i n g s o f t h e F o u r t h " I n t e r n a t i o n a l C o n f e r e n c e o f A g r i c u l t u r a l E c o n o m i s t s O x f o r d U n i v e r s i t y P r e s s , p p . 1 7 1 - 1 8 3 . ~ 1 8 W i c k i z e r , V . D . , o p . c i t . , page 4 . - 14 -r e c e s s i o n i n 1921 f o l l o w i n g t h e p o s t w a r boom o f 1 9 1 9 - 2 0 r e s u l t e d i n v e r y m a r k e d d r o p s i n t h e p r i c e l e v e l s o f many i m p o r t a n t s t a p l e s . F o r e x a m p l e , d e s p i t e s h i p p i n g s h o r t a g e s a n d a c c u m u l a t i n g s t o c k s i n t h e O r i e n t , r u b b e r p r i c e s h o v e r e d a r o u n d 72 t o 50 c e n t s p e r pound d u r i n g t h e c l o s i n g y e a r s o f t h e f i r s t W o r l d W a r . The b u s i n e s s r e c e s s i o n w h i c h 19 f o l l o w e d t h e i m m e d i a t e p o s t - w a r boom h a d i m m e d i a t e e f f e c t s , h o w e v e r , and b y t h e summer o f 1 9 2 1 , r u b b e r p r i c e s h a d f a l l e n t o 1 1 . 5 c e n t s p e r p o u n d . T h i s i n s t a b i l i t y o f p r i c e s i s p a r t i c u l a r l y i m p o r t a n t f o r t h o s e c o u n t r i e s whose economy i s h e a v i l y d e p e n d e n t u p o n t h e e x p o r t o f a few raw m a t e r i a l s . T h e i r f o r e i g n exchange p o s i t i o n becomes c r i t i c a l b e c a u s e o f t h e i r g r e a t dependence on a b a l a n c e o f t r a d e i n o r d e r t o o b t a i n most o f t h e i r c o n s u m p t i o n r e q u i r e m e n t s . T h i s i s p a r t i c u l a r l y s o i n t h e ca se o f a p r o d u c t l i k e c o f f e e w h i c h a c c o u n t s f o r 30 t o 90 p e r c e n t o f t h e t o t a l v a l u e o f a l l e x p o r t s f o r s u c h c o u n t r i e s as E l S a l v a d o r , C o l o m b i a , G u a t e m a l a , N i c a r a g u a , H a i t i , C o s t a R i c a a n d B r a z i l . B r a z i l h a d t o g i v e u p h e r g o l d s t a n d a r d when f a c e d w i t h t h e r a p i d d e c l i n e i n c o f f e e p r i c e s w h i c h o c c u r r e d 20 i n 1930. S i m i l a r l y p r i c e d e c l i n e s i n R u b b e r c a n u p s e t t h e w h o l e M a l a y a n economy, w h i l s t s u g a r p r i c e s a r e v i t a l t o C u b a , t e a p r i c e s t o C e y l o n , w o o l p r i c e s t o A u s t r a l i a and w h e a t p r i c e s t o Canada a n d A r g e n t i n a ? Many p r o d u c e r s o f m i n e r a l s who w e r e s m a l l e r i n number t h a n f o o d p r o d u c e r s , a n d t h u s b e t t e r a b l e t o o r g a n i z e r e g u l a t o r y b o d i e s , have f o r m e d K n o r r , K . E . , w o r l d R u b b e r & I t s R e g u l a t i o n , F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d , p p . 9 0 , 9 1 . B l a c k , J . D . & T s o u , S t a n l e y S . : " I n t e r n a t i o n a l Commodity A r r a n g e m e n t s " , The Q u a r t e r l y J o u r n a l o f E c o n o m i c s , A u g u s t 1 9 4 4 , page 5 4 6 . - 15 -i n t e r n a t i o n a l c a r t e l s p a r t l y w i t h o b j e c t i v e o f s t a b i l i z i n g p r i c e s . T h e i r e f f o r t s i n t h a t d i r e c t i o n have n o t b e e n t o o s u c c e s s f u l o The f o l l o w i n g t h r e e s t a p l e c o m m o d i t i e s w e r e a l l s u b j e c t t o s t r o n g m a r k e t c o n t r o l s d u r i n g t h e l a t e 1 9 3 0 f s , y e t t h e i r p r i c e s c h a n g e d d r a s t i c a l l y as i s shown b y t h e f o l l o w i n g f i g u r e s . F r o m F e b r u a r y 12 t o M a r c h 1 5 , 1 9 3 7 , t i n p r i c e s r o s e f r o m £ 2 2 9 p e r t o n t o £ 3 1 1 p e r t o n . I n t h i r t y - e i g h t days f r o m Sep tember 15 t o November 8 , 1 9 3 7 , t i n p r i c e s f e l l f r o m £ 2 6 4 t o £ 1 8 1 . The m o n t h l y a v e r a g e p r i c e o f c o p p e r i n c r e a s e d i n New Y o r k b e t w e e n O c t o b e r 1936 and M a r c h 1937 f r o m 9 . 5 6 3 c e n t s p e r pound t o 1 5 . 7 7 5 c e n t s . O f f i c i a l e x p o r t p r i c e s f o r s t e e l m e r c h a n t b a r s i n c r e a s e d 21 b e t w e e n December 1936 a n d J u n e 1 9 3 7 , f r o m £ 4 . 2 6 t o £6. The a b o v e c a r t e l s r e s o r t e d g e n e r a l l y t o m a k i n g a d d i t i o n s o r c u t s i n e x p o r t q u o t a s w h e n e v e r p r i c e s c h a n g e d . However s i n c e changes i n t h e p r o d u c t i o n o f s u c h m i n e r a l s o n l y show t h e . i r e f f e c t a f t e r s e v e r a l months have e l a p s e d , t h e p r e v a i l i n g s t o c k s and o t h e r a n t i c i p a t e d a r r a n g e m e n t s f o r p r o d u c t i o n have a much more i m m e d i a t e e f f e c t o n p r i c e s . I t i s t h e i n a b i l i t y o f a number o f s m a l l u n o r g a n i z e d p r o d u c e r s t o h e l p t h e m s e l v e s , c o u p l e d w i t h t h e s i g n i f i c a n c e o f t h e e x p o r t r e v e n u e f r o m t h e t r a d e i n s u c h p r o d u c t s , w h i c h l e a d s government s t o i n t e r f e r e a n d t a k e s t e p s t o t r y a n d s t a b i l i z e t h e p r i c e s o f c e r t a i n raw m a t e r i a l s . U n i l a t e r a l 22 a c t i o n m i g h t b e d e s c r i b e d as v a l o r i z a t i o n . The o p e r a t i o n s o f t h e H e x n e r , E r v i n : I n t e r n a t i o n a l C a r t e l s , U n i v e r s i t y o f N o r t h C a r o l i n a P r e s s , p . 1 2 2 . 22 The t e r m o r i g i n a t e s f r o m t h e B r a z i l i a n w o r d " v a l o r i z a c a o " , s i g n i f y i n g • t h e a c t o r p r o c e s s o f government i n t e r f e r e n c e t o r a i s e p r i c e s . - 16 -C a n a d i a n w h e a t b o a r d i n t h e l a t e 1 9 2 0 « s , t h e U n i t e d S t a t e s p o l i c y w i t h r e s p e c t t o c o t t o n and t h e B r a z i l i a n c o f f e e c o n t r o l programme a r e example s o f s u c h v a l o r i z a t i o n s chemes . The b a s i c i d e a u n d e r l y i n g v a l o r i z a t i o n i s t o t a k e a d v a n t a g e o f t h e i n e l a s t i c i t y o f demand b y w i t h h o l d i n g s u r p l u s 23 s t o c k s o f t h e c o m m o d i t y . C y c l i c a l P r i c e F l u c t u a t i o n s I n t h e s h o r t r u n t h e p r i n c i p a l p r o b l e m l i e s i n t h e e x i s t e n c e o f p r o d u c t i o n c y c l e s s t i m u l a t e d b y p r i c e changes a n d a l s o c o n t r i b u t i n g t o t h e m . T h i s phenomenon i s a r e s u l t o f t h e i n a b i l i t y o f a l a r g e number o f s m a l l p r o d u c e r s t o f o r e c a s t f u t u r e s u p p l y and demand r e q u i r e m e n t s w h i c h l e a d s t h e i n d u s t r y t o o v e r d o a d j u s t m e n t s t o p r i c e c h a n g e s . T h u s , one p r o d u c e r w i l l d e c i d e t o e x p a n d p r o d u c t i o n when p r i c e s a r e h i g h . I f e v e r y . p r o d u c e r a c t s i n a s i m i l a r manner t h e a g g r e g a t e s u p p l y i s g r e a t l y i n c r e a s e d t h o u g h t h i s i s n o t a p p a r e n t u n t i l a y e a r o r more a f t e r t h e d e c i s i o n t o expand p r o d u c t i o n has b e e n made. T h i s c a u s e s p r i c e s t o f a l l w h i c h i n d u c e s p r o d u c e r s t o c o n t r a c t p r o d u c t i o n . The s u p p l y f a l l s a n d p r i c e s r i s e up a g a i n . The cobweb t h e o r e m has b e e n d e v e l o p e d t o e x p l a i n t h e 24 m e c h a n i s m o f t h i s r e c u r r i n g p r i c e and p r o d u c t i o n c y c l e . 23 Rowe , J . W . F . : M a r k e t & Men - a s t u d y o f a r t i f i c i a l c o n t r o l schemes i n some P r i m a r y I n d u s t r i e s , C a m b r i d g e U n i v e r s i t y P r e s s , 1 9 3 5 , p p . 2 2 4 - 2 5 0 . 24 N i c h o l l s , W . H . ; . A T h e o r e t i c a l A n a l y s i s o f I m p e r f e c t C o m p e t i t i o n w i t h  S p e c i a l A p p l i c a t i o n t o t h e A g r i c u l t u r a l I n d u s t r i e s , I o w a S t a t e C o l l e g e P r e s s , 1 9 4 1 , p p . 305-317. - 17 -C h a r t 4 i l l u s t r a t e s t h i s t h e o r e m . When t h e demand c u r v e s h i f t s f r o m t o D 2 b e c a u s e o f a g e n e r a l i n c r e a s e i n c o n s u m e r s ' demand, t h e p r i c e w i l l r i s e CHART 4 f r o m P.. t o P . H o w e v e r , 1 2 a t t h i s p r i c e , t h e q u a n t i t y ^ •p R Q 2 w i l l b e s u p p l i e d , s o j. E. t h a t t h e m a r k e t i s n o t i n e q u i l i b r i u m © T h i s q u a n t i t y w i l l i n t u r n r e a c t t o p r o d u c e Q U A N T \ T T a p r i c e o f P ^ w h i c h w i l l c a l l f o r t h a q u a n t i t y o f I n t h i s c h a r t , t h e s u p p l y s c h e d u l e has b e e n d r a w n more e l a s t i c t h a n t h e demand. The ' c o b w e b ' p r o d u c e d i s , c o n s e q u e n t l y d i v e r g e n t . When t h e e l a s t i c i t i e s o f b o t h s c h e d u l e s a r e e q u a l , t h e r a n g e o f f l u c t u a t i o n s r e m a i n s c o n s t a n t , t h e ' c o b w e b ' r e t u r n i n g t o i t s p o i n t o f o r i g i n . When t h e demand s c h e d u l e i s more e l a s t i c t h a n t h e s u p p l y s c h e d u l e t h e cobweb i s c o n v e r g e n t , r e s u l t i n g i n t h e s t a b l e e q u i l i b r i u m o f c l a s s i c a l e c o n o m i c t h e o r y . The s e c o n d c a s e , w i t h a c o n s t a n t r ange o f p r i c e f l u c t u a t i o n s e x p l a i n s t h e r e g u l a r p r i c e and p r o d u c t i o n c y c l e s w h i c h a r e more c h a r a c t e r i s t i c o f t h e p r o d u c t i o n o f p r i m a r y c o m m o d i t i e s w i t h w h i c h t h i s s t u d y i s concerned * . I t c a n r e a d i l y b e a p p r e c i a t e d t h a t t h e more i n e l a s t i c t h e s u p p l y a n d demand s c h e d u l e s a r e , t h e w i d e r t h e r a n g e o f p r i c e o s c i l l a t i o n . The o c c u r r e n c e o f t h e b u s i n e s s c y c l e s u p e r i m p o s e d u p o n t h e p r o d u c e r g e n e r a t e d c y c l e , e x a g g e r a t e s t h e d i s - e q u i l i b r i u m . I n boom t i m e s , s u p p l y i n e l a s t i c i t i e s l e a d t o v e r y h i g h p r i c e s w h i c h r e s u l t i n a n o v e r - o p t i m i s t i c o u t l o o k t o e x p a n d o u t p u t w h i l s t i n t h e t r o u g h o f a d e p r e s s i o n , p r o d u c e r s may s u f f e r s u c h l o w p r i c e s as t o f o r c e t h e m i n t o b a n k r u p t c y . T h e r e may c o n s e q u e n t l y b e - 18 -a n e x c e s s i v e l i q u i d a t i o n o f p r o d u c t i o n r e s o u r c e s i n t e r m s o f t h e l o n g r u n r e q u i r e m e n t s o f n o r m a l t i m e s . T h i s w i l l r e s u l t i n a n e v e n g r e a t e r r i s e i n p r i c e s w i t h t h e f o l l o w i n g u p s w i n g o f t h e b u s i n e s s c y c l e 0 ( i v ) S e c u l a r F o r c e s . . I n t h e l o n g r u n t h e r e a r e many f a c t o r s w h i c h h a v e s i g n i f i c a n t r e p e r c u s s i o n a r y e f f e c t s on t h e i n t e r n a t i o n a l t r a d e i n raw m a t e r i a l s . A d e t a i l e d ^ c o n s i d e r a t i o n w o u l d a g a i n be o u t s i d e t h e s c o p e o f t h i s e s s a y . Changes i n t h e c o n c e n t r a t i o n and r a t e o f i n c r e a s e o f n a t i o n a l p o p u l a t i o n s have a d y n a m i c e f f e c t o n t h e m a r k e t f o r raw m a t e r i a l s . S t u d i e s h a v e r e v e a l e d a d e f i n i t e p a t t e r n o f g r o w t h t r a n s i t i o n i n r e l a t i o n t o t h e l e v e l o f c u l t u r a l a n d e c o n o m i c d e v e l o p m e n t w i t h i n a n a t i o n . B a c k w a r d c o u n t r i e s w i t h a p r e d o m i n a n t l y a g r a r i a n economy and r a t h e r r i g i d c l a s s p a t t e r n s , a r e c h a r a c t e r i z e d b y a f a i r l y s t a b l e o r g r a d u a l l y i n c r e a s i n g p o p u l a t i o n , w i t h v e r y h i g h b i r t h and d e a t h r a t e s . O t h e r n a t i o n s b e g i n n -i n g t o i n d u s t r i a l i z e a n d u t i l i z e t h e a d v a n c e s i n s c i e n c e , t e n d t o have a d e c l i n i n g d e a t h r a t e as a r e s u l t o f t h e a p p l i c a t i o n o f i m p r o v e d h y g i e n e and m e d i c a l k n o w l e d g e . T h e i r b i r t h - r a t e , h o w e v e r , r e m a i n s h i g h , w i t h a c o n s e q u e n t r a p i d u p s u r g e i n p o p u l a t i o n . The most a d v a n c e d i n d u s t r i a l n a t i o n s a g a i n a p p e a r t o have r e t u r n e d t o a p o s i t i o n o f e q u i l i b r i u m w i t h l o w b i r t h a n d d e a t h r a t e s . The f o r m e r i s t h e r e s u l t o f v o l u n t a r y r e s -t r i c t i o n o f f a m i l y s i z e b e c a u s e o f t h e o u t - w e i g h i n g e c o n o m i c a d v a n t a g e s w h i c h a r e a t t a i n a b l e w i t h s m a l l f a m i l i e s . The g r o w t h o f demand t h r o u g h p o p u l a t i o n i n c r e a s e i s g r e a t e s t i n t h o s e c o u n t r i e s w i t h t h e l o w e s t e f f e c t i v e demand, w h i c h m i g h t be - 19 -25 c h a r a c t e r i z e d b y demographer s as s u b j e c t t o M a t h u s ' s L a w . I n t h o s e i n d u s t r i a l l y d e v e l o p e d c o u n t r i e s w h i c h c o n s t i t u t e t h e b i g g e s t e f f e c t i v e m a r k e t f o r p r i m a r y c o m m o d i t i e s , t h e p o p u l a t i o n i s h o w e v e r , t e n d i n g t o r e a c h a s t a t i c o r e v e n d e c l i n i n g e q u i l i b r i u m . S u c h c o u n t r i e s m i g h t 26 be c h a r a c t e r i z e d as s u b j e c t t o E n g e l ' s L a w . We have t h e p o s s i b i l i t y t h e r e f o r e t h a t t e c h n o l o g i c a l a d v a n c e s may r e s u l t i n a n e x p a n s i o n o f p r o d u c t i o n o f s u c h raw m a t e r i a l s w h i c h c o n s t a n t l y o u t s t r i p s t h e e f f e c t i v e demand, y e t s i m u l t a n e o u s l y t h e r e m i g h t be p o t e n t i a l m a r k e t s d e v e l o p i n g i n t h e b a c k w a r d c o u n t r i e s w h i c h c o u l d impose a v e r y s e v e r e s t r a i n o n o u r p r o d u c t i v e r e s o u r c e s . The d y n a m i c e f f e c t s o f t h e r a t e o f t e c h n o l o g i c a l p r o g r e s s h a v e b e e n r e c o g n i z e d s i n c e t h e b e g i n n i n g o f t h i s c e n t u r y . The g r e a t c l a s s i -c a l e c o n o m i s t , J o h n S t u a r t M i l l , d e m o n s t r a t e d t h a t i m p r o v e m e n t s i n t h e p r o d u c t i v e p r o c e s s w o u l d t e n d t o have a n a d v e r s e e f f e c t on p r i m a r y p r o d u c e r s s i n c e s u c h w o u l d l e s s e n t h e demand f o r l a b o u r a n d l a n d r e s o u r c e s 27 and make t h e p r o d u c t s o f i n d u s t r y r e l a t i v e l y more e x p e n s i v e . T e c h n o -l o g i c a l p r o g r e s s l e a d s t o a downward t r e n d i n c o s t s , w h i c h n e c e s s i t a t e s t h e r e t i r e m e n t o f o l d h i g h c o s t c a p a c i t y , w h i c h c a n n o t e i t h e r p h y s i c a l l y o r p r o f i t a b l y be m o d e r n i z e d . A d v a n c e s i n t e c h n i q u e h a v e a d i s - e q u i l i b r a t i n g t 0 3 T h a t t h e r e i s a t e n d e n c y f o r p o p u l a t i o n s expand?more r a p i d l y t h a n f o o d p r o d u c t i o n , s o t h a t n a t i o n s w i l l b e l i m i t e d i n t h e i r r a t e o f g r o w t h b y t e c h n o l o g i c a l d e v e l o p m e n t and t h e i r p o p u l a t i o n w i l l t e n d t o be r e s t r i c t e d t o a s u b s i s t e n c e l e v e l . 26 T h a t a n e x p a n d i n g i n c o m e amongst consumers l e a d s t o a c h a n g i n g p a t t e r n o f e x p e n d i t u r e w i t h a l o w e r r a t e o f e x p e n d i t u r e on s t a b l e f o o d - s t u f f s , p a r t i c u l a r l y c e r e a l s . ^ M i l l , J o h n S t u a r t : P r i n c i p l e s o f P o l i t i c a l E c o n o m y , 5th E d i t . , D . A p p l e t o n & C o . , New Y o r k , V o l . 1 1 , p . 296-302. - 20 -28 effect. The significance of the particular application of techno-logical advance to international trade, is revealed in the growing trend in the inter-war years, to adverse terms of trade for the primary producing countries. The large scale importing countries are often in a position to act as monopsonists and they may even raise the prices of the industrial goods they sell to such primary producers. In secondary and manufacturing industries, as productive efficiency increases so can output. This is not so in the agricultural industry where surplus labour must simply be removed. If neither immigration or industrializa-tion occurs, the terms of trade of such countries experiencing rapid 29 technological advance, may often be extremely adverse. T. W. Schultz and Colin Clark have both demonstrated the effect of this technological 30 progress on the primary producers. Other secular changes in production due. to the dynamic effects of war and technological advance will become apparent in the next chapter. It is a tragic fact that the former often stimulates the latter. The development of anti-malarial drugs, synthetic rayon and rubber were largely the results of German chemists striving to prepare for war through achieving economic anarchy. It will be seen in the subsequent study of 28 Keynes, J.M., Rowe, J.W.F. & Schwartz, G.L.: Royal Economic Society, Memorandum No. 24 October 1950, page 4. 29 Editor Seymour E. Harris, Post War Economic Problems, (Chap. XXII "Stock of Staple Commodities" by CP. Kindle Berger) McGraw-Hill & Co. 1943. 30 (a) Clarke, Colin: The Condition of Economic Progress, London, McMillan, 1940. (b) Schultz, T.W.: Production & Welfare of Agriculture, The MacMLllan Co., New York, 1949, pp. 62 & 63. - 21 -i n d i v i d u a l c o m m o d i t i e s , how w a r s may commonly c u t o f f t h e c h e a p e r more e f f i c i e n t p r o d u c i n g a r e a s . D i s r u p t i o n o f t r a d e r o u t e s l e a d s t o s t i m u l a t i o n o f h i g h c o s t p r o d u c t i o n a t home. When c o n d i t i o n s r e t u r n t o n o r m a l p o l i t i c a l c o n s i d e r a t i o n i n t h e f o r m o f government p r o m i s e s t o d o m e s t i c p r o d u c e r s t o g e t h e r w i t h some o f t h e f r i c t i o n s m e n t i o n e d e a r l i e r o n ( h i g h f i x e d c o s t , a t o m i s t i c p r o d u c t i v e u n i t s e t c e t e r a ) o f t e n p r e v e n t r e a d j u s t m e n t o f t h e s u p p l y t o a c t u a l demand c o n d i t i o n s . F i n a l l y we s h o u l d c o n s i d e r t h e e f f e c t s o f i n d u s t r i a l i z a t i o n i n t h e p r e s e n t s o - c a l l e d b a c k w a r d n a t i o n s w h i c h c o n s t i t u t e t h e c h i e f s o u r c e o f raw m a t e r i a l s . The p a t t e r n o f w o r l d t r a d e i n p r i m a r y c o m m o d i t i e s has b e e n l a r g e l y b e t w e e n a s m a l l g r o u p o f W e s t e r n E u r o p e a n i m p o r t e r s and a number o f d i s t a n t p r o d u c e r s i n t h e t r o p i c s , s o u t h t e m p e r a t e z o n e , a n d N o r t h A m e r i c a . As t h e s e p r i m a r y e x p o r t i n g c o u n t r i e s d e v e l o p t h e i r own m a n u f a c t u r i n g i n d u s t r i e s , as has a l r e a d y h a p p e n e d i n some o f t h e d o m i n i o n s , a n i n c r e a s i n g l y c o m p l e x p r o b l e m w i l l p r o b a b l y d e v e l o p i n t h e s e h i g h l y i n d u s t r i a l i z e d n a t i o n s whose w h o l e economy has b e e n g e a r e d t o t h e o u t w a r d f l o w o f m a n u f a c t u r e d o r p r o c e s s e d goods and t h e i n w a r d f l o w o f t h e p r o d u c t s o f a g r i c u l t u r e . ( v ) E x c e s s C a p a c i t y . E x c e s s C a p a c i t y c a n a r i s e o u t o f t h e f a i l u r e o f a n i n d u s t r y t o a d j u s t t o t h e above m e n t i o n e d s e c u l a r f o r c e s . I t c o n s t i t u t e s , p e r h a p s , t h e most v i t a l p r o b l e m w i t h w h i c h ICA. ' s have t o d e a l . E x c e s s c a p a c i t y m i g h t be d e f i n e d as a s t a t u s o f c h r o n i c o v e r - p r o d u c t i o n , w h e r e b y t h e p r o d u c t i v e r e s o u r c e s a r e s o much g r e a t e r t h a n t h e e f f e c t i v e demand, t h a t t h e r e t u r n t o some f a c t o r s o f p r o d u c t i o n i s b e l o w w h a t s i m i l a r f a c t o r s e a r n e l s e w h e r e . The p o s s i b i l i t y o f s u c h a c o n d i t i o n o f e x c e s s - 22 -c a p a c i t y p e r s i s t i n g was n o t r e c o g n i z e d b y t h e e a r l i e r c l a s s i c a l e c o n o m i s t s s i n c e i t i s a b a s i c t e n e t o f t h e i r d o c t r i n e t h a t n a t u r a l f o r c e s w o u l d a l w a y s b e o p e r a t i n g t o e q u i l i b r a t e t h e f o r c e s o f s u p p l y a n d demand* I t was n o t u n t i l a t t e n t i o n b e g a n t o be f o c u s e d u p o n t h e e x t e n t o f m o n o p o l i s t i c o r i m p e r f e c t c o m p e t i t i o n w i t h a s e e m i n g l y n o r m a l s o c i e t y t h a t t h e p r o b l e m o f e x c e s s c a p a c i t y became f u l l y a p p a r e n t . C h a m b e r l i n who has made one o f t h e m a i n c o n t r i b u t i o n s t o the t h e o r y o f 31 m o n o p o l i s t i c c o m p e t i t i o n , d e v e l o p e d a v e r y d e f i n i t e t h e o r y w h e r e b y a f i r m c o u l d be i n e q u i l i b r i u m w i t h t h e c o e x i s t e n c e o f e x c e s s c a p a c i t y , o w i n g t o the m u t u a l l y r e c o g n i z e d i n t e r - d e p e n d e n c e o f p r o d u c e r s i n many i n d u s t r i e s . S u c h c o n d i t i o n s l e a d e n t r e p r e n e u r s t o a v o i d c o m p e t i n g o n a p r i c e b a s i s a n d even t o t a k e p o s i t i v e measures s u c h as m a r k e t s h a r i n g o r f o l l o w i n g - t h e - l e a d e r as t o p r i c e p o l i c i e s , w h i c h r e s u l t i n m a i n t a i n i n g p r i c e s a t a r t i f i c i a l l y h i g h l e v e l s . I f s u c h c o n d i t i o n s a r e a c c o m p a n i e d b y a n y d e g r e e o f f r e e d o m o f e n t r y o f new c o m p e t i t o r s , t h e h i g h p r i c e s p r e v a i l i n g l e a d t o h i g h p r o f i t e x p e c t a t i o n s w h i c h a t t r a c t new e n t e r p r i s e s , 32 a n d w h i c h r e s u l t i n t h i s c o n d i t i o n o f e x c e s s c a p a c i t y . C h a m b e r l i n * s t h e o r y depends upon t h e e x i s t e n c e o f a n o n - a g r e e s i v e p r i c e p o l i c y w i t h i n t h e i n d u s t r y i n q u e s t i o n . E x c e s s c a p a c i t y c a n , h o w e v e r , d e v e l o p i n p r i m a r y i n d u s t r i e s where t h e p r i c i n g s y s t e m seems t o c o m p l y i n e v e r y way 33 w i t h a p e r f e c t l y c o m p e t i t i v e m a r k e t . The e x a c t c o n c e p t o f e x c e s s C h a m b e r l i n , E d w a r d : The T h e o r y o f M o n o p o l i s t i c C o m p e t i t i o n . H a r v a r d U n i v e r s i t y t r e s s , 1 9 3 5 ; C h a m b e r l i n , E . : Op. C i t . , p p . 104-109 & p p . 1 7 1 - 1 7 6 2 . See p a r t i c u l a r l y E . C h a m b e r l a i n i O p . C i t . , p p . 6 - 7 . - 23 -34 c a p a c i t y i s t h e r e f o r e s u b j e c t t o s e v e r a l d i f f e r e n t i n t e r p r e t a t i o n s . The p r o b l e m o f e x c e s s c a p a c i t y has b e e n p a r t i c u l a r l y a c u t e i n p r i m a r y i n d u s t r i e s b e c a u s e o f t h e d i s r u p t i v e e f f e c t o f t h e s e c u l a r f o r c e s d i s c u s s e d a b o v e , and s h o r t r u n changes i n demand a r i s i n g f r o m w a r c o u p l e d w i t h s h o r t r u n changes i n s u p p l y due t o l a r g e a n d s m a l l c r o p s . I t i s t h e p r o d u c t i o n o f many o f t h e s e p r i m a r y c o m m o d i t i e s t h a t s e v e r a l y e a r s a r e r e q u i r e d i n o r d e r t o add p r o d u c t i v e c a p a c i t y . I t i s t y p i c a l o f t h e a g r i c u l t u r a l i n d u s t r y , t h a t a d e c i s i o n t o e x p a n d p r o d u c t i v e c a p a c i t y w h i l e m o t i v a t e d p r i m a r i l y b y c u r r e n t m a r k e t c o n d i t i o n s , i s made o n t h e a s s u m p t i o n t h a t s i m i l a r p r o f i t p o s s i b i l i t i e s w i l l b e p r e s e n t 35 f o r some y e a r s t o come . From t h e w r i t i n g s o f t h e many s t a t e s m e n a n d e c o n o m i s t s who h a v e c o n s i d e r e d t h e p r o b l e m o f e x c e s s c a p a c i t y o r i t s symptoms o f c h r o n i c s u r p l u s e s , t h e r e emerges a f a i r l y c l e a r p i c t u r e o f how t h i s phenomenon r e l a t e s t o the d i f f i c u l t i e s o f i n t e r n a t i o n a l t r a d e i n raw m a t e r i a l s , and t h e way i n w h i c h i t i s b o t h a r e s u l t o f t h e i n e l a s t i c i t i e s o f s u p p l y a n d demand d i s c u s s e d e a r l i e r , and t h e r e s u l t o f t h e i n c i d e n c e o f d y n a m i c c h a n g e s . Changes i n c o n s u m e r s 1 t a s t e s , t e c h n o l o g i c a l a d v a n c e s , t h e e x t e n s i o n o f p r o d u c t i o n i n t o new a n d l o w e r c o s t a r e a s a n d t h e p r o d u c t i o n o f p o p u l a r s u b s t i t u t e s , have a l l been s u g g e s t e d as c o n t r i b u t o r y 34 See f o r example t h e d e f i n i t i o n s a n d d S s c u s s s i o n s g i v e n b y C a s s e l s , J . M . " E x c e s s C a p a c i t y & M o n o p o l i s t i c C o m p e t i t i o n , The Q u a r t e r l y J o u r n a l o f  E c o n o m i c s , V o l . I I , May 1 9 3 7 , p p . 4 2 6 - 4 4 3 * a n d R e y n o l d s , L l o y d G . , The C o n t r o l o f C o m p e t i t i o n i n C a n a d a , H a r v a r d U n i v e r s i t y P r e s s , 1 9 4 6 , p p . 8 1 , 8 2 , a n d N i c h o l l s , W i l l i a m H . : " A T h e o r e t i c a l A n a l y s i s o f  I m p e r f e c t C o m p e t i t i o n w i t h S p e c i a l A p p l i c a t i o n t o t h e A g r i c u l t u r a l  I n d u s t r i e s , Iowa S t a t e C o l l e g e P r e s s , 1 9 4 1 , page 221-223. 35 W i c k i z e r , V . D . : O p . C i t . , page 93 & J o h n s o n , D . G a l e : F o r w a r d P r i c e s  f o r A g r i c u l t u r e , C h a p t e r V I , p p . 72 & 8 6 . - 24 -f a c t o r s r e s u l t i n g i n a c o n d i t i o n w h e r e : " s t o c k and c a r r y - o v e r s a r e a c c u m u l a t i n g ( i f t h e commodi ty i s n o n - p e r i s h a b l e ) , p r i c e s and r e t u r n s t o p r o d u c e r s a r e t o o l o w t o p e r m i t p r o f i t a b l e o p e r a t i o n o f a l a r g e p a r t o f t h e i n d u s t r y , a n d p r o d u c e r s a r e s e e k i n g a l t e r n a t i v e means o f s e c u r i n g a l i v e l i h o o d . 36 The m a l a d j u s t m e n t s a r e p e r p e t u a t e d b y t h e f i x e d n a t u r e o f c a p i t a l g o o d s , t h e a b s e n c e o f a t t r a c t i v e a l t e r n a t i v e e n t e r p r i s e s , t h e imm-o b i l i t y o f l a r g e g r o u p s o f w o r k e r s , a n d e v e n f r o m government p r o t e c -t i v e a n d p r i c e r a i s i n g p o l i c i e s . E l a c k and T s o u i n t h e i r a r t i c l e o n 37 I C A ' s i n t h e Q u a r t e r l y J o u r n a l o f E c o n o m i c s ^ q u o t e L o r d K e y n e s as h a v i n g a t t r i b u t e d s u c h c h r o n i c s u r p l u s e s t o t h e e f f e c t o f e x c e s s i v e government s u b s i d i e s a n d t a r i f f s a n d t h e s t i m u l u s o f o c c a s i o n a l y e a r s o f v e r y h i g h p r i c e s . The a u t h o r s f u r t h e r s u g g e s t t h a t t h e e x i s t e n c e o f some n a t u r a l r e s o u r c e o f s o i l a n d c l i m a t e , l e a d s t o e x c e s s c a p a c i t y , w h e n e v e r t h i s r e s o u r c e c a n be c h e a p l y e x p l o i t e d w i t h t h e a i d o f a 38 s i z a b l e f i x e d c a p i t a l i n v e s t m e n t © K . . E . K n o r r i n t h e p r e f a c e o f h i s s t u d y o f r u b b e r r e g u l a t i o n s t a t e s t h a t : " C o n d i t i o n s o f f r e e c o m p e t i t i o n o f t e n promote s e l e c t i v e d i s - i n v e s t m e n t o n l y a f t e r a l o n g p e r i o d o f a t t r i t i o n , s p e l l i n g a c u t e , d i s t r e s s f o r a l l p r o d u c e r s a n d p a r t i c u l a r l y f o r t h o s e p r o d u c i n g c o u n t r i e s whose p r o s p e r i t y depends h e a v i l y on t h e i n d u s t r y i n q u e s t i o n . " 39 36 W h i t e , B e n n e t t S . & D e n h a r d t , E d i t h ' T . : C h r o n i c S u r p l u s e s o f A g r i c u l t u r a l C o m m o d i t i e s i n the P o s t War P e r i o d " , J o u r n a l  o f F a r m E c o n o m i c s , V o l . X X V , N o v . 1943 N o . 4 page 7 4 3 . 37 B l a c k , J o h n D., and T s o u , S t a n l e y : Op . C i t . , page 540 5 8 I b i d . , page 5 3 8 . 39 K n o r r , K . }E», W o r l d R u b b e r a n d I t s R e g u l a t i o n , S t a n f o r d U n i v e r s i t y P r e s s C a l i f o r n i a © - 25 -J . W. F . Rowe i n h i s s t u d y o f a r t i f i c i a l c o n t r o l schemes i n p r i m a r y i n d u s t r i e s , draws a t t e n t i o n t o t h e e x i s t e n c e o f e x c e s s c a p a c i t y i n many 40 o f t h e s e i n d u s t r i e s , w e l l b e f o r e t h e f i n a n c i a l c r a s h o f 1929. I t i s n o t t h e r e f o r e s i m p l y t h e r e s u l t o f a n u n d u l y d e p r e s s e d demand. He 41 f u r t h e r p o i n t s . .out, .. how t h i s c o n d i t i o n o f e x c e s s c a p a c i t y i s u s u a l l y m a n i f e s t e d b y a r e s i s t a n c e o f o l d , h i g h c o s t c a p a c i t y , t o o b s o l e s c e n c e . T h i s c l e a r l y p o i n t s up t h e r e l a t i o n s h i p b e t w e e n t e c h n o l o g i c a l a d v a n c e and i t s d i s - e q u i l i b r a t i n g e f f e c t s w h i c h was f i r s t d e s c r i b e d b y J . S . M i l l . Rowe f i n a l l y p o i n t s t o t h e s i g n i f i c a n c e o f h i g h p r o f i t s i n l e a d i n g t o o v e r - e x p a n s i o n i n s u c h i n d u s t r i e s . He d e f i n e s n o r m a l p r o f i t s as " s u c h a r a t e o f r e t u r n t o c a p i t a l a n d e n t e r p r i s e as w i l l m a i n t a i n t h e e x i s t i n g 42 vo lume o f p r o d u c t i o n b u t n o t i n c r e a s e i t " . H i s d e f i n i t i o n m i g h t have b e e n more e x p l i c i t i f he h a d a l s o i n c l u d e d h i g h p r o f i t e x p e c t a t i o n s . A p p a r e n t l y t h e e x i s t e n c e o f h i g h p r o f i t e x p e c t a t i o n s may b e t h e c h i e f c a u s e o f e x c e s s c a p a c i t y i n p r i m a r y i n d u s t r i e s , r a t h e r t h a n t h e e x i s t e n c e o f a n y d e f i n i t e ~ n o n - a g r e s s i v e p r i c e p o l i c i e s . H i g h p r o f i t e x p e c t a t i o n s may r e s u l t f r o m t h e i n e l a s t i c i t y o f s u p p l y w h i c h i s somet imes u n a b l e t o a d j u s t r a p i d l y enough t o e x p a n d i n g demand. The i n a c c u r a c y o f p r o d u c e r s * 43 e x p e c t a t i o n s as d e s c r i b e d b y J o h n s o n , c o u p l e d w i t h o c c a s i o n a l v e r y h i g h p r i c e s l e a d t o e x p a n s i o n whose r e p e r c u s s i o n a r y e f f e c t s may n o t be f e l t u n t i l some y e a r s l a t e r . T h i s / p a t t e r n o f o v e r e x p a n s i o n i n r e s p o n s e t o u n d u l y h i g h p r i c e s has b e e n c l e a r l y d e m o n s t r a t e d i n a number o f i n s t a n c e s o f w h i c h two a r e c i t e d . Howe, J . W . F . , Op. C i t . , page 170. I b i d . , p . 195. Row, J . W . F . : Op C i t . , page 234. J o h n s o n , G a l e : Op . C i t . , C h a p t e r V , p p . 7 2 - 8 6 . - 26 -The enormous expansion of productive capacity in the rubber industry which became apparent from 1930-34 was largely the result of 44 the new planting made during 1925, a year of very high prices. Similarly the big coffee crop in the State of Sao Paulo, Brazil in 1927, coupled with the very high prices received under that govern-ment's valorisation scheme, were largely responsible for the excess 45 capacity which became apparent around 1932. While i t is recognized by a l l writers on the subject that such excess capacity is eliminated under competitive conditions, i t is of importance to this study because the process of readjustment is only very gradual, and gives rise to such hardship amongst producers, that in practive governments have generally been forced to intervene before the process of readjustment through the operation of natural forces is ever completed. Summary It is hoped that the foregoing preliminary survey of the conditions and problems surrounding the production of raw materials has demonstrated the existence of certain forces and productive properties which give rise to serious problems for the producers of primary products. Most important of these are the acute distress caused among producers by, (i) excessive price instability and, (ii) the creation of chronic surplus capacity. ICA's become an important consideration for national govern-ments when there are a large number of small independent producers, 44 Knorr, K.E., Op.Cit., pp. 70 & 100-01. 45 Rowe, J.W.F., Op.Cit. page 38. - 27 -engaged in the intensive production of a commodity, which depends upon distant overseas markets and which'constitutes a large part of the national income* OBJECTIVES OF INTERNATIONAL COMMODITY AGREEMENTS. Although a detailed consideration of both the desirable and feasible objectives of ICA's must be left t i l l the concluding portion of this study, i t is now possible to make some tentative postulates as to the desirable goals for such international cooperation, the possible conflicts of interest and the probable objectives of such agreements* 46 If desirable objectives of ICA's are to be framed in economic terms they must recognize firstly, that the general public interest must always predominate over the conflicting interests of any special group* The chief interests of the general public lie in the elevation of consumption levels and particularly in the prevention of their temporary decline, as a result of violent business fluctuations. The means by which consumption levels are raised l i e in provision for expansion of production through the optimum utilization of the low-cost, more efficient productive units* In the light of the difficulties outlined above, i t seems likely that ICA's will be concerned particularly with the problems of raising and maintaining price levels and trying to retain a m a m i n i share of the market, since the impetus to organize commodity agreements comes generally See criteria suggested by K.E. Knorr in the Preface of his evaluation of rubber control, Op. Cit., pp. v-vii. - 28 -at a time when markets are glutted and prices are very low. There is a very real. danger that there will be excessive liquidation of productive capacity during the trough of a depression, and a desirable criterion has been suggested by Rowe as to the levels to which prices might be raised under such conditions. He suggests that the consumer "ought not to pay a price under restriction higher than is necessary to maintain irtr efficient working order, that proportion of the capacity which wil l be required in the future.n47 Any remedial measures must also in the long run make positive provision for the liquidation of excess productive capacity* Resistance to a downward trend in prices will tend to preserve high cost and less-efficient productive capacity, and is justifiable only as a temporary measure in the depths of a depression, when the readjustment and re-allocation of resources is impossible. We shall subsequently see that the strong desire on the part of producers, to protect their vested interests will have run contrary to such goals and will tend to result in the persistence of such ICA's, which in their regulatory capacity, should be purely temporary. The actual mechanisms by which governments are able to alleviate the distress amongst producers and help towards readjusting supply and demand, will consist of export and import quotas, price discrimination, and stock holding operations. In the international field destruction of physical stocks would never be contemplated, though attempts might be made to control the supply through the amount produced as well as marketed. Alternatively governments might resort to international Howe, J.W.F., Op. Cit., page 214. 48 storage of surpluses. ICA's are likely to be the outcome of one or many divisions of interest, however. Governments of primary exporting countries have opposing interests to those nations wholly dependent upon imports. Consuming nations moreover, do not necessarily represent the general interest of their nationals. This has been particularly so in the history of wheat and sugar, where the chief consuming countries have for national defense and political reasons attempted to preserve a considerable measure of economic autarchy. This has resulted in the protection and stimulation of high cost domestic production which has been bitterly resented by the chief exporting nations. The view point of these partly self sufficient importing nations is well presented by Giuseppe Orlando i n presenting 49 Italy's attitude towards international wheat policy. There is also a conflict of interests between the triangle of producers, manufacturers and ultimate consumers. The manufacturer is not concerned so much ^ ith price levels as with stability since this enables him to avoid changes in the size of his stock and its balance sheet value.J The consumer is of course primarily concerned with low For a discussion of possible government measures see: Johnson, D. Gales Trade & Agriculture, A Study of Inconsistent Policies, John Wiley & Sons Inc., New York, 1950, pp. 128-136. 49 Orlando, Giuseppes International Wheat Agreements, International  Journal of Agrarian Affairs, Vol. I, No. 3, 1949, pp. 23-39. 50 Hexner, Ervin: Op. Cit., p. 120. prices, whilst the producer w i l l forego high prices only to the extent that he can expand his market thereby. This chapter whilst giving only an elliptical presentation of the underlying difficulties which lead to the formation of Ida's and their probable objectives, wil l now serve as a background against which the following individual commodity studies can be evaluated. CHAPTER II INDIVIDUAL COMMODITY STUDIES The economic nature of production together with an account and evaluation of Control Measures in the rubber, coffee and tea industries* (I) Rubber Rubber has been selected as the f i r s t commodity for study because i t has been subject to the most prolonged and extensive control and has consequently received most notice in the writings of both critics and advocates of ICA's* Before the second world war, the crude rubber industry was encumbered.with large surplus output facilities which, under conditionsof free competition, tended to result in excess supplies and severely depressed prices. Also supply and demand con-ditions were such as to create violent price fluctuations. Both these factors at times caused Intense suffering i n the producing industry. The importance of the industry may be indicated by the fact that in 1937, rubber represented 54 per cent of the total value of exports from British Malaya, 31 per cent of the value of Netherlands Indies exports, and 23 per cent of the total value of Ceylon's exports. In value, rubber was the leading commodity imported into the U.S.A. up to 1939."'" Rubber has unique properties which make i t suitable for diverse uses. It is impermeable to liquids and gases, resistant to electrical currents, elastic and resistant to abrasion. It finds its uses in such diverse articles as water proof clothing, automobile tires, electrical ^ Knorr, K.E. World Rubber and Its Regulation, Stanford University Press, California, p. 2* .- 32 -insulators, hoses, shock absorbers and sporting equipment. Raw rubber comes from the coagulation of rubber granules, contained in the latex of various plants. The chief commercial source is "Hevea Brasiliensis n, an indigenous tree of the Amazon basin. The shift i n rubber production from Brazil to the Orient occurred around the end of the nineteenth century. The devastation of the Singalese coffee industry by disease gave impetus to rubber expansion. Plantations began to produce on a 2 large scale by 1910. The following table indicates the rapid extent of expansion in Oriental Plantation production. TABLE 3. Year Total Cultivated area (acres) Total Exports (tons) •1B99 4,000 4 1905 127,000 145 1910 1,125,000 8,200 Source: Knorr, K.E., World Rubber and its Regulation (Food Research Institute, Stanford University, California, page: 10.) Reclaimed rubber is also a significant factor in the supply of rubber. In the United States such reprocessed rubber constitutes about 27 per cent Lawrence, Olivers "International Control of Rubber", Commodity Control  in the Pacific Area, Stanford Univ. Press, California, 1935, Chapter XIII. - 33 -as much as crude rubber absorption. Synthetic rubber under the impetus of the second world war has also become a significant source of supply. At the present time, though possessing some qualities superior to those possessed by raw rubber, none of the several different types of synthetic product measure up to natural rubber in every respect. Consequently their main use is in blending with the natural product. However the extent to which synthetic rubber can replace raw rubber has been demonstrated by Nazi Germany's wartime production, and Russia's present utilization. Plantation rubber, with which this study is concerned, s t i l l constitutes the major source of rubber. The rubber bearing latex is obtained by tapping, an operation which involves cutting narrow diagonal strips of bark from the bole of the tree. Latex exudes from the surface and is drained into containers, down the diagonal slope of the new incision. About a hundred-and-sixty of such tapping operations during the year will give a yield of four to five pounds of crude rubber per tree. Market Characteristicsi The supply of raw rubber is relatively inelastic as rubber trees do not reach bearing age until five to seven years after planting. They reach their mavimnm yield at about thirteen years of age. The economic l i f e span of the tree is not definitely known but is probably about f i f t y years. In the mid 1930*s i t was estimated to cost from $200 to $400 per 4 acre to plant and raise estate trees. About 99 per cent of a l l plantation Knorr, K.E.: Op. Cit., p. 14. 4 Knorr, K.E.: Op. Cit., p. 18 - 54 -rubber comes from Eastern Asia. British Malaya is the foremost exporter, followed by Indonesia. Up to the time of the Japanese occupation of those areas in 1940, 78 per cent of a l l exports came from Malaya and the Netherlands East Indies.'' In the short run, production is continuous with a slight falling off during the winter months when the tree sheds its leaves. The equitable equitorial climate of rubber growing areas causes l i t t l e yield variability. There is moreover only slight response in yields from heavier tapping, and resting of the tree results only in a very transient increase in yields when tapping is recommenced. The tree produces .latex in response to tapping. Supply varies, however, in response to prices since native producers tend to cease tapping operations when prices are low, and to tap very intensively when prices are high. The European Estates, on the other hand, continue to maintain output even in face of a fall ing demand, due to their relatively high proportion of fixed costs. Estate labour is often employed on a long-term contract and is obtained at considerable expense. These differences in the response of estate and native production to price changes are illustrated in chart five. Since there is a time lag of some two-and a half months between tapping and receipt in rubber manufacturing plants, the volume of crude rubber stocks varies greatly with changes in demand. Significant inverse correlation has been found between the movement of rubber prices and rubber stocks.^ The demand for rubber is concentrated mainly in the wealthier countries of which the United States is by far the biggest consumer. In 1957-59, per capita rubber consumption i n the United States averaged 8 pounds, in Britain 514 pounds per capital, and in Italy only 1.2 pounds per 5 Ibid, p. 58 6 Ibid, p. 84 - 35 -capita. Table 4 shows the annual rubber absorption in selected regions, during the inter-war years. CHART 5 ESTATE AND NATIVE RUBBER PRODUCTION IN MALAYA AMD THE NETHERLANDS INDIES, & . CRUDE RUBBER PRICES AT SINGAPORE, ANNUALLY 1929-34. A. ESTATE PRODUCTION B. NATIVE PRODUCTION Source: Knorr, K.E.: - World Rubber & Its Regulation (Food Research Institute, Stanford University, California, page 61. TABLE 4 Thousands of Tons Percentage Period U.S.A. dom Contin-ental Europe Rest of World U.S.A. United King-dom Contin-ental Europe Rest of World 1920-22 228.4 17.6 53.8 26.3 70.0 5.4 16.5 8.1 1927-29 55.1 55.1 55.1 71.8 61.3 7.9 20.4 10.4 1937-39 524.1 114.8 114.8 131.0 50.3 11.0 26.1 1.2.6 Source: Knorr, K.E. World Rubber and Its Regulation (Food Research Insti-tute, Stanford University, California). - 36 -The automobile industry is by far the biggest consumer of rubber. In the U.S.A. 76.6 per cent of a l l crude rubber consumed 7 between 1938-40, went into tires, inner tubes and tire sundries. Consumption is very unresponsive to changes in the price of rubber. Variations i n the total consumption volume are determined chiefly by the changing level of industrial activity. The prices of raw rubber in no way affects the demand for automobiles, and there is no signi-ficant mathematical correlation between crude rubber prices and the price of automobile tires and tubes. The close correlation between changes in the level of industrial production and rubber absorption in the United States, plus the great dependence of the world market on American con-sumption, has proved a highly unsettling factor throughout the inter war period. During the great depression, United States production of automobiles dropped from 5,300,000 in 1929 to 1,300,000 in 1932.9 The significance of the United States market is particularly apparent from a comparison of crude rubber imports between different nations during the depression of the 1930's. Due to the relative unimportance of automobile industries in governing rubber consumption i n European countries, and a secular upward trend in rubber utilization for other purposes, the demand for rubber from a l l other countries except the 10 United States, remained relatively constant in terms of import levels. The time lag between planting and the maturation of trees renders prices a rather inadequate guide for investment in additional 7 Ibid., p. 46 8 Ibid., p. 73 9 Taylor, Henry C. World Trade in Agricultural Products. The MacMillan Co., New York, 1943, p. 51. : """""" Rowe, J.W.F.: Markets and Men, A study of Artific i a l Control Schemes in some Primary industries, Cambridge University Press, 1935, page 142, - 37 -capacity. It is not surprising therefore "that the simultaneous response from a great number of producers with relative similarity in reaction patterns, information, and outlook, tends to result in over-expansion of capacity in response to price changes. This is born out by the direct relationship between new plantings and the long-run trend of rubber prices, as shown in Table 5» TABLE 5 NEW RUBBER PLANTINGS AND NEW YORK CRUDE RUBBER PRICES, AVERAGES 1900 - 1933 Period Additional Planted Area Annual Average (thousand acres) Average Annual Price (cents per pound) Estates Natives 1900 - 09 439 78 109.8 1910 - 14 219 117 123.4 1915 - 19 174 169 63.8 1920 - 24 88 95 25.4 1925 - 28 215 375 63.0 1929 - 33 130 78 9.2 Source: Knorr, K.E. World Rubber and its Regulation (Food Re-search Institute, Stanford University, California) p. 67. The foregoing account indicates how the rubber industry is subject to both price instability and excess capacity. The price inelas-ticity of demand, together with an unresponsive supply situation and a high degree of dependence on the level of United States industrial activity, gives rise to wide fluctuations in price levels. The longevity of the rubber tree, its ability once mature to exist without much care, and the large capital investments involved in the plantation economy, coupled with inadequate information on consumption and production trends. 38 -has led to the development of excess productive capacity. History of Control Schemes; The post-war recession of 1920 was met by a voluntary res-trictive scheme on the part of rubber growers under the aegis of the Rubber Growers Association. When^this scheme broke down in 1921, the Rubber Growers Association appealed to the British Colonial Office to assume compulsory control. Accordingly, a committee under the chair-manship of Lord Stevenson, was appointed in 1921, to investigate the 1 1 situation in the industry. The Stevenson Committee made its report the following year, in which i t was estimated that present production would have to be cut by 25 per cent. Though the British dependencies of Malaya and Ceylon at that time contributed 70 per cent of the world output, the cooperation of the authorities of the Netherlands East Indies was considered essential. The Dutch Government, however, refused to co-operate, ostensibly on political grounds, as they argued that i t was against their policy of "laissez-faire 1 1. It seems more probable that they were doubtful of their ability to control native production. The Stevenson Committee finally recommended application of its restriction plan regardless of Dutch collaberation. The scheme consisted essentially of a restriction of production through a prohi-bitive scale of export quotas in order to maintain prices at a certain level. A price of one shilling and three pence was set up as the pivotal price and the participating countries were to be allowed a Lawrence, Oliver: (International Control of Rubber). Op. Cit., p. 402. - 39 -varying percentage of their exports in a certain base year, according to the potential demand. Table 6 shows the actual price levels during the operation of the Stevenson Scheme and the export percentages that were allowed. TABLE 6 PRICES AND EXPORT PERCENTAGES DURING OPERATION OF THE STEVENSON SCHEME Restriction Pivotal Average Percentage of Period Price Price Standard Exportable s. d. s. d. 1922-1923 1 3 1 2.3 60 1 3 1 4.9 60 1 3 1 2.2 65 - 1 3 1 2.0 60 1923-1924(1) 1 3 1 2.2 66 (11) 1 3 1 0.9 60 1 3 11.0 60 1 3 1 2.6 55 1924-1925 1 3 1 6.0 50 1 3 1 7.4 55 1 3 3 2.5 65 1 3 3 7.3 75 1925-1926 1 3 3 10.7 85 1 3 2 4.0 100 1 9 1 9.0 100 1 9 1 8.2 100 1926-1927 1 9 1 7.3 80 1 9 1 7.7 70 1 9 1 6.2 60 1 9 1 4.6 60 1927-1928 1 9 1 7.0 60 1 9 1 0.6 60 1 9 9.2 60 1 9 8.9 60 Source: Holland, W.L. (Editor): Commodity Control in the Pacific Area (Stanford University Press), Chapter XIII, p, 409. - 40 -It can be seen during the first two years of the scheme that prices generally stayed below the pivotal range. When world absorption began to expand and stocks declined, however, the market turned panicky and rubber prices began to jump up. The mechanical rigidity of the Stevenson plan prevented the swift adjustments that the situation demanded. The 1925 boom in rubber prices was certainly aggravated by the operations of the Stevenson plan. Subsequent complaints from United States representatives led to a modification of the plan so that export quotas could be increased by 10 per cent at a step. However, the pivotal price was raised at the same time to one shilling and nine-pence per pound. This latter action in raising the pivotal price, brought forth many bitter comments. There is no evidence that such action was justified since estate costs were estimated at the time to be only ten or eleven 12 pence per pound. In the words of K. E. Knorr, "the most important and deplorable consequence of the Stevenson scheme was the tremendous increase in total capacity which was to accrue from 1930 to 1934, and which 13 resulted largely from the exorbitant prices of the middle 1920,s. . After 1926, prices declined again, and i t became increasingly obvious that the restricting countries ceased to command sufficient monopoly power to render the Stevenson Plan workable. The British controlled share of world exports had dropped from 75 to 55 per cent of 12 Lawrence, Olivers (International Control of Rubber), Op. Cit., p. 415. 13 •J Knorr, K.E. Op. Cit., pp. 100-101 - 41 -14 total exports T by November 1928, when Prime Minister Stanley Baldwin declared the Stevenson plan to be abandoned. The Netherlands East Indies nearly doubled their productive capacity during these years. A number of authorities have analyzed the effects of the 15 Stevenson Scheme and make exhaustive criticisms, and i t is only possible to summarize some of their conclusions. That prices were raised above normally profitable levels is shown in the accompanying table of selected dividends paid by certain British Companies before and after the operations of the scheme. TABLE 7 DIVIDENDS OF BRITISH RUBBER GROWING COMPANIES Name and Amount of Share Tears 1920 1924 1925 1926 Anglo - Malay (£1) 6 7 20 17.5 Chersonese (2/-) 10 10 20.9 18.75 Highlands, etc. (£L) 7.5 10 57.5 32.5 Linggi (£1) 7.5 7.5 32.5 25 London Asiatic (2/0) 7.5 10 40 35 Selangor (2/-) 12.5 12.5 50 35 Sunger Kapar (2/-) 10 12 55 37.5 United Serdang (2/-) 10 12.5 25 40 Source: Economist, (London), July 30, 1929, page 204. These prices were not so high as to prevent the secular upward trend in rubber consumption which occurred during the six years Rowe, J.W.F.: "Studies in the Control of Raw Material Supplies" No. 2 Rubber, Royal Economic Society, Memorandum No. 29, April 1931. See especially Rowe, J.W.F.: Ibid.,: Wallace & Edminister; Inter- national Control of Raw Materials, The Brooking Institute, 1930: also League of Nations: Inter-GoVernmental Commodity Control Agree- ments, International Labour Office, Montreal, 1943. 42 -that the scheme was in operation, but they undoubtedly enabled the less efficient high cost plantations to remain in production and increased rather than diminished, the problem of chronic surplus capacity. The London Times, which is usually at pains to support the actions of the Government, made this commentary in I925j "When the restriction was introduced, a number of companies forming a comparatively small percentage, were on point of falling out of production, owing to the unremunerative price of rubber. This group was comprised of the smaller and less efficient, badly financed, and economically weak companies largely the inevitable legacy of ,boom» conditions3 they formed that part of an industry which must always languish when boom conditions come to an end. Restriction frustrated the eliminative work of the price factor and prevented the reorganization and amalgamation of those companies from which, i t is indicated, the large excess of production might have emanated. On these grounds i t is well to conclude that, in the absence of restriction, much of the undesirable element of production would have gone out, unless basic laws of economics were to be flouted. Had this been the case the industry would, at the end of 1922, have moved towards gradual recovery on a sounder, cleaner basis, especially as the increase in consumption has been fairly persistent."17 Rowe makes quite an able defense of the Stevenson Scheme, pointing out that there were conditions of acute distress in the rubber industry during 1921 especially in Malaya where the large number of Chinese producers with their precarious credit structure would have upset the whole Malayan economy i f their government had not insisted on restriction. He admits however that restriction was not instituted early enough since Wallace & Edminister: Op. Cit., page 185 1 7 The Times, February 10, 1925. i t should have been used to remove the surplus of 1922-23. It should, moreover, have been terminated in 1924-25 when conditions in the industry began to recover. It was unfortunate that the scheme per-sisted and became in effect a monopolistic exploitation of the consumer. 1Q He concludes in a subsequent study J that " a l l the disasterous history of the latter years of the scheme does not, however, undermine the validity of the proposition that the scheme as originally established was sound, and that i f i t had been brought to an end when the demand recovered, say in 1924 or early 1925, a l l would have been well." The International Rubber Regulation Agreementt For a period of six and a half years after the termination of the Stevenson Scheme, the rubber market was free. This period coin-cided with the trough of a severe depression, and prices f e l l from 20.2 cents per pound in September 1929 to 2.7 cents per pound in June 1932. The ability of European Estates to maintain their out put and survive the severe slump of prices, revealed the manner in which they were able to reduce production costs drastically, despite the very high proportion of fixed costs. Daring these years, producers were, however, continually clamour-ing for Government intervention and control. British and Dutch Planters formed a liaison committee in 1930 with such objectives. The Dutch Government at f i r s t refused to consider their requests for participation in a control scheme, mainly because of the difficulty anticipated in trying to control native production. (The Dutch Government was already partici-pating in Sugar and Tea Control Schemes). However, by 1933 the Dutch Rowe, J.W.F.s Op. Cit., pp. 17-19 Rowe, J.W.F.: Markets & Men - A study of A r t i f i c i a l Control Schemes in Some Primary xndusxnes, Cambridge University Press, 1935, p.183 - 44 -Government changed its policy, decided in favour of government control, and so negotiations started immediately. In April 1934 the International Rubber Regulation Agreement was drawn up and duly ratified by the governments of Britain, Holland, France, India and Thailand. These countries, in com-20 bination, furnished 98.7 per cent of the world's rubber exports in 1934. The new scheme was much less inflexible than the Stevenson Plan. It was based simply on the provision of export quotas without any attempt to main-tain a pivotal price. Moreover, unlike the Stevenson Plan, provision was made for restricting new planting and some attempt was also made to allow for potential production rather than adhering to a past pattern of production as under the former scheme. The agreement was to be administered by an International Rubber Regulation Committee, hereinafter referred to as the IRRC. A consumers panel, with advisory powers only, was appointed. Table 8 shows the quotas as they were set up for the years 1934 - 1938. TABLE 8 NEW RUBBER EXPORT QUOTAS (in tons) UNDER INTERNATIONAL RUBBER REGULATION AGREEMENT 1934 - 1938 Years 1934 1935 1936 1937 1938 Malaya 504,000 538,000 568,000 589,000 602,000 Netherlands East Indies 352,000 400,000 443,000 467,000 435,000 Ceylon 77,500 79,000 80,000 81,000 82,500 India 6,850 8,250 9,000 9,000 9,250 Burma 5,150 6,750 8,000 9,000 9,250 North Borneo 12,000 13,000 14,000 15,500 16,500 Sarawak 24,000 28,000 30,000 31,500 32,000 Siam (Thailand) 15,000 15,000 15,000 15,000 15,000 Sources Lawrence, Olivers Commodity Control in the Pacific Area, (Editor W. L. Holland,) Chapter XIII, page 421. Knorr, K.E., Op. Cit., p. 109 - 45 -It is interesting to note in the foregoing table, that Siam was given an extremely liberal quota allowance. She was also allowed to make new planting as desired. The inclusion of Siam in the agreement was, however, felt to be essential at any cost because of her strategic geographic location and the possibility of smuggling. The original agreement, which was to terminate in 1938, was renewed in 1937 for a five year period. It was again estended for a few months in 1943 to facilitate the post war establishment of a non-regulatory organization embracing the major importing as well as con-21 suming countries. The scheme was finally terminated in April 1944. The history of the scheme affords evidence of a constant tendency for the IERC to make insufficient and tardy quota increases whenever an upward shift in the demand was anticipated. - Consequently the scheme did nothing to mitigate the effects of price instability. When there was a repetition in 1937 of the boom like conditions which had previously occurred in 1925 i n the rubber market, the United States Department of Commerce blamed the Control Scheme entirely, stating that. "effect of international rubber regulation thus far is in the direction of a reduced volume of international trade at an unreasonable price, when 22 the world needs increased volume at a reasonable price." The official report of the IERC claims that control did reduce price fluctuations, and supports this contention by stating that "the average price throughout the pre-war period of regulation was 7.35 pence Knorr, K.E.: Op. Cit., p. 125 22 Rubber News Letter, March 31, 1937, p. 2 - 46 -per pound. This is to a decimal point, the price which prevailed when 23 the agreement was signed in May 1934". From a statistical view point such a statement i s , of course, correct but gives no indication of the degree of dispersion around the average, and Is no proof of stability. Table 9 shows the extent to which rubber prices actually did fluctuate during these years. TABLE 9 TABLE SHOWING EXTENT OF PRICE MOVEMENTS FOR RAW RUBBER IN LONDON DURING OPERATION OF INTERNATIONAL RUBBER REGULATION AGREEMENT Period Highest Lowest Fluctuations Average 1934 7 5/8 5 25/32 127/32 6 13/L2 1935 5 3/16 l 5/8 6 1936 11 lyfe 6 1/2 45/8 7 4/4 1937 11 3/4 6 3/4 7 9 V 2 1938 8 9/16 5 X/4 35/L6 7 7/32 1939 8 7/8 7 5/8 71/4 8 5/32 Sources J.W.F. Rowe: Markets and Men - Prices quoted in pence per pound for standard quality ribbed smoked sheets. The success of the control arrangement in combating undue price oscillation depended on the ability of the IRRC to forecast requirements at least three or four months ahead. The decision of the IRRC invariably The History of Rubber Regulation, 1934 - 1943, Edited by Sir Andrew McFadyean, G. Allen and Union Ltd., 1944, p. 155. - 47 -conflicted with the recommendation of the Advisory Panel of Industrial Consumers, whenever changes in the volume of rubber stocks seemed imminent. Whilst the latter, preoccupied with future supplies was likely to overes-timate requirements, the IERC preoccupied by a fear of surpluses was subject to a downward bias. K.E. Knorr points out that i t is an implied tendency or policy of a l l producer-operated restriction plans to keep world stocks down to a low level since small stocks minimize the risk of sudden price 25 falls when consumption contracts* In attempting to evaluate the success of the operations of the International Rubber Regulation Agreement i t is necessary to realize that the statement of objectives as given in the preamble of the Agreement are restricted to somewhat vague generalizations about attainment of an "equitable" and "fair" price level for both producers and consumers, by eliminating surplus stocks and adjusting supplies to the current demand. The Agreement studiously refrains from referring to surplus production capacity, although this constituted the chief source of the troubles to be remedied. The authors of the scheme presumably hoped that consumption would eventually catch up with such capacity. Within the terms of its stated objectives, the IRRC can be commended for having resisted extreme price demands, an attitude which was not shared by the International Tin 26 Committee. Although average profits in the States would undoubtedly have been much lower without control, they were not strikingly high under 27 regulations and do not give the same evidence of monopolistic extortion Knorr, K.E. Op. Cit., p. 149 Loc. Cit. See pp. 128-130 of this Thesis. See Tables 7 & 10. - 48 -as those during the period of operation of the Stevenson Scheme. Table 10 shows British Rubber Company earnings and dividends for the years immediately before and during restriction. \ In the short run i t appears that regulation, whilst i t did not moderate price swings, was able to reduce surplus stocks gradually, to maintain a profitable price level, and save investors from painful losses. However in the long run investments in obsolete producing units were preserved, and as restriction f e l l with equal incidence on both high and low cost producers, the more inefficient were in effect specially favoured* TABLE 10 BRITISH RUBBER COMPANY EARNINGS AND DIVIDENDS ANNUALLY 1924 - 1940 Twelve Months to No. of Companies Average earned Average Paid June 30 Analyzed per ordinary per ordinary Share (per cent) Share (per cent) 1926 280 24.2 19.9 1927 233 29.1 23.8 1928 361 15.4 11.2 1929 360 8.4 6.2 1930 336 8.0 5.8 1931 340 1.4 1.2 1932 326 1.7* 0.1 1933 298 •1.4* 0.1 1934 301 0.4 0.8 1935 345 4.1 3.3 1936 346 4.3 3.6 1937 388 6.2 4.8 1938 377 11.8 8.0 1939 362 7.0 4.6 x - loss Source: "Rubber and the Investor", Economist, (London), Sept. 31, 1940 p. 373. AiS the demand for rubber contained in rubber goods is markedly price-unresponsive, industrial consumers can readily pass on the extra costs of their raw material* Consequently i t is the final consumer who has born the cost of artificially prolonging the l i f e of redundant and obsolete 28 productive capacity* The agreement also tended to preserve the status quo between the lower cost native producers and European owned plantations. This aspect of the problem has hitherto been neglected so we shall turn to a brief consideration of the problems of native production before summarizing this case study. Knorr expresses the view that a fear that the industry was 'going native' may have been the primary raison d'etre for the Regulation 29 Agreement. , In 1936, the chairman of the British North Borneo Company admitted frankly "that one of the primary objects of the Rubber Control Scheme was to protect European capital in plantation companies in Malaya, Borneo, and the Netherlands East Indies from competition arising from the production of rubber by the native at a fraction of the cost involved on European owned estates". Native production is almost equal to total plantation production and is especially important in Siam, Java, Borneo and Sumatra. Furthermore the native producers cost structure is simple. He is often able to subsist independently of any income from rubber sales* and w i l l therefore cease tapping when prices are low. Moreover in areas like Sumatra and Borneo where the land is not densely settled, natives commonly plant rubber after a patch of cleared jungle has produced several rice crops and gives evidence of exhaustion. This rubber will however be tapped later on i f prices appear favourable and this tapping is moreover, Ibid., pp. 157 - 164 Ibid., p. 109 far more drastic than that practiced by European estates. The situation is different amongst native producers in British Malaya and Ceylon, since they are very dependant in these areas upon an income from rubber sales. Such natives tend to respond to a falling market by expanding production as opposed to those in Indonesia and Siam. The rapid development of native production is well illustrated in Table 11. TABLE 11 EXPORTS FROM THE NETHERLANDS EAST INDIES • 1929 - 1933 (1000 tons) Tear Estate Exports Native Exports Total Exports Ratio of Native to Estate Exports 1929 152.-9 108.6 261.5 71 ! 100 1930 152.8 90.5 243.3 59 : 100 1931 168.7 90.2 258.9 53 : 100 1932 149.8 61.4 211.2 41 : 100 1933 116.0 113.0 279.0 68 : 100 Sources Lawrence, Olivers Commodity Control in the Pacific Area, (Chap. XIII, Editor W.L. Holland) page 416. The bulk of the native acreage was planted in the years between 1910, - 1919 and 1924 - 1929, both periods of very high rubber prices. Undoubtedly the excessive planting b y natives contributed to the surplus productive capacity in the industry, and the inflexible nature of Plantation production, made native production appear particularly aggravating. How-ever there is ample evidence that the IRRC discriminated quite unfairly against native producers. Over the f i r s t two yearsand seven months of the scheme, two-thirds of the value of a l l native rubber exported, was absorbed 50 by export duties« In the closing months of 1936s the duties on native 31 exported production accounted for as much as 85 per cent of the value* Rowe in his rubber study, gives evidence that the government assessments of native small holdings were much too low at the initiation of the scheme." Plantation production could compete successfully with native production i f time was allowed for more extended planting of superior stock, i f native executives and administrators were employed, and the smaller un-economic estates were merged. The present directorial system and capital structure of many plantations would also need drastic re-organization and pruning* Summary and Conclusions Regulation i n the rubber industry has been facilitated by the fact that there were a relatively small number of important producing nations in one localized area of the world. Since no important consuming nation was also a large scale rubber producer, the restriction schemes have tended to neglect the consumer's interests. The Stevenson Plant was too rigid and its continuation after conditions of general recovery in the industry, together with the high prices i t maintained, caused i t to be in effect, a producer's monopolistic organization. The International Rubber Regulation Committee was more flexible in operation and did not create unduly high prices. However, i t undoubtedly preserved the condition of surplus output capacity, and put the burden of preservation of high cost inefficient producers on the shoulders of the consuming public. 3 0 Ibid., p. 122 3 1 Ibid., p. 128 32 5 Rowe, J.W.F.: Ruber Memorandum Nol 29, Royal Economic Society April, 1931, pp. 32 - 33. = 52 -The elimination of excess capacity could have been helped to some extent by the following provisions: (1) The effective assessment of native and estate capacity on an equal basis* (2) Adoption of the principle of differential assess-ment of estate capacity in accordance with a few broad criteria of efficiency such as age of trees, and yields per acre* (3) Maintaining a low price level that might not be considered "fair" by the majority of producers, but would be higher than prices in the absence of control* (In concrete terms during the middle and late 1930*s control policy should have prevented prices from rising about ten cents per pound until a sufficient margin of surplus capacity had been eliminated)33 There is further more, a definite need for stabilization of •34 rubber prices* However in the absence of adequate stock holdings, regulation can do l i t t l e to mitigate such price fluctuations* Formation of buffer stocks in the chief consuming countries would probably be a suitable way of combating the problem of price instability. It should be realized however that the propensity of raw rubber to fluctuate with changes in the volume of industrial production, is shared by many other raw materials. Efforts to stabilize industrial production by general monetary, fiscal and other counter-cyclical measures are likely to be more potent stabilizing factors than any buffer stock scheme* At the present time, though there is potential surplus capacity, the Korean war and general political tension has stimulated demand and kept i t in line with supplies. Synthetic rubber wil l in the future limit 53 Knorr, K.E.: Op. Cit., pp. 170 - 171 ^ Rowe, J.W.F.: (Rubber Memo), Op. Cit., p. 83 - 52 a -the powers of raw rubber producers to exploit the consumer. This greater iriter-dependence of consumer and raw material producing nations has been recognized by the formation in September 1944 of a rubber study group. The study group at present includes a l l substantially interested countries including Australia. Belgium, Burma, Canada, Ceylon, Czechoslovakia, Denmark, France, Hungary, Italy, Liberia, Holland, Britain and the United States* The purpose of the organization is to promote international co-operation concerning rubber trade. The study group may convene an inter-national conference to discuss the formation of an ICA i f i t considers conditions necessitate such action. Perhaps the most important lesson from this study of rubber, lies on the apparent confusion between long and short run objectives. It seems almost as though an essentially short run solution justifiable in such a context, has persistently received a long run application with consequent detriment to the industry as well as to society as a whole. There appears to be a definite tendency for governments to allow the pressure from interested parties to perpetuate such control schemes, which are either wholly unwarranted, or unadapted to a real solution of the long run problems. In fairness to rubber producers the following quotation is used by way of conclusion: . "Such (ICA's) interferences with the working of the the laws of supply and demand bring certain temporary advantages, but are generally accompanied by disadvant-ages of a more permanent kind. The difference of opinion between the supporters and opponents of such schemes may largely be explained as differences between •short period* and 'long period' views applied to the International Organizations in which the U.S. participates, U.S. Dept. of State Publications 3655, Feb. 1950, pp. 76 - 77. - 53 -industries in question .•• such schemes have the dis-advantage of keeping production and strengthening the organization of weak or high cost producers — they increase the cost of production by reduction of outputs and by the costs of administration of the scheme — they discourage consumption by increasing the price of the commodity ....... Further whatever efforts are made to secure equitable treatment of a l l producers, grave inequalities in the administration of such schemes are inevitable .... having regard to the above consideration, regulation schemes should never be prolonged for a great-er period"than is absolutely necessary ... Schemes for restriction and regulation of such industries as ours (rubber) only become necessary because the conditions of the industries are economically unhealthy, and consequent-ly the same return upon capital should not be expected of them while working under such schemes as could reasonably be expected i f the Industries were in an economically healthy condition," 36 ( i i ) Coffee Though coffee is produced in nearly f i f t y different countries and colonies, in a l l parts of the world, i t is primarily of interest to the Western Hemisphere. This is because Brazil produces nearly 60 per cent of the world's supplies, and the United States consumes nearly 50 per cent of total world'exportsCoffee is included with wine, tobacco, tea and cocoa as the .five "enjoyment goods", since in the 1930's i t ranked fifth in value amongst foodstuffs in international trade. It was 37 exceeded by wheat, sugar, pork products and butter. Coffee is further-more one of the few basic commodities that s t i l l shapes the economic l i f e of more than half a dozen nations; Madagascar, Kenya, El Salvador, Colombia, Haiti, Guatemala, Nicaragua, Costa Rica and Brazil are a l l depdendent upon coffee exports for vital foreign exchange supplies. Coffee 36 Welch, J. H. (chairman of the Rubber Plantation Investment Trust Ltd): Rubber News Letter, June 15, 1936, pp. 3 - 4. 37 Wickizer, V . D.: The World Coffee Economy with special reference to Control Schemes, Food Research Institute, Stanford, California, 1943, p. 11. - 54 -is one of the major commodities in the trade of the United States and in 1946 the value of green coffee imports in that country amounted to 1468,000,000.58 Market Characteristics Coffee is obtained from a pair of seeds contained in the fruit of a perennial bush, which grows in mountainous regions in the sub-tropics. The species Coffea Arabica, indigenous to parts of Arabia and Ethopia, is still.rthe source of 90 per cent of world coffee consumption. It is usually grown at elevations of 2000 to 5000 feet. Two other species have been brought into extensive cultivation within the past three or four decades. C. Robusta is a low quality coffee, but highly resistant to disease and able to grew at lower elevations. C. Liberica is popular with small holders since the ripe fruits do not f a l l from the bush and can 39 be harvested at any season. Fruiting is fairly continuous throughout the year. The geographic habitat together with the growth requirements of the coffee plant, lead to wide variations in yields. Coffee requires heavy and regular rainfall and is susceptible to drought and frost. The significance of climatic influences is revealed in the 1941 report of the Brazilian National Coffee Department.40 The 1940-1941 drought in the province of Sab Paulo was officially characterized as "one of the most calamitous of any in the memory of man in that region." (Sao Paulo pro-duced only 4,000,000 bags in that year as against a normal average of 14,500,000 bags.) Shepherd, G.S.: Agricultural Price Policy,Iowa State College Press, Ames, 1947, p. 78. 3 9 Wickizer, V. D.: Op. Cit., pp. 27-28. 40 Guedes, Jayme Fernandesi '^Brazil Coffee in 1941'", Report submitted on April 30, 1942 to 1he Advisory Council of the National Coffee Dept., Rio de Janeiro, 1942, p. 45. - 55 -The coffee tree begins to bear fruit about five or six years after planting, but does not produce commercial quantities until i t is six to eight years old. Yields vary from one to three pounds per tree, declining after the fifteenth year. Its economic l i f e is limited to 41 about forty years* Coffee has no food value, but is simply a stimulant as the beans contain caffeine. There is considerable variation in tiie quality of coffee, arising both from its geographic source and the manner in which the beans are separated from the fruit pulp In preparation for market. A few generalizations must suffice. Brazilian coffees are generally of low quality and described in the trade as 'hard'. Almost a l l other countries produce •mild' coffees. The better qualities are grown at the highest elevations. Moreover the better quality beans are prepared by removing the fruit pulp by the wet method, without allowing any fermentation to take place. 'Milds' are commonly used to impart flavour 42 to blends predominantly composed of various Brazilian growths* Statistics of world stocks and coffee production are s t i l l very unreliable, even in Brazil, the chief producing country. Table 12 shows the main sources of production, together with some indication of the trend in production during the decade between 1930 - 1940. It will be noticed that Brazilian production has tended to decline whereas that of Columbia, a producer of 'mild' coffees, has made considerable increases. 41 Wickizerj V. D. Op. Cit., p. 38 4 2 Ukers, W.H.: A l l About Coffee, (2d. Edition, New York, 1935) for a more comprehensive account of the coffee plant and Its characteristics. TABLE 12 WORLD COFFEE PRODUCTION 1929 - 40 Continents \ i * ') Countries \ Thousands of Bags ' of 60 Kg. Per cent of World Total 1929-30 to 1933-34 1934-35 to 1938-39 : 1939 to 1940 1929-30 to 1933-34 1934-35 to 1938-39 1939 to 1940 WORLD TOTAL 37,860 37,867 37,782 100.0 100.0 100.0 South American 29,633 28,347 27,832 78.3 74.9 73.7 Brazil 24,519 22,441 22,067 64.8 59-3 58.4 Colombia 3,545 4,154 4,450 9.4 11.0 11.8 Venezuela 940 988 800 2.5 2.6 2.1 Others in S. America 629 764 515 1.6 2.0 1»4 Central America and Mexico 4,389 4,898 4,933 11,6 12.9 13.1 El Salvador 1,000 1,013 1,117 2,6 2.7 3.0 Guatemala 749 919 917 2.0 2.4 2.4 Mexico 635 714 873 1.7 1.8 2.3 Other 2,005 2,252 2,062 5.3 6.0 5.4 Africa 1,371 2,138 2,600 3.6 5.6 6.9 Asia 2,377 2,381 2,317 6.3 6.3 6.1 Netherlands Indies 1,978 1,999 1,888 5.2 5.3 5.0 Other 399 382 429 1.1 1.0 1.1 Oceania 90 103 100 0.2 0.3 0.2 Source: Wickizer, V.D.: The World Coffee Economy, (Food Research Institute, Stanford, California), 1943, page 19. - 57 -Reference has already been made to the plant's growth cycle. Tears of high yields tend to alternate with years of low yields when the tree is recuperating. Coincidence of favourable or unfavourable climatic conditions exaggerate these differences, so that the output of one par-ticular plantation may be ten times as great as its lowest output, in a favourable year. 4 3 In addition to inelasticity of the supply of coffee due to its botanical origins, and the fluctuations in yield due to the plant's health cycle, there is a variation in supply which might be ascribed to psycho-logical causes. Owing to the inability of a large number of small producers to forecast accurately the future profit possibilities, and the considerable time lag between a decision to expand productive capa-city and the realization of such expansion, we have conditions conducive to grower produced market cycles. We have in effect the phenomenon which has been explained by the cobweb theorem.44 H . E . Jacob in his study of coffee well describes this phenomenon in the following words: "Throughout the nineteenth century we can trace the history of this anarchic succession of over-production and under-production of coffee. Delight in a year when prices have been high is translated into an undue extension of planting which, four years later, leads to a recurrence of rock bottom prices. Then there is a panic. In the seventh year the pendulum swings back once more towards the side of extended planting." 4 5 4 3 Wickizer, V.D.: (The World Coffee Economy), Op. Cit., p. 4. 4 4 See.Chap. 1 pp. 1 8 - 1 9 4 5 Jacob, H . E . : Coffee, The Epic of a Commodity, New York, 1935 , p. 210 = 58-The resultant variability in the world's supplies of coffee is well illustrated i n Table 13, showing the range in the size of -the Brazilian crop. TABLE 13 RANGE IN SIZE OF THE BRAZILIAN COFFEE CROP BY DECADES SINCE THE 1890«s Decade average Crop \ Number of 1 ! 1 crops "Large" 1 \ Crops ; ==-.— "Small" Crops Million bags Index Number Above Av. Below Av. Number Range million bags Number Range Million bags 1890 's 7.2 100 4 6 6 6.5-11.2 4 4.4-6.0 1900' s 12.6 175 4 6 4 12.9-20.2 6 9.4-11.3 1910' s 13.3 185 5 5 6 13.0-16.0 4 9.7-12.7 1920* s 14.7 204 4 6 6 14.5-27.1 4 7.5-136 1930' s 23.5 326 4 6 7 20.9-29.6 3 16.6-19.8 Sources Wickizer, V. D.s The World Coffee Economy, (Food Research Institute, Stanford, California) 1943, page 110. The demand for coffee tends to be very stable since, as an enjoyment good i t is habit forming, and has only one use and that is as a beverage*^ People accustomed to drinking coffee wish for no other substitute. The United States is by far the heaviest consumer of coffee on a population basis, and with the exception of the Scandinavian coun-tries, coffee has been kept beyond the reach of the masses in most other importing nations, as a result of high tarrifs, colonial import prefer-The Brazilian Government is now financing a pilot plant to discover the commercial possibility of producing from green coffee beans a moulding powder for a new thermosetting plastic - 59 -ence3 and taxes, Italy, for instance has a tax on coffee equivalent to 35 cents per pound.47 Tables 14 (a) and 14 (b) show per capita consumption and import levels for various countries and areas. The large Dutch element in South Africa accounts for the relatively greater preference for coffee in that area. TABLE 14 (a) NET IMPORTS OF GREEN COFFEE INTO WORLD MARKETS Tear Annual Average in Millions of 60 Kg. Bags World U.S.A. U.S.A. Percentage of World Imports % U.S.A. increasecf over 1930 - 34 Average 1930-34 25.1 12.0 47.9 1935-39 27.6 13.9 50.4 15.5 1940-44 20.3 16.4 80.7 36.2 1945 26.3 20.5 78.1 70.7 Source: Shepherd, Q.S. Agricultural Price Policy, (Iowa State College Press, Ames) 1947, p. 78. TABLE 14 (b) ANNUAL PER CAPITA COFFEE CONSUMPTION IN POUNDS DURING DECADE 1929-1938 47 Denmark 16.6 Sweden.. 16.4 Norway .* 13.2 U*S«A.» ••••••• • 13*0 Belgium 12.8 Netherlands 10.1 France 9.8 Switzerland • 8.2 Germany 5.1 Argentina 4.2 Canada 3.2 Italy 2.1 Britain 0.75 Source: WickLzer, WD.: The World Coffee Economy, (Food Research Institute, Stanford, California), 1943, p. 16. Wickizer, WD.: Op. Cit., page 17. - 60 -In the long ran there are possibilities for considerable changes in the world pattern of coffee consumption. Examination of past and present trends gives ample evidence of this. In the past thirty years imports into European countries have declined from 50 to 40 per cent of world coffee exports, whilst imports into the united States had increased from 35 to nearly 50 per cent of world coffee exports by 1 9 3 9 . 4 8 In 1he world as a whole, there has however, been a steady upward trend i n coffee consumption levels. 4 9 The gradual growth in the preference for mild over Brazilian coffees has also been an impressive trend in recent decades. Holland, once the stronghold of coffee drinking on -the European continent, has in recent years shown a marked shift towards cocoa consumption, and this is a substitution not a supplementation, since per capita coffee consumption in that •50 country has fallen from 15.7 pounds to 9.3 pounds between 1910 and 1935. It will be recalled that coffee was the preferred drink of the British until the middle of the eighteenth century, and i t was moreover the great popularity of the London coffee houses which served to spread the tea drinking habit. In the short run there is a slight response in consumption levels, to price changes since the cost of the raw product is roughly 50 per cent of the retail price. Wholesalers and distributors are able 4 8 Ibid., p. 12 49 Taylor, Henry C: (World Trade in Agriculture! Products) Op. Cit., p. 70 5° International Institute of Agriculture, Monthly Crop Report and  Agricultural Statistics, Nov. 1931, p. 695. - 61 -to stabilize retail prices to a considerable extent, however, by-varying their blends and using more cheap grades when prices are high. The Pah American Coffee Bureau is a producer's organization formed in 1937 with the objective or promoting coffee consumption tri in the United States, There is l i t t l e evidence however that this organization has had any appreciable effect in expanding coffee consumption in view of established trends before i t began its 52 activities. Surplus productive capacity became a problem in the world*s coffee industry from about 1927. This problem became centred parti— cularly in Brazil as the world's largest producer and because of the unique character of her coffee which suffered a declining demand in favour of the better quality ,mild , coffees. The position today is much healthier, as a result partly of a natural decline in Brazilian production from exhaustion of many plantations, together with that country*s restriction on new plantings during the past years. Fixed costs form a higher proportion of total costs in coffee plantations, 53 than they do in either rubber or sugar plantations. This factor combines with an inherent annual variability in output, to result in profits which cause new planting at wrong times. Table 15 shows the way in which surplus stocks of coffee accumulated during the interwar years. Since these surpluses have largely accumulated in Brazil, the Brazilian Government has combatted this problem by a 51 Interim co-ordinating Committee for International Commodity Arrangements, Review of International Commodity Problems 1948, p. 1. Wickizer, Op. Cit.., p. 52 5 3 Ibid., p. 94 - 62 -deliberate policy of crop destruction. In the twelve years 1931-1942, over 75,000,000 bags of coffee were destroyed. That is suffic-ient to meet the consumption requirements of the entire world for three years.54 TABLE 15 WORLD COFFEE EXPORTS, SURPLUSES AND PRICES, BY FIVE YEAR AVERAGES, 1919-1939 Export Years Exports Average Annual excess of. Production Over Exports Cumulative Excess Price, of Santos 4's (New York) 1919 - 23 20.6 -0.2 -1.0 16.7 1924 - 28 22.9 5.7 27.5 22.0 1929 - 33 25.3 12.6 90.5 12.8 1934 - 38 27.0 10.9 145.0 9.7 Source: Wickizer, V.D. The World Coffee Economy, (Food Research Institute* Stanford, California), 1943, page 121. History of Control Schemes The early history of coffee regulatory measures is a history of control within the borders of Brazil since the effects of her domestic policy were inevitably international. It was not until the beginning of the second world war that political forces became strong enough to induce Latin American producers to co-operate in solving their common problems. Ibid., p. 7 - 63 — At the beginning of this century the sources of the world's coffee were localized to the extent of nearly 40 per cent in the single state of Sao Paulo. Yield instability had such a marked effect on world prices, that the state government instituted a stabilizing scheme as early as 1905. The objective of the scheme was to equalize prices by government storage of part of the crop, in surplus years* The state also took steps to regulate production by restricting new plantings. This valorization ^ 5 scheme as i t came to be called, lasted until the outbreak of the f i r s t world war* With government financial support, a second valorization scheme was put into operation in 1917 until 1920 when the federal government took over the control scheme. A permanent price stabili-zing scheme was set up early in 1925 after the government had com-pleted construction of a large number of storage warehouses*^ A succession of bumper crops between 1927 and 1929 over-extended the credit facilities of the scheme, which was forced to cease operation when the financial crash came in 1929. A new defense scheme was started in 1930 which lasted until 1937. During this period, the Brazilian government relied on the prohibition of new planting and the destruction of supplies, to maintain prices. Efforts on the •>-} See Chapter I , page 15 56 Rowe, J.W.F.: (Markets and Men), Op. Cit., p. 32. 57 wickizer, V.D.s Op. dt., p. 146. - 64 -part of the Brazilian government to obtain an international agreement, repeatedly failed, so i n 1937 a radical change of policy was made. The Brazilian government allowed free competi-tion to take over the industry, though she continued to purchase and destroy surplus coffee stocks. In reviewing the effects of Brazilian coffee control schemes, there are grounds for believing that much harm was done to the industry. Though growers undoubtedly received abnormal profits during the 1920»s, the price paid for such prosperity i n later years more than offset the temporary gains. Control encouraged over-expan-sion of coffee production in its early years. It inhibited agricul-tural diversification, and the resultant high prices in Brazil, stimulated competition from other producers. Whilst coffee became of increasing importance within her domestic economy, Brazil fs relative importance in world trade deteriorated very considerably. This history of Brazilian control is exactly analogous to United States cotton control under the Agricultural Adjustment Act. In both cases, storage programmes with price stabilizing objectives, have become in effect price raising measures with a consequent inevitable accumulation of stocks. It is however not possible to speculate intelligently as to what would have happened to Brazilian producers without government intervention. The problem was essentially a human one and a strict policy of laissez-faire would have resulted in much suffering amongst producers. In the words of a Brazilian official quoted by Professor Rowe: M I t is better to destroy coffee than to destroy human lives n. - 65 -The Inter-American Coffee Agreement There is quite an extended record of international conventions and conferences between coffee producing countries, though i t was not until the chief consuming country took the lead that agreement to any material extent was reached* An International Coffee Conference was fi r s t called in 1902, following a record crop in Brazil and a drastic f a l l in coffee prices on the New York market.^8 Nothing materialized from this conference. The Brazilian Government made attempts in 1951 and 1936 to secure agreement with other countries. The f i r s t pan-American Coffee Conference was convened at Bogota in Columbia. It resulted in the formation of an International Coffee Bureau for statistical and promotional activities. The second pan-American Coffee Congress which was held in Havana in 1937, revealed the sharp conflict of interests between Brazil and Columbia© It was after the failure of this conference to produce any international agreement that Brazil abandoned her domestic price support policies. The invasion of the low countries in 1940 revealed the extent to which European markets were being cut off, and emphasized to Latin-American producers the importance of the United States market. At a third pan-American coffee conference in 1940 i t was decided to invite the United States to participate in some regulatory agreement. A conference on Western Hemisphere defense i n July 1940 resulted subsequently in the production of the Inter-American Coffee Agreement, which was put into effect in April 1941. 5 9 58 Wickizer, V.D.: Op. Cit., page 139. CO - * Havemeyer, John K.: The Background and Present Status of the Inter- American Coffee Agreement, Dept. of State Bulletin, March 2, 1947, pp. 578 - 380. - 66 -The Inter-American Coffee Agreement included fourteen Latin-American producing countries, accounting for 85 per cent of the world's production. It was dominated by the United States as a consuming country and was similar to the International Beef Conference in this respect. 6 0 The agreement established a relatively large import quota for the United States (15,900,000 bags) which was divided between signatory and non-signatory countries. No price provisions were made in the agreement. It was to be administered by a board comprising one delegate from each country, and having the following voting powers -twelve votes for the U.S.A., five for Brazil, three for Colombia and one each for the remaining c o u n t r i e s T h e export quotas for individual countries were not set solely on the basis of the coffee production of each country, or on recent participation in the United States.' market, or any other mathematical formula. They were the result of compromises. 6 9 based on negotiations* The original agreement, made to last until October 1943, was extended for two further periods of twelve months. Thereafter the agreement was terminated, though the Inter-American Coffee Board continued to function until September 1948, as a medium for international exchange of information and co-operation. The Inter-American Coffee Agreement has been described as a model ICA on which any future agreements relaLting to other commodities could be based. 6 4 The United States in her position as a monopsonist 60 See pages 125-12? of this Thesis. 6 1 Shepherd, G.S.: Op. Cit., pp. 79 - 80 6 2 Daniels, P.C.: "The Inter-American Coffee Agreement", Law and Contem- porary Problems, Autumn 1941, VIII,"p. 714. 63 Interim Co-Ordinating Committee for International Commodity Arrangements, Review of International Commodity Problems, 1948. 64 Wickizer, V.D. : Op. Cit., p. 220 - 6 7 -certainly did not exploit the producing countries. There is evidence in fact to the contrary, since the agreement was origin-ally designed in the interests of hemispheric solidarity, and the United States was at particular pains to treat its Latin-American neighbours generously. The Agreement did not, however, contribute anything towards solving the fundamental problems of the world coffee economy, and the high prices which American consumers were obliged to pay for coffee during the war years only added to the inflationary boom experienced in a l l the coffee producing countries. It seems likely that a buffer stock arrangement would be the most beneficial inter-national scheme that could be devised to stabilize grower's incomes. There are however considerable administrative difficulties since a large crop would always tend to bring larger return to growers as long as the buffer stock agency bought up surpluses. Similarly, because a short crop involves such high unit costs to producers, a "stabilized" price would tend to show a loss to growers. Wickizer in his study of world coffee problems, considers that a buffer stock scheme, would "perhaps not be feasible at a l l , for coffee. Summary and Conclusions The case study of coffee reveals in very clear relief, those economic characteristics which give rise to price instability Ibid., page 215 and excess capacity described i n chapter one. The history of Brazilian Control Schemes reveals the manner in which one country may often be obliged to shoulder the burden of what is really a world wide problem. International co-operation was only made possible by the political generosity of the principal consuming country which in turn was motivated by the exigencies of war* The Brazilian record of valorization reveals the common danger of such schemes in setting price raising objectives as their real goal. Such policies undoubtedly aggravated Brazil's position in the world coffee economy and rigorous control in latter years was largely heeded because of the over-expansion caused by injudicious price regulation in earlier years* ( i i i ) Tea International trade in tea has been subject to a high degree of regulation since 1958. Yet because of the economic characteristics of the industry and the relationship between the chief exporting and importing nations Involved, control has.operated without any apparent friction and indeed might be judged highly successful. Tea regulation has not given rise to any of the public opprobrium which has been attached to the burning of coffee in Brazil, or the restriction of rubber stocks by the International Rubber Regulation Committee* Tea, like coffee, belongs with the five most important enjoyment goods or world trade. Though lagging behind coffee in commercial import-ance, i t is s t i l l the world's most widely used beverage being cheaper than coffee or cocoa. Among food-stuffs important in international trade, tea exports are usually only exceeded in value by wheat, sugar, butter, pork - 69 -products and coffee. Tea has no food value, but like coffee contains the stimulant caffeine. Market Characteristics The tea plant "Thea Sinensis11, a member of the camellia family is indigenous to China which is s t i l l the largest producing country. The great bulk of Chinese tea, is however, consumed internally. Four-fifths of a l l tea exports come from the "black tea couhtries", that is India, Ceylon, Indonesia, and Pakistan. Three types of tea are produced from the same plant, according to the processing methods employed. The plucked shoots (leaf buds with top young leaves) are dried to produce green tea, dried and fermented in the preparation of oolong tea, and roasted in an oven, a process known as 'firing 1, in the preparation of black tea. The tea bush, which grows best on well drained slopes under generous rain f a l l , takes three or four years before i t is big enough to stand up to plucking. A further four to six years are required to fully establish an estate. The tree i f carefully pruned, will then continue productive for several decades.^ The supply of tea is very stable since weather affects yields and moreover output can be considerably increased by the application of fertilizers and by varying the number of leaves plucked with the new shoots. When the prices are very low, planters commonly resort to finer plucking, which whilst reducing yields, also gives a better quality product. Plucking of the tree has to be continuous however in contrast to rubber ' For a detailed account of the different kinds of tea and methods of preparation for market, see Harler, C.R., Culture and Marketing of  Tea. London, 1933« plantations where the tree can be rested indefinitely without injury. ' Finer plucking therefore requires a generous labour force since i t is a slower and more skilled operation than coarse plucking. Coarse plucking allows the larger coarser leaves to be pulled off the plant together with the young shoot, and such a process requires!less manual dexterity. The supply of tea in the long run i s , however, relatively inelastic, due to the high fixed costs and capital requirements, which characterize the industry. A plantation in the early thirties i t was estimated, 6 8 would cost not less than £100, per acre to bring to maturity. The plantation system is typical of the industry, and there is very l i t t l e tea production by native small holders. In contrast to raw rubber and green coffee, tea cannot be stored for long periods. After three or four months the poorer quality teas completely lose their flavour. This factor enhances the long run inelasticity of the supply situationa There is a wide range in production costs, the better quality teas emanating from the high altitude plantations where growth is slow and costs comparatively high. The finest quality teas come from Assam and the poorest from Indonesia. Lower quality teas are almost flavourless, and are commonly used as f i l l e r s in making up blends. A rising level of tea prices, for this reason, tends to discriminate against the better quality producers, since wholesalers purchase a relatively greater proportion of the lower grade ' f i l l e r ' teas, when prices are high. Aggregate world tea production is probably about two billion Taylor, Henry C : (World Trade in Agricultural Products) Op. Cit., p. 84. Economist (London), October 31, 1931, pp. 800-801. - 71 pounds annually.^9 China and Russia are big producers though the latter country is s t i l l a net importer of tea. Some tea is grown in Kenya, Uganda and Rvasaland. Table 16 shows the chief exporting producers of tea* TABLE 16 TEA EXPORTS FROM MAJOR EXPORTING COUNTRIES, PRE-WAR AND 1946-1949 (In thousands of metric tons) Exporting Country Average for 1934-38 1946 1947 1948 1949 India and Pakistan 152 136 193 171 276 Ceylon 100 132 130 134 135 China and Taiwan (Formosa) 51 7 17 18 20 Indonesia 68 3 4 9 22 Japan 18 4 3 4 7 Others 8 14 14 14 16 TOTAL 397 296 361 350 436 Sources "Interim Co-ordinating Committee for International Commodity Arrangements," Review of International Commodity Problem, 1950, page 36. The demand for tea is generally recognised as being highly ir>-elastic. In the first place, because i t is an enjoyment food and habit forming, competition with other beverages is very limited. Moreover, because of its low price, tea is normally accessible to the maaigmarket in a l l the chief importingcountries. (This is in contrast to coffee which Is s t i l l a luxury food in most European countries). 7 0 However, tea consump-tion is adversely affected by a high level of tea prices. In nearly a l l countries, except the United States, duties are imposed on tea for revenue Wickizer, 7.D.: Tea Under International Regulation, Food Research Institute, Stanford, California, 1944, p. 28. See page58 of this Thesis. 72 -purposes. There is some evidence that the expansion of tea consumption has been seriously checked by such tea taxes and duties and the incidence 71 of colonial preferences. The vast potential markets for tea consumption within the producing countries of the Orient are only just beginning to be developed.72 per capital consumption is highest in the United Kingdom, as is shown in Table 17. TABLE 17 PER CAPITA TEA CONSUMPTION IN PRINCIPAL IMPORT MARKETS, 1930-39 Country Apparent consumption per capita (pounds) Average Average 1930-34 1935-39 United Kingdom 9.6 9.4. Eire 8.0 7.7 Australia 7.0 7.0 Canada 3.8 3.5 Netherlands 3.1 2.9 French Morocco 2.8 2.8 Union of So. Africa 1.3 1.6 Egypt 0.8 1.0 Iran 0.8 1.1 U.S.A. 0.7 0.7 Germany 0.2 0.2 Source: Wickizer, V. D.: Tea Under International Regula-tion, (Food Research Institute, Stanford, Califor-nia, 1944, p. 52. Taylor, Henry C : Op. Cit., p. 89 72 In the 1948 Review of International Commodity Problems by the Interim Co-Ordinary Committee for International Commodity Agreements i t is stated that the exported percentage of the Indian crop in recent years has been slightly smaller due to internal consumption. Efforts to expand tea consumption have been extensive, though i t is doubtful whether they have been very successful. The Inter-national Tea Market Expansion Board was established in 1935 to co-ordinate 7 3 the promotional work of the black tea countries. Its activities have been confined to propaganda in the chief importing countries whilst the domestic market has been neglected until recently. Before the second world war this Board was spending annually £500,000 for propaganda purposes. Table 18 showing the relative position of the chief importing countries> demonstrates the overwhelming importance of Britain in the world's tea trade. The London tea market is dominated by four British 74 firms, and world Tea prices are "made" in this market. It would be difficult without extended facilities, TABLE 18 to ascertain the extent and signi-ficance of monopolistic competition in the tea industry. Certainly tea wholesalers in London are in the position of oligopsonists, and the inflexibility of tea prices tends to support the view that a non-agressive price policy is followed. TEA IMPORTS OF SELECTED COUNTRIES In Thousands of metric tons United Kingdom 215.1 United States 43.0 Australia 24.8 Canada 19.6 Egypt 16.1 Union of S. Africa 9.0 Eire 8.4 Netherlands 7.7 Source: "Interim Co-ordinating Committee for International Commodity Arrangements," Review of International Commodity Problems, 1950, page 36. 7 5 Taylor, H.C.: Op. Cit., p. 89 74 Wickizer, V.D.: Op. Cit., p. 10 - 74 -A comparison of tea, tin and rubber prices between the industrial boom of 1920 and the crash of 1929, shows that tea prices declined by only 18 per cent, whilst tin prices declined by 31 per cent 75 and rubber prices by as much as 72 per cent. Moreover tea export prices showed only a 46 per cent decline between the years 1929 and 1938, whilst coffee export prices over the same period showed an 80 per cent decline. 7 6 As early as 1931, the Imperial Economic Committee, (now known as the Commonwealth Economic Committee), investigating the tea market, pointed to the dangers of this excessive concentration in the buying, and even advocated concentration amongst producers to counteract this danger. To quote that Committee's report: "In a highly sensitive market such as the tea market i s , .... the absence of one of the big buyers for any considerable period may in i t -self cause a depression in prices.77 Dr. Wickizer, on the other hand, in his study of Tea regulation, does not think that this concentration of buyers in the tea industry has been significant in affecting the course of international regulation and states that "the existence of large combinations and some degree of imperfect competition is not necessarily incompatible with either producers* or " consumers' interests."78 There has been a tendency towards the development of excess capacity in the tea industry since the boom that followed the fi r s t world 75 Ibid., p. 112 76 League of Nations, Review of World Trade, 1938, Geneva 1939, p. 13 77 Imperial Economic Committee, 1931, Eighteenth Report: Tea (London, 1931), p.. 23. 7 8 Wickizer, V.D..: Op. Cit., p. 132. - 75 -war0 By 1921 current production of tea was estimated, to exceed con-sumption by 25 per cent. 7 9 Subsequent boom conditions hid the trend for production to exceed consumption until 1928 when surplus stocks began to accumulate once more. Expansion was undoubtedly not so excessive in the tea industry as in other plantation crops. The moderate prices under International Regulation prevented excessive expansion in countries outside the agreement. However there was ample evidence of excess pro-ductive capacity at the beginning of the second world war. In 1939 world potential exportable production under normal ;conditions, totalled' 1,105,000,000 pounds, whilst consumption of exported teas totalled 890,000,000 pounds only. 8 0 History of Control Schemes The history of marketing control schemes in the tea industry shows the same pattern as that followed by rubber. Tea Growers' Associations formed the f i r s t voluntary restriction schemes in the early years after the first world war, and i t was not until the severe depression of the early nineteen-thirties that producers felt compelled to cail upon their governments for support in regulating the industry. As early as 1920, when tea prices f e l l from 15-3/4 pence per pound to only 5 pence, the planters 1 associations of India, Ceylon and the Netherlands Indies voluntarily agreed to restrict the crop of that 79 ' 3 Ibid., p. 60 an Davis, Joseph St "Experience Under Inter-Governmental Commodity Agree-ments", Journal of Political Economy, Vol. LIV, June 1942, p. 202 ^76 -81 year to 90 per cent of the previous five years' average production. Poor crops combined with improved industrial activity brought prices back to remunerative levels the following year, and i t was not until 1928 that prices began to decline again. When the depression "broke" in 1950, the Netherlands Indian, British Indian and Ceylon producers quickly decided 82 to reduce the outputs of their estates. The scheme failed, but is interesting in that i t attempted to prevent the shift in blenders* demand towards f i l l e r teas which usually accompanied a rise in prices, by calling upon the producers of cheaper teas to make greater reduction in output than the producers of finer teas. World exports increased during 1931 without any restriction, but stocks were accumulating to new high levels. Whereas the Dutch had been reluctant to participate in ICA's,83 they now took the initiative and sought an understanding with the British. Accordingly an agreement was entered into in April 1933, to be effective for five years. In 1936, the agreement was extended, with slight modifications for another period of five years i.e. from April 1938 until March 1943.84 The Agreement was renewed for a third period in 1943, to extend for two years after the end of the war. Subsequently producers' associations renewed the scheme from April 1948 t i l l March 1950 pending the support of the newly autonomous governments of Pakistan, Ceylon, Indonesia and India. 8 5 8 1 Wickizer, V.D.: Op. Cit.., page 60. 82 ' Rothe, G.H.: "Commodity Control in Netherlands India", Commodity Control  in the Pacific Area, edited by W.L. Holland, page 288. 8 3 See pages 38 and 43 8 4 Wickizer, V.D.: Op. Cit., page 72. 85 Interim Co-ordinating Committee for International Commodity Arrangements, 1949, Op. Cit., Appendix B. pp. 54-56. - 77 -This was obtained in 1950 when a new agreement to last from April 195Q to March 1955 was formed. This had the backing of the govern-86 ments of India, Pakistan, Ceylon and Indonesia. The essence of the first regulation scheme, which has set the pattern for a l l subsequent agreements, has been the raising tea prices from depressed levels and stabilizing them at profitable levels to growers, by regulating the amount of tea reaching overseas markets. The export quota was the device used, each country being given a basic quota, subject to adjustment from time to time. An International Tea Regulation Committee (hereinafter referred to as the ITC) set varying percentages of this basic export quota which was reviewed and revised, i f necessary, once a year. In comparison with the rubber regulation agreement, provisions for revising or renewing quotas were much less flexible, yet the tea industry was not subject to the same degree of price instability and the operations of the scheme subsequently worked quite smoothly. The ITC was also made responsible for prohibiting new planting except in exceptional circumstances. It was not until 1936 that the ITC was made responsible also for collecting statistical data for the industry as a whole.87 In the 1933 Agreement, the three participating governments India, Ceylon and the Netherlands Indies, were allowed to select any year between 1929 and 1931 as the base year for the establishment of quotas. The following standards were set up, as shown i n Table 19. 8*> Interim Co-ordinating Committee for International Commodity Arrange-ments, 1 9 5 ° , Op. Cit., Appendix 2, pp. 54. 87 International Tea Committee, A Review of the Tea Regulation Scheme, 1933-1943 (London) 1943, page 6. " - 78 -TABLE 19 STANDARD EXPORTS SET FOR THE FIRST PERIOD OF REGULATION (1933-1938) Country Base Year Standard Exports in pounds India 1929 382,594,779 Ceylon 1929 251,522,615 Netherlands Indies 1931 173,597,000 Source: Wickizer, V.D.: Tea under International Regulation (Food Research Institute, Stanford, California), 1944, page 73. In reviewing the first five years of operation of the scheme, disappointment was expressed in many quarters that consumption had not expanded appreciably. Even the ITC in its annual review admitted that the scheme had "not succeeded to the f u l l extent hoped."88 Jack Brooks made the following evaluation; "On the credit side may be set down the facts that tea stocks have been reduced 35 per cent; auction prices have gone up 50$j exports reduced by approximately 12 per cent ... But the bare 5 per cent increase in world tea absorption after five years1 active campaigning is however, not as good."89 However, during the operation of the scheme up to the outbreak of the second world war, tea prices remained fairly stable and quota adjustments, as shown in Table 20, appeared reasonable. It was necessary to increase the quotas in 1941 to 125 per cent of the 'standard' exports. In effect the ITCallowed free exports of tea until the end of the war, 8 8 International Tea Committee, Report for 1937-38 8 9 Brooks, Jack: "Tea Industry in Improved State after First Regulation Period", Tea and Coffee Trade Journal, May, 1938, p. 12. - 79 -shipping facilities being the only limiting factor. In comparison with tin and rubber regulation agreements, tea quotas were never restricted by more than 82^ per cent. Rubber quotas, were commonly as low as 45 to 60 per cent of the basis year, and tin quotas were even restricted as low as 35 per cent of the standard quota. TABLE 20 WORLD TEA PRICES AND PERCENTAGE OF STANDARD QUOTAS ALLOWED FROM 1932-33 to 1939-40 Tears ending March 31. Quota (per cent) Prices "All Tea" London, pence per pound 1932-33 None 9.6 1933-34 85.0 12.9 1934-35 87.5 12.6 1935-36 82.5 13.1 1936-37 82.5 13.4 1937-38 87.5 15.2 1938-39 92.5 14.1 1939-40 95.0 14.1 Source: Wickizer, V.D. Tea under International Regulation, (Food Research Institute, Stanford, California), 1944, page 75. In evaluating the history of tea control i t must be conceded that the ITC followed a moderate price policy and that i t made genuine efforts to consider the general interest. For example, In explaining the 1940 increase in quotas the ITC stated that i t felt that, "supplies of tea should exceed rather than f a l l short of requirements, and that i t was necessary to guard against any suggestion that the regulation scheme was being used to maintain prices at an unduly high level".9° A very enlightened statement of policy is also contained in the official review of tea regulationo 9° ITC Report for 1940 - 41, - p. 4. - 80 -n0ne of the strongest features of the scheme has been the maintainance of the policy est-ablished at the outset that the principle of control was as far as possible to obtain equilibrium between supply and demand, and in exercising control the International Tea Committee have always endeavoured to see that in the matter of supply there should be a liberal margin to meet any emergency,"91 Because of this, the profits in the industry have i n recent years averaged from 10 to 12,5 per cent whilst profits before the great depression were commonly as high as 40 and 50 per cent.92 Table 21 shows the earnings of six selected tea companies before and after regulation. TABLE 21 EARNINGS OF SIX SELECTED TEA COMPANIES IN INDIA AND CEYLON, 1924-39 Period INDIA CEYLON uons on dated kanan jokai Amalgamated Eastern Tea and Lands Devan (Assam) Tea Estates Plantations Produce 06 Estates Average Price Realized (pence perpund) 1924-33av. 38.1 22.8 16.6 37.7 37.9 1927 47.6 58.8 56.9 53.5 48.4 53.5 1932 - 5.2 4.7 - 5.6 <= 1933 21.6 20.2 16.8 10.4 15.8 20.8 1937 18.8 25.5 12.5 9.2 22.2 24.4 Ordinary Dividends (per cent) 1924-33AV, 16.75 24.5 18.0 10.9 34.75 28.75 1927 32.5 37.5 45.0 37.5 45.0 40.0 1932 Nil 7.5 4.0 Nil 5.0 Nil 1933 15.0 15.0 12.5 6.5 12.5 15.0 1937 13.0 16.0 12.5 7.0 12.5 17.5 1939 10.0 14.5 ;o.o 7.0 10.0 16.0 Sources Wickizer, V.D. s Tea Under International Regulation (Food Research Institute, Stanford, California), 1944, page 124. ITC Review of the Tea Regulation Scheme, 1933-43, p. 3. Arner, G.B.L.: Review of V.D. Wickizer1s Tea Under International Regulation, Journal of Farm Economics, Vol. XXVI, August 1944, page 539. - 81 -The tea industry also definitely enjoyed greater stability than existed before the 1933 Agreement, as is shown by the annual price ranges up to the time that the British Ministry of Food closed the London Tea auctionsa TABLE 22 PRICE RANGES IN ALL TEA SOLD AT LONDON AUCTIONS BETWEEN 1922 &1939 Six-year Periods Range (pence per pound; Range (per cent; 1922 - 27 15.1 to 19.8 31 1928 - 33 9.5 to 16.7 76 1934 - 39 12.9 to 15.2 18 Source: Wickizer, V.D.: Tea under International Regulation, (Food Research Institute, Stanford, California), 1944, page 122. On the deficit side, there is evidence that control stimulated production amongst countries outside the agreement. China refused to participate in the 1933 Agreement, because she had plans for 1 6 9 expanding production which was then at a low ebb. 3 However the i n i t i a l expansion was never maintained, though Japan and Formosa appear to have derived lasting benefit, as is shown in Table 23. TABLE 23 EXPORTS OF TEA FROM COUNTRIES NOT ADHERING TO THE INTERNATIONAL TEA AGREEMENT 1932-33 to 1939-40 April-March China Japan Formosa French Total Percentage Indo-China of World Exports 1932-33 91.4 27.8 14.9 1.5 135.6 14.0 1933-34 91.5 32.9 16.0 1.6 142.0 17.7 1934-35 102.0 28.9 21.5 2.8 155.2 17.9 1935-36 91.0 37.3 20.0 2.5 150.8 17.8 1936-37 90.3 33.9 21.6 3.0 153.8 18.5 1937-38 70.5 51.9 21.8 4.3 148.5 17.0 1938-39 92.1 41.4 25.2 4.7 163.4 17.7 1939-46 " 72.6 55.6 25.3 6.5 160.0 17.2 ments", Quarterly Journal of Economics, Aug. 1944, p. 530 - 82 -The restriction scheme definitely had an adverse effect in price differentials since i t tended to stimulate the demand for the loner grade teas because the scheme resulted in a high and rising level of prices which operated against the producers of high quality tea. Table 24, showing the average annual prices for different quality teas, confirms this tendency for lower quality teas to have recovered more rapidly after the depression, whilst the fine quality Darjeeling teas were s t i l l selling at an 11 per cent discount. TABLE 24 PRICE CHANGES IN DIFFERENT TEA QUALITIES BETWEEN 1925-28 and 1939-40 Tea Av. Price Index # Averages for years indicated 1926-28 1926-28 1930-32 1933-35 1936- -38 1939-40 Darjeeling (fine quality) Assam (med. Quality) 16.78 (annas) 13.39 as. 11.61 as. 100 100 71 62 72 68 76 80 89 97 Gosher & Sylhat (common tea) 100 48 73 83 100 Sources Wickizer, V.D.s Tea Under International Regulation, (Food Research Institute, Stanford, California), p. 87 As judged by economic criteria, tea regulation in.restricting new planting must inevitably be guilty of protecting vested interests. The protection afforded weak producers during the 1930»s also tended to delay necessary adjustments in productive capacity. - 83 -International tea regulation might also, be criticized on two other points according to desirable requisites for ICA's, as outlined 93 by the specialized agencies of the United Nations Organization."-^ The Agreements have always been producer controlled and sponsored, having neither official consumer representation, or direct government control. As regards the former, the ITC official review recognizes this weakness, but points out the difficulties in the following wordss "It is impossible to find suitable representatives for a l l the different countries using tea, nor would i t be possible to make a choice from the distributing trade in the various regions as buyers are much too Individualistic and com-petitive. Past experience shows, however, that i t is necessary to satisfy the Governments of consuming countries that the powers entrusted to a committee controlling a scheme of this kind are being exercised in a proper manner and i t should be left to them to elect one of their officers to serve on the controlling body for this purpose.'' 94 In practice i t is obvious that i t has been to the advantage of the dominating British interests to keep prices low, as they constituted the biggest consumers. A high level of prices would also favour Dutch producers since the common teas come mainly from Javanese plantations. This has led Wickizer to conclude that "when a control scheme is wisely managed, the necessity for participating by consuming countries is 95 entirely lacking," The question of making the scheme an official inter-governmental agreement has frequently been raised. The ITC itself took active steps in 1939 to transform the agreement in this manner, but the 9 3 See Appendix A, 11 & 111 pages 184-187 9 4 Graham, Sir Robert, ITC Review of the Tea Regulation Scheme, 1933-43,p. 14. 9 5 Wickizer, V.D., Op. Cit., p. 139 - 84 -matter was dropped with the outbreak of hostilities. We may conclude therefore that government sanction and legislative backing is necessary to make dissident minorities conform, but that comprehensive governmental regulation of such agreements is not a prerequisite to their successful functioning. Indeed the history of rubber regulation shows us that governments are no less susceptible to making mistakes than are producer sponsored organizations* Summary and Conclusions The success of the tea regulation agreements can be attributed to the concentration of financial interests, both producing and selling in two countries, Britain and Holland* Moreover the high capital require-ments and long period of waiting, before a tea garden starts producing, together with the high labour requirements for harvesting, and the technical process of preparing the product for market, has served to prevent extensive development of native production which has been such a problem in the rubber industry. The ease with which supply can be restricted in the short run, by finer plucking, has also eliminated the need for costly storage which has characterized the coffee industry. Perhaps the most significant lesson from this study of tea regulation is the fact that such ICA's tend to persist. Control originated from the great depression and the very low prices which prevailed in the early 1930»s. However, even after substantial industrial recovery and relatively prosperous conditions amongst tea growers, regulation has persisted. This protection of vested interest is almost inevitable in schemes dominated by producers, and prevents a proper read-justment of productive capacity and efficient resource allocation in those - 85 -primary producing countries. Even the most efficient producers are not in favour of continued control since i t shelters their weaker competitors. The ITC in its annual report of 1937-38 stated that i t did not consider that continuous regulations were necessary or desirable. It anticipated, then, that "five years would be sufficient for the recovery of the industry and the relinquishment of regulation n. However, a similar control agreement is s t i l l in operation fourteen years after this statement was made* ITC, Report for 1937-38, page 3 CHAPTER I I I CONTINUING INDIVIDUAL COMMODITY STUDIES ( i v ) Wheat T h i s - s u r v e y o f i n t e r n a t i o n a l c o n t r o l o f t h e wheat m a r k e t a n d t h e s t u d y o f s u g a r t h a t f o l l o w s , b o t h p r e s e n t a n e n t i r e l y d i f f e r -e n t t h e o r e t i c a l p a t t e r n t o t h e c o m m o d i t i e s p r e v i o u s l y c o n s i d e r e d . However, , t h i s d i v i s i o n i n t o c h a p t e r s i s f o r c o n v e n i e n c e r a t h e r t h a n f o r any d e s i r e t o make a f u n d a m e n t a l d i s t i n c t i o n between c o m m o d i t i e s . A l l p r i m a r y c o m m o d i t i e s h a v e i n h e r e n t p r o d u c t i o n p r o b l e m s w h i c h t e n d t o r e s u l t i n p r i c e i n s t a b i l i t y and t h e f a i l u r e o f s u p p l y t o a d j u s t r e a d i l y t o p e c u l i a r c h a r a c t e r i s t i c s , and no two a r e f a c e d w i t h e x a c t l y s i m i l a r d i f f i c u l t i e s . ~ Wheat a n d s u g a r do h a v e some common c h a r a c t e r i s t i c s w h i c h g i v e r i s e t o s i m i l a r i t i e s i n t h e i n t e r n a t i o n a l t r a d e p r o b l e m s o f e a c h . I n b o t h p r o d u c t s , t h e r e a r e a l a r g e number o f p r o d u c i n g c o u n t r i e s , a n d v e r y few i m p o r t e r s o f any c o n s e q u e n c e a r e u n a b l e t o s u p p l e m e n t i m p o r t s t o a v a r y i n g d e g r e e by d o m e s t i c p r o d u c t i o n . W i t h o u t t h a t a b s o l u t e d e g r e e o f dependence on e x p o r t i n g c o u n t r i e s w h i c h c h a r a c t e r i z e s t h e c h i e f c o n -sumers o f t h e c o m m o d i t i e s h i t h e r t o e x a m i n e d , i m p o r t i n g c o u n t r i e s h a v e been a b l e t o m o d i f y and c o n s t r u c t t h e p a t t e r n o f i n t e r n a t i o n a l t r a d e i n a c c o r d a n c e w i t h t h e needs f o r s e l f d e f e n c e , p r e s e r v a t i o n o f a p r e -c a r i o u s t r a d e b a l a n c e , o r t h e s u b s i d i z a t i o n o f d o m e s t i c p r i m a r y p r o d u c e r s . M a r k e t C h a r a c t e r i s t i c s : Wheat i s t h e most i m p o r t a n t p r i m a r y p r o d u c t i n i n t e r n a t i o n a l t r a d e . B e c a u s e i t f o r m s t h e b a s i s o f t h e d i e t o f so many -na t ions ; and b e c a u s e t h o s e o f w e s t e r n c i v i l i z a t i o n s : i n p a r t i c u l a r , h a v e r e g a r d e d . i t -is - 87 -as the s t a f f of l i f e , wheat has been subject to exhaustive study 1 for a prolonged period. The examination of wheat problems must nec e s s a r i l y be b r i e f , and a greater amount of attention has been devoted to other commodities i n t h i s study, for the very reason that s t a t i s t i c a l records of wheat trade and production v a r i a t i o n are so extensive, and that many volumes have already been written about 2 every aspect of wheat production. Wheat i s an annual crop, and l i k e sugar belongs to the "grass family" or order Graminacae. Originating i n Asia Minor, wheat f l o u r i s h e s best i n temperate zones, though c u l t i v a t i o n has been extended to sub-arctic and semi-tropical regions of the world. It i s therefore grown very widely. The primary wheat producing areas are, however, the natural p r a i r i e , pampas or steppe lands; t r e e l e s s , b l a c k - s o i l regions, characterized by a low annual r a i n f a l l . There are few a l t e r n a t i v e methods of u t i l i z i n g the land i n such areas except by gra-zing herds. Extensive methods of c u l t i v a t i o n are employed i n these areas, and wheat can be produced very cheaply. I t i s such s p e c i a l i z e d producing areas which are normally dependent upon overseas markets., and which s u f f e r the most when wheat production i s a r t i f i c i a l l y stim-ulated i n areas adapted to a more diverse system of a g r i c u l t u r e . 1 Ashley, S i r William: The Bread of our Forefathers:.- an Inquiry i n Economic History, Clarendon Press, Oxford, 1928. 2 There are a s e r i e s of over 180 studies contained i n twenty volumes e n t i t l e d "Wheat Studies"', published by the Food Research I n s t i t u t e . C a l i f o r n i a . See a l s o Crookes,, S i r William: The Wheat Problem. Longmans; Green & Co., 1917\ Hevesy, Paul de: World Wheat Planning and Economic Planning i n Gener- a l . Oxford Univ. Press 5, 194°» ana also Swanson, W. W. & Armstrong, P. C.: Wheat. MacMillan Co. Toronto, 1930. - 88, -The s u p p l y o f wheat i s f a i r l y e l a s t i c i n t h e l o n g r u n and s i g n i f i c a n t c o r r e l a t i o n has; b e e n d i s c o v e r e d between t h e a c r e a g e p l a n t e d 3 a n d t h e g e n e r a l l e v e l o f i n d u s t r i a l a c t i v i t y . The h i g h l e v e l o f o u t -p u t m a i n t a i n e d d u r i n g t h e d e p r e s s i o n o f t h e 1930 's was a r e s u l t o f t h e l a c k o f a l t e r n a t i v e o p p o r t u n i t i e s f o r t h e f a c t o r s o f p r o d u c t i o n , a c o n -d i t i o n c r e a t i n g s u p p l y i n e l a s t i c i t y w h i c h i s common t o a number o f p r o d u c t s . The s u p p l y o f wheat on a n i n d i v i d u a l n a t i o n a l b a s i s i s h i g h -4 l y u n s t a b l e due t o t h e e f f e c t s o f c l i m a t i c v a r i a t i o n s . T h i s w i l l be shown l a t e r . The a g g r e g a t e w o r l d s u p p l y o f wheat t e n d s t o be q u i t e s t a b l e s i n c e t h e w i d e g e o g r a p h i c r a n g e o f p r o d u c i n g c o u n t r i e s t e n d s t o h a v e a c o m p e n s a t i n g e f f e c t . T h e r e i s , h o w e v e r , s i g n i f i c a n t v a r i a t i o n i n o c c a s i o n a l y e a r s . Thus i n 1928 c r o p s were good e v e r y w h e r e amount-i n g t o 3 f903,000:,000 b u s h e l s w h i l e t h e d r o u t h s o f t h e m i d d l e 1930*s on t h e W o r t h A m e r i c a n c o n t i n e n t h a d w o r l d w i d e r e p e r c u s s i o n a r y e f f e c t s , t o t a l 5 w o r l d p r o d u c t i o n f a l l i n g b y as; much as 600,000,000 b u s h e l s i n 1934* The demand f o r t h e wheat o f any one e x p o r t i n g c o u n t r y i s f a i r l y e l a s t i c i n i n t e r n a t i o n a l t r a d e . Thus t h e p r i c e ' p r o b l e m o o f v a r i o u s l a r g e p r o d u c i n g c o u n t r i e s i s n o t t h e same. T h i s c a n b e a p p r e -c i a t e d by c o m p a r i n g c o n d i t i o n s be tween t h e U n i t e d S t a t e s and C a n a d a . B o t h a r e l a r g e wheat p r o d u c e r s b u t t h e f o r m e r p r o d u c e s a l m o s t e n t i r e l y 3 P e d e r s e n , J ^ r g e n : "The J u s t i f i c a t i o n o f Commodity Agreement s ; " . I n t e r -n a t i o n a l Wheat Agreements ; , I n t e r n a t i o n a l J o u r n a l o f A g r a r -4 i a n A f f a i r s . V o l . l j N o . 3 , S e p t . 1949, p p . 41 - 43 . 4The e x t e n t o f s u c h v a r i a b i l i t y i s w e l l shown i n t h e s t u d y by Temoshenko , V . P . : " V a r i a b i l i t y i n I h e a t Y i e l d s , & Out-put s " ; Wheat S t u d i e s o f The F o o d R e s e a r c h I n s t i t u t e , M a r c h 1943, V o l . X I X , pp.190-96. - ' F i g u r e s e x c l u d e R u s s i a who was no t an i m p o r t a n t e x p o r t e r d u r i n g t h i s t i m e . T a k e n f r o m The W o r l d Wheat S i t u a t i o n . 193ii.-3S» A p p e n d i x T a b l e I, Wheat S t u d i e s . F o o d R e s e a r c h I n s t i t u t e , C a l i f o r n i a , V o l . X I I , P . I6l. - 8 9 -f p r a d o m e s t i c m a r k e t and c o n s e q u e n t l y f a c e s a h i g h l y i n e l a s t i c demand. Canada' depends u p o n t h e e x p o r t t r a d e f o r t w o - t h i r d s : o f h e r e x p o r t s and b e c a u s e t h e r e s u l t a n t demand i s f a i r l y e l a s t i c , she w o u l d n o t be a b l e t o r e s o r t t o any o f t h e d o m e s t i c p r i c e r a i s i n g measure s r e s o r t e d t o by t h e U n i t e d S t a t e s G o v e r n m e n t . The i n d i v i d u a l c o n s u m e r ' s demand f o r wheat i s h i g h l y i n e l a s -t i c s i n c e b r e a d i s t h e s t a p l e o f d i e t i n t h e c h i e f wheat i m p o r t i n g c o u n t r i e s . . T h i s i s . a . s i g n i f i c a n t f a c t o r i n f a c i l i t a t i n g n a t i o n a l s e l f s u f f i c i e n c y p o l i c i e s w h i c h ; i n v o l v e m e a s u r e s t h a t r a i s e t h e p r i c e o f b r e a d . The demand f o r wheat i s s u b j e c t t o p r o b l e m s w h i c h d i s t i n g u i s h i t f r o m t h e c o m m o d i t i e s c o n s i d e r e d i n t h e p r e v i o u s : c h a p t e r , s i n c e t h e r e a r e t h r e e d i s t i n c t s o u r c e s o f c o n s u m p t i o n . T h i s i s i l l u s t r a t e d i n C h a r t 6 , s h o w i n g a h y p o t h e t i c a l demand s c h e d u l e . The s t e e p e s t , i n e l a s -t i c p a r t o f t h e s c h e d u l e r e p r e s e n t s t h a t q u a n t i t y w h i c h e n t e r s i n t e r -n a t i o n a l t r a d e , and i s demanded f o r human c o n s u m p t i o n ; . The l o w e r p a r t o f t h e s c h e d u l e r e p r e s e n t s t h o s e p r i c e ranges^ w i t h i n w h i c h wheat i s 1 e x t e n s i v e l y u s e d a s a f e e d f o r l i v e s t o c k . F i n a l l y a s a s o u r c e o f s t a r c h , t h e r e c o u l d be an u n l i m i t e d demand f o r wheat f o r i n d u s t r i a l p r o c e s s i n g and m a n u f a c t u r e o f a l c o h o l , p r o v i d e d t h e p r i c e l e v e l was l o w e n o u g h . The income e l a s t i c i t y o f demand f o r wheat i s a l s o q u i t e l o w . As c o n s u m p t i o n l e v e l s : a r e r a i s e d i n t h e wheat c o n s u m i n g c o u n t r i e s , t h e l o w e r i n c o m e g r o u p s t e n d t o e a t more wheat p e r c a p i t a i n p r e f e r e n c e t o r y e a n d m i l l e t s , w h i l e t h o s e on t h e h i g h l e v e l s t e n d t o e a t l e s s ? wheat p e r c a p i t a as-, i t s p l a c e i n t h e i r d i e t i s p a r t i a l l y t a k e n by o t h e r f o o d s - 90 -CHART 6 DEMAND SCHEDULE FOR WHEAT Q U A N T I T Y OF W H E M 1 6 regarded as preferable. At lower prices therefore fluctuations in yields would have a less pronounced price effect as the adjustment would be made in livestock feed and industrial uses. However, costs' are such that wheat cannot be produced in the price range that w i l l attract indust-r i a l uses. A History of International Wheat Agreements-.. The number of committees, councils and conventions, which have revolved around the problem of formulating an international wheat agreement during the.past two decades, exceeds forty. 6 Bennett, M. K.: ?Wheat i n National Diets"', Wheat Studies, Food Research Institute, October, 1941* Vol. XVIII, pp. 37 - 76. - 91 -F o l l o w i n g i s a b r i e f a c c o u n t o f t h e e v e n t s w h i c h l e d t o t h e s e n e g o -7 t i a t i o n s . The 1914-18 war h a d t h e f i r s t g r e a t d i s r u p t i v e e f f e c t on t h e w o r l d wheat t r a d e . P r i o r t o 1915t R u s s i a was one o f t h e l a r g e s t 8 e x p o r t e r s ' , w i t h a v e r a g e a n n u a l e x p o r t s o f o v e r 19.000,000 q u a r t e r s . 9 The U n i t e d S t a t e s ' a v e r a g e d 13,000,000 q u a r t e r s and A r g e n t i n a 10,000,000. A f t e r t h e war R u s s i a n e x p o r t s were s u d d e n l y and c o m p l e t e l y c u t o f f , S t i m u l a t i n g p r o d u c t i o n i n A r g e n t i n a and A u s t r a l i a . B e t w e e n I.924 a n d I 9 2 8 , A u s t r a l i a and A r g e n t i n a i n c r e a s e d t h e i r s h a r e o f t h e w o r l d e x p o r t t r a d e f r o m 27 t o 35 P e r c e n t , w h i l e Canada a n d t h e U . S . A . d e -10 c r e a s e d t h e i r s h a r e f r o m 57 p e r c e n t t o 35 P © r c e n t . A f t e r 1919» Germany, F r a n c e and I t a l y i m p o s e d s u b s t a n t i a l i m p o r t t a r i f f s on wheat i n an e f f o r t , t o become more s e l f s u f f i c i e n t . F o l l o w i n g t h e f i n a n c i a l c r a s h o f 1929, t h e p o s i t i o n r a p i d l y d e t e r i o r a t e d , w i t h t h e c h i e f E u r o p e a n wheat i m p o r t i n g c o u n t r i e s t a k i n g more and more a c t i v e s t e p s t o s t i m u l a t e home p r o d u c t i o n . Germany, I t a l y and F r a n c e were t h e f i r s t n a t i o n s a f t e r t h e o n s e t o f t h e d e p r e s s i o n t o impose q u a n t i t a t i v e r e g u l a t i o n o f t h e demand o f m i l l e r s , by c o m p e l l i n g them t o g r i n d a 7 A h e l p f u l summary o f two decades o f i n t e r n a t i o n a l wheat n e g o t i a -t i o n s t h a t p r e c e d e d t h e p r e s e n t I n t e r n a t i o n a l Wheat Agreement (1949) i s p r o v i d e d by H . T y s z y n s k i , " E c o n o m i c s o f t h e Wheat Agreement " ' , Economics ; . V o l . X V I N o . 6 l , F e b . 1949, pp 27-29 8 1 Q u a r t e r 2. 8 b u s h e l s : . 9 Rowe, J . W . F . : M a r k e t s and M e n . A s t u d y o f A r t i f i c i a l C o n t r o l Schemes i n some P r i m a r y I n d u s t r i e s , • C a m b r i d g e U n i v . P r e s s , 1935. 5 3 . 10 T h i s and t h e f o l l o w i n g d a t a on N a t i o n a l R e s t r i c t i v e M e a s u r e s come f r o m : T a y l o r , H e n r y C . : W o r l d T r a d e i n A g r i c u l t u r a l P r o d u c t s . ( M a c M i l l a n C o . L t d . : 1943). PP« 107-126. 1 - 92 -c e r t a i n p e r c e n t a g e o f d o m e s t i c w h e a t . I n 1931 B e l g i u m s u b j e c t e d i m p o r t s t o a l i c e n s i n g s y s t e m and t h e N e t h e r l a n d s i n t r o d u c e d f i x e d p r i c e s and c o m p u l s o r y m i l l i n g q u o t a s . I n 1933 I t a l y r a i s e d t h e com-p u l s o r y m i l l i n g q u o t a f o r d o m e s t i c wheat t o 99 P e r c e n t . B y t h e e a r l y 1930's t h e wheat economy was t h o r o u g h l y s t a t e c o n t r o l l e d i n Germany, I t a l y and F r a n c e . T a b l e 25 i l l u s t r a t e s t h e e x t e n t t o w h i c h t h e s e t h r e e n a t i o n s h a d s t i m u l a t e d d o m e s t i c ; p r o d u c t i o n . TABLE 25 PRODUCTION INCREASES AND IMPORT DECREASES BETWEEN I924-I928 and 1933 P r o d u c t i o n Germany F r a n c e a n d F r e n c h N o r t h A f r i c a I t a l y ( I n t h o u s a n d s h o r t t o n s ) G r a i n -625; -442 -151 Wheat -278 -273 -262 Net i m p o r t s ; o f wheat -220 -U6 -217 S o u r c e : T a y l o r , H e n r y C . W o r l d T r a d e i n A g r i c u l t u r a l P r o d u c t s ( M a c M i l l a n C o . L t d . . 1943), p a g e 114. C z e c h o s l o v a k i a , , P o r t u g a l and Sweden h a d s t o p p e d i m p o r t i n g wheat a n d even C h i n e s e i m p o r t s ; ( i n c l u d i n g M a n c h u r i a n p o r t s ) d r o p p e d f r o m 74.000,000 b u s h e l s i n I933 t o 7,000,000 b u s h e l s ; i n 1937. W h i l e b e -t w e e n I9.09-IO and 1913-14, B r i t a i n , Germany, H o l l a n d , B e l g i u m , I t a l y a n d F r a n c e depended on i m p o r t s t o t h e e x t e n t o f 38 p e r c e n t o f t h e i r t o t a l r e q u i r e m e n t s , by 1938-39 t h e s e same c o u n t r i e s i m p o r t e d o n l y 27 11 p e r c e n t o f t h e i r r e q u i r e m e n t s . 11 ! '• ' S c h w e n g e r , R o b e r t B . : " W o r l d A g r i c u l t u r a l P o l i c i e s and t h e E x p a n s i o n o f T r a d e 9 , J o u r n a l o f F a r m Economics ; . V o l . X X V I I , F e b . 1943, P . 70. - 9 3 -R o b e r t Schwenger g i v e s a c o m p r e h e n s i z e l i s t o f t h e d i f f e r e n t k i n d s o f b a r r i e r s r e s u l t i n g f r o m t h e i n t e r v e n t i o n o f v a r i o u s g o v e r n -m e n t s , w h i c h p a r t i e s t o a. f o r e i g n s a l e o f A m e r i c a n wheat m i g h t have, t o 12: f a c e d u r i n g t h e 1930*a. These i n c l u d e d c o m p e t i n g a g a i n s t s u b s i d i z e d p r o d u c e r s , a s i n B r i t a i n , and t a r i f f duties-- e x c e e d i n g s e v e n t y - f i v e c e n t s a. b u s h e l i n A u s t r i a , E s t o n i a , . F r a n c e , Germany , L i t h u a n i a , . P o l a n d , R u m a n i a , T u r k e y , Y u g o s l a v i a , E g y p t a n d M e x i c o . He l i s t s i m p o r t q u o t a s , m i l l i n g r e g u l a t i o n s , f o r e i g n exchange r e s t r i c t i o n s and p r e f e r e n t i a l t r e a t m e n t s among d i f f e r e n t i m p o r t i n g c o u n t r i e s . I n a d d i t i o n t h e c h i e f e x p o r t i n g n a t i o n s ; , i n c l u d i n g t h e U . S . A . . A r g e n t i n a , A u s t r a l i a , and U r a g u a y s u b -s i d i z e d t h e i r e x p o r t s : on a t l e a s t one o c c a s i o n . W i t h t h e e x c e p t i o n o f Germany, and p o s s i b l y I t a l y , t h e s e r e s t r i c t i v e government m e a s u r e s were n o t b o r n o u t o f any a g g r e s s i v e des igns- b u t were i n t h e n a t u r e o f s e l f d e f e n c e m e c h a n i s m s a g a i n s t t h e o n s l a u g h t o f s e v e r e w o r l d w i d e d e p r e s -s i o n , c o u p l e d w i t h t h e g e n e r a l f e e l i n g o f t h e need f o r s e l f s u f f i c i e n c y i n f o o d p r o d u c t i o n . I t i s e a s y t o see t h a t s u c h m e a s u r e s s e r v e o n l y t o deepen and l e n g t h e n t h e d e p r e s s i o n , and c r e a t e d much human s u f f e r i n g i n t h e g r e a t wheat g r o w i n g r e g i o n s o f t h e w o r l d . B u t i n i n d i v i d u a l c o u n -t r i e s ; i t d i d r e d u c e u n e m p l o y m e n t . W o r l d wheat s u p p l i e s were more t h a n ample d u r i n g t h i s p e r i o d . The s h o r t a g e s s u f f e r e d f r o m 1914-1919 l e d t o a t e m p o r a r y s t i m u l a t i o n o f w o r l d demand, and t h e a n n u a l a v e r a g e v o l u m e o f wheat e x p o r t s ; a p p r o a c h e d t h e l e v e l o f 800,000,000 b u s h e l s b e t w e e n 1922 and 1932. N e v e r t h e l e s s , huge s u r p l u s e s ; a c c u m u l a t e d w h i c h were o n l y a b s o r b e d by t h e s u c c e s s i o n o f s e v e r e d r o u g h t s f r o m 1934 t o 1937. The y e a r I938 was a g a i n a bumper c r o p y e a r , w i t h y i e l d s t o t a l l i n g 20 p e r c e n t above t h e a v e r a g e a n n u a l 1 2 I b i d . , p p . 69-70 - 94 -13 u t i l i z a t i o n i n t h e s i x p r e c e d i n g y e a r s . N e g o t i a t i o n s f o r i n t e r n a t i o n -a l , a g r e e m e n t s , a s w i l l l a t e r be s e e n , c o i n c i d e d w i t h s u c h p e r i o d s when t h e wheat s u r p l u s ; was u n d u l y l a r g e . I n t e r n a t i o n a l Wheat Agreement 1 9 3 3 ; Wheat s t o c k s i n t h e f o u r p r i n c i p a l c o u n t r i e s , C a n a d a * U . S . A . , A r g e n t i n a and A u s t r a l i a , h a d r i s e n f r o m 270,000,000 b u s h e l s i n 1923 "to 14 656,000,000 b u s h e l s by 1931. C o m p e t i t i o n became i n c r e a s i n g l y s e v e r e b e t w e e n t h e f o u r wheat e x p o r t i n g c o u n t r i e s , and E a s t e r n E u r o p e a n c o u n -t r i e s ; w h i c h o c c a s i o n a l l y h a d q u i t e s u b s t a n t i a l s u r p l u s e s f o r e x p o r t . The E c o n o m i c C o m m i t t e e o f t h e L e a g u e o f N a t i o n s s u g g e s t e d an i n t e r n a t i o n -a l c o n f e r e n c e w i t h t h e o b j e c t i v e o f r e a c h i n g some agreement on t h e 15 wheat t r a d e , a n d c o n f e r e n c e s w e r e s u b s e q u e n t l y h e l d i n 1931 i n Rome and l a t e r i n L o n d o n . N e g o t i a t i o n s : b r o k e down when t h e U . S . A . d e c l a r e d 16 t h a t i t w o u l d be u n c o n s t i t u t i o n a l f o r h e r t o r e g u l a t e e x p o r t s . The. M o n e t a r y and Economic C o n f e r e n c e h e l d i m 1933 p r o d u c e d few t a n g i b l e r e s u l t s , b u t o n e o f t h e p r o b l e m s i t c o n s i d e r e d was t h e w o r l d wheat t r a d e , and t h e s e c r e t a r y g e n e r a l o f t h e C o n f e r e n c e a c t u a l -l y c a l l e d a m e e t i n g o f t h e p r i n c i p a l wheat e x p o r t i n g c o u n t r i e s 13 D a v i s , J . S . : "New I n t e r n a t i o n a l Wheat A g r e e m e n t s " 1 . Wheat S t u d i e s o f t h e F o o d R e s e a r c h I n s t i t u t e , V o l . X I X , S e p t . 1942. p . 26. 14 B l a c k , J . D . & T a o u , S t a n l e y : " I n t e r n a t i o n a l Commodity A g r e e m e n t s " , Q u a r t e r l y J o u r n a l o f E c o n o m i c s . . A u g u s t 1.944» P« 526 15 P l u m m e r , A l f r e d : I n t e r n a t i o n a l Combines, i n M o d e r n I n d u s t r y , p u b -l i s h e d by S i r I s a a c P i t m a n a n d Sons; L t d . L o n d o n 1934» P» 98* 16 " I n t e r n a t i o n a l Wheat A g r e e m e n t s " , I n t e r n a t i o n a l J o u r n a l o f A g r a r -i a n A f f a i r s . " V o l . 1, N o . 3 , September • 1943, O x f o r d U n i v e r -s i t y P r e s s . . F o r a d e t a i l e d a c c o u n t , see T a y l o r A . E . "The I n t e r n a t i o n a l Wheat C o n f e r e n c e s d u r i n g I93O-3I0. Wheat S t u d i e s . V o l . V I I , A u g u s t 1931, F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d U n i v e r s i t y ; pp.439-475-• - 95 -f o r t h e p u r p o s e o f n e g o t i a t i n g a wheat a g r e e m e n t . An i n t e r n a t i o n -a l agreement was s u b s e q u e n t l y r e a c h e d i n t h e same y e a r (1933) s i n c e e v e r y n a t i o n r e a l i z e d t h a t " t h e l o w e r t h e p r i c e a t w h i c h t h e e x p o r t e r s were f o r c e d t o s a c r i f i c e t h e i r wheat t h e h i g h e r a n d more c o s t l y were t h e t a r i f f s , , b o u n t i e s , and r e s t r i c t i o n s w h i c h t h e i m p o r t i n g c o u n t r i e s f o u n d i t n e c e s s a r y t o impose i n o r d e r t o p r o t e c t t h e i r home p r o d u c e r s , • 18 The new agreement was s i g n e d by n i n e e x p o r t i n g a n d t w e l v e i m p o r t i n g c o u n t r i e s . I t p r o v i d e d f o r e x p o r t q u o t a s t o t a l l i n g 516,000,000 b u s h e l s ; i n t h e f i r s t y e a r , and f o r a 15 p e r . c e n t c u t i n p r o d u c t i o n i n t h e f o u r b i g e x p o r t i n g c o u n t r i e s i n t h e two e n s u i n g y e a r s . The i m p o r t i n g c o u n t r i e s a l s o a g r e e d t o r e d u c e t h e i r t a r i f f s as; soon as. t h e i n t e r n a t i o n a l ( i . e . L o n d o n ) wheat p r i c e r o s e t o 63 g o l d c e n t s p e r b u s h e l f o r a c o n t i n u o u s p e r i o d o f f o u r m o n t h s . The agreement c o n t a i n e d no p r o v i s i o n f o r t h e d i r e c t l i m i t a t i o n o f p r o d u c t i o n . A l t h o u g h i n t h e f i r s t y e a r n e t e x p o r t s were 10,000,000 b u s h e l s l e s s t h a n 20 t h e amount a l l o w e d u n d e r t h e a g r e e m e n t , p r i c e s d e c l i n e d v e r y c o n s i d e r -a b l y t o 43 c e n t s p e r b u s h e l . The Agreement c o n s e q u e n t l y b r o k e down a f r e r a y e a r o f o p e r a t i o n s i n c e e x p o r t q u o t a s h a d f a i l e d t o r a i s e p r i c e s . However A r g e n t i n a e x c e e d e d h e r q u o t a and r e c r i m i n a t i o n s s p o i l e d t h e 21 a t m o s p h e r e f o r r e v i s i n g t h e p a c t . The Wheat A d v i s o r y C o m m i t t e e , w h i c h was c r e a t e d f o r t h e p u r p o s e o f a d m i n i s t r a t i n g t h e a g r e e m e n t , c o n t i n u e d t o 17 H e x n e r , E r v i n : I n t e r n a t i o n a l C a r t e l s . . U n i v e r s i t y o f N o r t h C a r o l i n a P r e s s , p . 202 ^ Rowe, J . W . F . : Op.. C i t . . p . 6 2 . *9 F o r a d e t a i l e d a c c o u n t o f t h e 1933 Wheat Agreement see T a y l o r , A . E . : " I n t e r n a t i o n a l Wheat P o l i c y a n d P l a n n i n g " , Wheat S t u d i e s . V o l . i i , J u n e 1935. F o o d R e s e a r c h I n s t i t u t e , pp 359-404. 2 0 ' H e x n e r , E r v i n e : 0p_. c i t . p . 202. 2 1 D a v i s , J . S . Op. C i t . , p . 26. - 96 -f u n c t i o n , h o w e v e r , and was; s u b s e q u e n t l y r e s p o n s i b l e f o r r e n e w e d i n t e r n a t i o n a l n e g o t i a t i o n s . The l a r g e W o r l d c r o p o f 1.938 s t i m u l a t e d t h e s e n e g o t i a t i o n s -b u t t h e U n i t e d S t a t e s h a d f o r some t i m e been a n x i o u s t o o b t a i n i n t e r -n a t i o n a l agreement and h e r s u b s i d i z a t i o n o f wheat e x p e r t s , was d i r e c t e d t o w a r d s t h i s e n d . The A n n u a l R e p o r t o f t h e S e c r e t a r y o f A g r i c u l t u r e f o r t h e U . S . A . f o r 1.935 c o n t a i n e d t h e f o l l o w i n g n o t e : "The U . S . s t a n d s r e a d y t o c o o p e r a t e w i t h . o t h e r n a t i o n s ; inv b r i n g i n g about an a d j u s t m e n t o f w o r l d p r o d u c t i o n t o w o r l d demand. I t i s b e l i e v e d t h a t an e f f e c t i v e I n t e r n a t i o n a l Wheat Agreement w i l l be h a s t e n e d i f t h i s ; c o u n t r y c o n t i n u e s . ' . t o p r o d u c e a s u f f i c i e n t amount of. wheat s o a s t o r e m a i n an a c t i v e p a r t i c i p a n t i n w o r l d t r a d e . " 22 A g a i n , i n h i s : a n n u a l r e p o r t f o r 1938 t h e S e c r e t a r y o f A g r i c u l t u r e s t a t e s t h a t : " O u r government i s : d o i n g what i t c a n t o p e r s u a d e o t h e r wheat e x p o r t i n g n a t i o n s t o j o i n i n what m i g h t b e c a l l e d a n e v e r n o r m a l g r a n a r y p l a n ; i n a. p l a n to- s t a b i l i z e t h e amount o f wheat o f f e r e d on t h e 7 / o r I d ' s m a r k e t s y e a r ' a f t e r y e a r . " 23 A r g e n t i n a , A u s t r a l i a , Canada1, a n d t h e U . S . A . h a d r e a c h e d t h e b a s i s f o r an a g r e e m e n t , when H i t l e r s t a r t e d h i s b l i t z k r i e g i n P o l a n d , and n e g o t i a t i o n s were d r o p p e d . B a r o n P a u l de H e v e s y i n a f o o t n o t e i n h i s monumenta l s t u d y o f wheat d e s c r i b e s ; t h e p r o g r e s s i n 1939 amongst t h e f o u r n e g o t i a t i n g c o u n t r i e s ; . I t h a d been d e c i d e d t o a l l o c a t e a n e x p o r t q u o t a t o f a b o u t 125 m i l l i o n b u s h e l s f o r t h e D a n u b i a n c o u n t r i e s a n d t h e S o v i e t R u s s i a , and t h a t t h e b a l a n c e be d i v i d e d i n a p p r o x i m a t e l y 22 H e x n e r , E r v i n , .Ojo. C i t . , p . 203 D a v i s , J . S . , L o c . C i t - 97 -St t?he f o l l o w i n g p r o p o r t i o n s : Canada 40 p e r c e n t , A r g e n t i n a 25 p e r c e n t , 24 U . S . A . 18 p e r c e n t and A u s t r a l i a 17 p e r c e n t . Wheat s u r p l u s e s ' v e r y q u i c k l y b e g a n t o a c c u m u l a t e i n t h e m a j o r e x p o r t i n g c o u n t r i e s d u r i n g t h e w a r , and t h e s e n a t i o n s , t o g e t h e r w i t h B r i t a i n r e sumed a c t i v e w o r k on t h e p r o b l e m i n J u l y 1941* A s u c c e s s i o n o f m e e t i n g s ; c u l m i n a t e d i n t h e 1942 Memorandum o f Agreement and D r a f t C o n v e n t i o n . I t was, a g r e e d a t t h a t t ime ; t h a t some f o r m o f i n t e r n a t i o n a l agreement was u r g e n t l y n e e d e d i n o r d e r t o d e a l w i t h t h e wheat s u r p l u s p r o b l e m and t h u s p r e v e n t t h e o u t b r e a k o f a, "wheat w a r " a s s o o n as s h i p -p i n g and t r a d e b a r r i e r s : became f r e e a t t h e c l o s e o f h o s t i l i t i e s . T h e r e was- a l s o t h e a d d i t i o n a l p r o b l e m o f m a k i n g p r o v i s i o n f o r s u p p l i e s o f r e -l i e f wheat t o war d e v a s t a t e d c o u n t r i e s a s soon a s t h e enemy was d e f e a t e d . C a i r n s , , who was. s e c r e t a r y o f t h e o r i g i n a l Wheat A d v i s o r y C o m m i t t e e , s t a t e d i n 1949 t h a t t h i s agreement had a c h i e v e d * i t s l i m i t e d o b j e c t i v e s , t h a t o f p r o v i d i n g f o r at wheat r e l i e f p o o l and c o n v e n i n g a 25 f u l l y r e p r e s e n t a t i v e wheat c o n f e r e n c e . T h e r e i s ' e v i d e n c e , h o w e v e r , t h a t t h e Memorandum o f Agreement was a t t h e t i m e i n t e n d e d t o be a m o d e l f o r a n agreement t o go i n t o o p e r a t i o n a t t h e c e s s a t i o n o f h o s t i l i t i e s . I n a c t u a l f a c t i t w a s s e v e r a l y e a r s a f t e r t h e end o f t h e war t h a t an agreement was r e a c h e d and t h i s d i f f e r e d q u i t e s u b s t a n t i a l l y f r o m t h e 1942. Memorandum. 24:-H e v e s y , P a u l d e : Op C i t . . p . 39« 25 " I n t e r n a t i o n a l Wheat A g r e e m e n t s ' 1 , I n t e r n a t i o n a l J o u r n a l o f A g r a r i a n A f f a i r s , V o l . 1 N o . 3, p . 5 . - 98 -The p r e a m b l e o f t h i s agreement i s p h r a s e d i n h i g h l y commend-a b l e t h o u g h i d e a l i s t i c t e r m s . I t c a l l s f o r : " A s u b s t a n t i a l d e c r e a s e i n u n e c o n o m i c i n c e n t i v e s t o h i g h - c o s t p r o d u c t i o n , a l o w e r i n g o f b a r r i e r s ' , t o w o r l d t r a d e , and an i n c r e a s e i n t h e consump-t i o n o f wheat t h r o u g h a l o w e r i n g o f p r i c e s . " . D r . D a v i s makes: a n e x h a u s t i v e c r i t i c i s m a n d a n a l y s i s o f t h i s : 1942 Agreement and i s ' a b l e t o p o i n t o u t t h a t f o r a l l t h e i n t r i c a c i e s o f i t s : m a n i f o l d d e v i c e s , t h e agreement p r o v i s i o n s f a l l v e r y f a r s h o r t o f 26 t h e o b j e c t i v e s a s s t a t e d i n t h e p r e a m b l e . The d i s t i n c t i v e f e a t u r e s o f t h e 194 2 Agreement were as. f o l l o w s . : ( I ) The p r o v i s i o n o f u n u s u a l l y l a r g e r e s e r v e s t o c k s . (2) R e g u l a t i o n o f t h e p r i c e . (3) P r o d u c t i o n c o n t r o l . ( 4 ) E x p o r t q u o t a s . The f i r s t p r o v i s i o n ( r e s e r v e s t o c k s ) was t o be a c h i e v e d by t h e f o u r p r o -d u c i n g c o u n t r i e s , namely A r g e n t i n a , A u s t r a l i a , Canada , and t h e U n i t e d S t a t e s : , p l e d g i n g t h a t s t o c k s o f o l d wheat h e l d a t t h e end o f t h e i r r e s -p e c t i v e c r o p y e a r s w o u l d n o t be l e s s t h a n 351 25, 8 0 a n d 150 m i l l i o n b u s h e l s , n o r more t h a n I 3 0 , 80, 273» and 4°0 m i l l i o n b u s h e l s r e s p e c t i v e l y . P r o d u c t i o n was t o be : c o n t r o l l e d by t h e f o u r e x p o r t e r s p l e d g i n g t h e m s e l v e s t o see t h a t wheat p r o d u c t i o n i n t h e i r t e r r i t o r i e s - d i d n o t e x c e e d t h e q u a n t i t y needed f o r d o m e s t i c c o n s u m p t i o n p l u s t h e i r e x p o r t : quotas : , p l u s : t h e i r maximum r e s e r v e s t o c k s . E x p o r t c o n t r o l was t o b e a c h i e v e d by d i v i d i n g t h e l a t e s t e s t i m a t e o f t h e t o t a l vo lume o f i n t e r -n a t i o n a l t r a d e i n wheat and f l o u r , w h a t e v e r i t s s i z e i n t h e f o l l o w i n g p e r c e n t a g e s : A r g e n t i n a 25 p e r c e n t , A u s t r a l i a 19 p e r c e n t , Canada 4° 26 D a v i s : : J . 3 . Op. C i t . p p . 26-79 - 99 -2? per.- c e n t , and U . S . A . l6 p e r c e n t . I n t h e m a t t e r o f p r i c e s a b a s i c maximum and. minimum w o r l d e x p o r t p r i c e ( c . i . f . U . K . p o r t s ) was t o be s e t , t o h o l d f o r one y e a r , and no s a l e s ' were t o be a l l o w e d o u t s i d e t h i s p r i c e r a n g e . The p r o v i s i o n o f a l a r g e wheat c a r r y - o v e r i m p l i e d t h a t government s u b s i d i z a t i o n o r p u r c h a s e w o u l d be n e c e s s a r y i n t h e f o u r e x p o r t i n g c o u n t r i e s . S u c h r e s e r v e s were i n t e n d e d t o f u n c t i o n a s v a l o r i z a t i o n s t o c k s , ' o r p r i c e s t a b i l i z e r s , so t h a t consumers w o u l d be p r o t e c t e d f r o m any sudden p r i c e r i s e s w h i c h m i g h t r e s u l t f r o m wheat s h o r t a g e i n a p a r t i c u l a r c r o p y e a r . The minimum r e s e r v e s t o c k s s p e c i f i e d i n t h e A g r e e m e n t , 28 D a v i s p o i n t s o u t , a r e about 50 P e r c e n t above t h e n o r m a l average : w h i c h w o u l d g r e a t l y add t o t h e c o s t o f c a r r y i n g s t o c k s , and was b e y -ond t h e s t o r a g e f a c i l i t i e s o f A r g e n t i n a and A u s t r a l i a . He f u r t h e r s t a t e s t h a t s u c h an e q u a l i z a t i o n r e s e r v e t o m i n i m i z e p r i c e f l u c t u a -t i o n s w o u l d be b e t t e r h e l d by an i n t e r n a t i o n a l n o n - p o l i t i c a l c o r p o r - . 29' a t i o n . T a b l e 26 shows; t h e wheat r e s e r v e s as s u g g e s t e d i n t h e d r a f t a g r e e m e n t , compared w i t h a c t u a l wheat c a r r y - o v e r s i n t h e f o u r c h i e f e x p o r t i n g c o u n t r i e s f o r d i f f e r e n t p e r i o d s . 27 B l a c k & T s o u , 0n> C i t . , pp 523-525 28'. D a v i s , J . S . 0p_. C i t . pp 49-64 29 See C h a p . I V . o f t h i s t h e s i s - 100 -TABLE 26 WHEAT CARRY-OVERS IN THE FOUR CHIEF EXPORTING COUNTRIES, COMPARED WITH STANDARDS SPECIFIED IN THE DRAFT CONVENTION (in millions of bushels) 1923-27 1935-38 Standard Standard Peak Actual Country Date Average: Average Minimum Minimum 1923-38 1948 U.S.A. July 1 117 131 150 400 378(1933) 633 Canada Aug. I 40 101 80 275 218(1933) 424 Australia Dec. 1 8 8 25 80 35(1934) 118 Argentina Dec. I 18 151 39 130 36(1929) 165 Total lS3 25<T 290 885 667 1340 Davis; raises doubts about the effectiveness of most of the 30 provisions- in this draft agreement. The provision for quotas, he feels, w i l l give r i s e to many d i f f i c u l t i e s , since the distribution of wheat exports in the past has been so variable that a r i g i d quota system w i l l make no allowance for the vagaries of nature and w i l l tend to run counterto the economic principles of drawing most freely from, abundant resources whilst economizing on scarce resources. He raises other doubts which might be equally applicable to any agreement of this nature. The concomitant extension of state control of industry, which such an agreement implies, runs; counter to his l i b e r a l economic p h i l -osophy. He feels that the implicit tolerance of export subsidization policy on the part of member governments i s an additional weakness. The implication moreover, that governments w i l l be able to res t r i c t domestic production, upon which the success of the proposed agreement was supposed to depend, has not, Davis points out* been borne out by the experience of the U.S. government, under the Agricultural Adjust-ment Act. Nor does the draft include any positive inducements to 30 Davis, J.S.: Op. Cit.. pp. 58-59 - 101 -h i g h - c o s t wheat p r o d u c i n g c o u n t r i e s t o make s h i f t s , t h u s e n l a r g i n g t h e m a r k e t s f o r t h e l o w - c o s t p r o d u c e r e x p o r t i n g c o u n t r i e s . I n t h e s p r i n g o f 1947 a f i f t h i n t e r n a t i o n a l wheat c o n f e r -ence was h e l d i n L o n d o n . T h i s c o n v e n t i o n p r o d u c e d a new memorandum on a p r o p o s e d i n t e r n a t i o n a l wheat agreement w h i c h c o n t a i n e d a c t u a l s u g g e s t i o n s f o r p r i c e r a n g e s , b u t was o t h e r w i s e s i m i l a r t o t h e 1942 d r a f t . T h r e e a l t e r n a t i v e s ! were p r e s e n t e d as f o l l o w s : ( a ) 125 - 155 C a n a d i a n c e n t s p e r b u s h e l f o r N o . 1 M a n i t o b a N o r t h e r n Wheat ( b ) 125 - 155 c e n t s p e r b u s h e l f o r t h r e e y e a r s a n d 100 - 155 c e n t s f o r t h e r e s t o f t h e p e r i o d c o v e r e d by t h e a g r e e m e n t . ( c ) 125 - 180 c e n t s p e r b u s h e l , t h e n 100 t o 155 c e n t s p e r b u s h e l f o r t h e r e s t o f t h e p e r i o d , c o v e r e d b y t h e a g r e e m e n t . 3 2 » E a r l y i n t h e p r o c e e d i n g s A r g e n t i n a r e f u s e d t o p a r t i c i p a t e , so t h e r e f o r e a n e n t i r e l y new t y p e o f Agreement was drawn u p c o n s i s t -i n g o f a m u l t i - l a t e r a l p u r c h a s e a n d s a l e s : c o n t r a c t , b u t w i t h o u t any a t t e m p t t o i n c l u d e p r o d u c t i o n c o n t r o l m e a s u r e s . However a t t h i s t i m e t h e U n i t e d K i n g d o m government o b j e c t e d t o t h e p r o p o s e d p r i c e l e v e l s : , c l a i m i n g t h a t t h e y d i d n o t a l l o w f o r t h e e s s e n t i a l d e f l a t i o n a r y a d j u s t -ment w h i c h w o u l d be r e q u i r e d a s c o n d i t i o n s : r e t u r n e d t o n o r m a l . N e g o -t i a t i o n s ; were opened a g a i n t h e f o l l o w i n g y e a r and t h e p a r t i c i p a t i n g g o v e r n m e n t s o f A u s t r a l i a , C a n a d a , a n d t h e U . S . A . s i g n e d l a m u l t i -l a t e r a l c o n t r a c t f o r m w i t h p r o v i s i o n s f o r a u n i f o r m maximum p r i c e o f two d o l l a r s ; p e r b u s h e l a n d a d e c l i n i n g s c a l e o f minimum p r i c e s ; f r o m one d o l l a r f i f t y t o one d o l l a r t e n p e r b u s h e l . The U . S . S e n a t e r e -31 I b i d . , p . 5&» 32 S h e p h e r d , C . S . A g r i c u l t u r a l P r i c e P o l i c y (Iowa S t a t e C o l l e g e P r e s s , Ames:) 1947, p . 89. - 102 -f u s e d t o r a t i f y this-- agreement b e f o r e t h e d e a d l i n e a n d t h e v a r i o u s i n t e r e s t e d n a t i o n s began t o l o s e hope o f any agreement e v e r b e i n g 33 r e a c h e d . The U n i t e d N a t i o n s F o o d a n d A g r i c u l t u r a l O r g a n i z a t i o n was however s t r o n g l y i n f a v o u r o f some f o r m o f m u l t i - l a t e r a l t r a d e a g r e e -ment b e i n g r e a c h e d w h i c h w o u l d i n c l u d e t h e p r o v i s i o n f o r s p e c i a l s a l e s 34 o f s u r p l u s s t o c k s ; t o n u t r i t i o n a l l y d e f i c i e n t c o u n t r i e s a t r e d u c e d , r a t e s . M o r e o v e r t h e I n t e r n a t i o n a l F e d e r a t i o n o f A g r i c u l t u r a l P r o d u c e r s h a d c o n t i n u e d t o c a m p a i g n v e r y a c t i v e l y f o r t h e f o r m a t i o n o f s u c h an a g r e e s m e n t . When P r e s i d e n t Truman o f f i c i a l l y d e c l a r e d t h a t h i s g o v e r n m e n t h a d c o n f i d e n c e i n t h e v a l u e o f a wheat a g r e e m e n t , a t t h e FAO A n n u a l C o n f e r e n c e i n 1948, t h e P r e p a r a t o r y C o m m i t t e e a g a i n became a c t i v e and r e q u e s t e d t h e U n i t e d S t a t e s government t o r e c o n v e n e a c o n f e r e n c e . The 1949 Wheat A g r e e m e n t . A f t e r p r o l o n g e d n e g o t i a t i o n s ' and many d i s a p p o i n t m e n t s , an agreement was. r e a c h e d i n J u l y 1949 w h i c h was s i g n e d by f i v e m a j o r e x p o r t i n g and t h i r t y - s i x i m p o r t i n g c o u n t r i e s . The agreement w h i c h i s e x t a n t , i s ; t o l a a t f o r f o u r y e a r s t e r m i n a t i n g i n 1953» The; o b j e c t i v e s ; o f t h i s agreement as s e t o u t i n t h e f i r s t A r t i c l e o f i t s ; t e x t a r e : " t o a s s u r e s u p p l i e s ; o f wheat t o i m p o r t i n g c o u n t r i e s and m a r k e t s ; o f wheat t o e x p o r t i n g c o u n t r i e s a t e q u i t a b l e and s t a b l e p r i c e s . 0 , 35' L i k e t h e 1942 d r a f t t h e r e , i s ; p r o v i s i o n f o r TnaTr-TTmrni a n d m i n -imum! p r i c e s ^ w i t h i n w h i c h s i g n a t o r y c o u n t r i e s ; g u a r a n t e e t o p u r c h a s e o r 33 " I n t e r n a t i o n a l Wheat A g r e e m e n t s " " I n t e r n a t i o n a l J o u r n a l o f A g r a r i a n  A f f a i r s . " V o l . I N o . 3 , p . 5 . 34 See t h e R e p o r t o f t h e FAO P r e p a r a t o r y C o m m i s s i o n on W o r l d F o o d P r o -35 p o s a l s , W a s h i n g t o n , D . C . , 1947. I n t e r n a t i o n a l Wheat A g r e e m e n t . U . S . D e p t . o f S t a t e . P u b l i c a t i o n 3614, W a s h i n g t o n D . C . , 1950, page 1 - 103 -s e l l t h e q u o t a s a l l o t t e d t o t h e m . A r t i c l e e i g h t o f t h e Agreement s e t s ; o u t t h e f o l l o w i n g maximum and minimum p r i c e s : Crop ' Y e a r Minimum Maximum 1949 - 50 $ 1.50 $ 1.80 B A S I S - C a n a d i a n c u r r e n c y p e r b u s h e l a t p a r i t y f o r 1950 - 51 $ 1.40 $ 1 . 80 t h e C a n a d i a n d o l l a r , f o r M a n i t o b a . N o r t h e r n Wheat 1951 -52 $ 1.30 $ 1.80 i n b u l k s t o r e a t F o r t W i l l i a m o r P o r t A r t h u r . 1952 - 53 $ 1.20 $ 1.80 Where q u o t a s a r e n o t f u l f i l l e d , t h e Wheat C o u n c i l h a s t h e r i g h t t o a l l o c a t e wheat be tween t h e o t h e r e x p o r t i n g c o u n t r i e s . P r o -v i s i o n i s a l s o made f o r q u o t a a d j u s t m e n t s ; i n t h e e v e n t o f t h e w i t h -d r a w a l o f any p a r t i c i p a t i n g c o u n t r y , o r f o r a d j u s t m e n t s b e t w e e n member n a t i o n s ; i f d i c t a t e d by t h e n e c e s s i t y o f p r e s e r v i n g m o n e t a r y r e s e r v e s , s a f e g u a r d i n g t h e b a l a n c e o f p a y m e n t s , o r r e s u l t i n g f r o m a 36 s h o r t c r o p . y The p r i c e p r o v i s i o n u n d e r t h i s : agreement d i f f e r s o n l y f r o m t h e I948 d r a f t i n t h a t t h e maximum p r i c e h a s been r e d u c e d f r o m two d o l l a r s t o one d o l l a r p e r b u s h e l . Y e t t h i s ; a s p e c t o f t h e a g r e e m e n t , w h i c h h a d been t h e r o c k upon w h i c h n e g o t i a t i o n s : h a d f o u n d e r e d a y e a r p r e v i o u s l y , _ d i d n o t p r e s e n t a s e r i o u s o b s t a c l e t o t h e i r s u c c e s s f u l 57 c o n c l u s i o n . One c r i t i c o f t h i s agreement h a s p o i n t e d o u t t h a t t h e v a r i o u s ; wheat i m p o r t i n g c o u n t r i e s were a n x i o u s t o s t a b i l i z e t h e i r o u t -l a y s ; f o r wheat a t t h i s t i m e , s i n c e i t was a p e r i o d o f r i s i n g p r i c e s . The U n i t e d . S t a t e s was a l s o i n t e r e s t e d i n r e d u c i n g b i l a t e r a l i s m i n t h e 3 ~~  : ' : I b i d . , p . 16 - 18 37 G o l a y , F r a n k H . ; I n t e r n a t i o n a l Wheat Agreement o f 1939, Q u a r t e r l y J o u r n a l o f E c o n o m i c s . V o l . L X I V , 1950, p . 443. - 104 -w o r l d wheat t r a d e . W i t h o u t s u c h i n c e n t i v e s , i t i s p r o b a b l e t h a t t h e o t h e r c h i e f e x p o r t i n g c o u n t r i e s w o u l d h a v e h a d l i t t l e d e s i r e t o c o l l -a b o r a t e and no agreement w o u l d h a v e been r e a c h e d . A r t i c l e I I o f t h e Agreement s e t s o u t t h e s c h e d u l e o f g u a r -a n t e e d s a l e s p e r c r o p y e a r f o r t h e s i g n a t o r y e x p o r t i n g c o u n t r i e s . C o u n t r y 1949 Agreement A u s t r a l i a 80,000,000 Canada 203,069,635 F r a n c e 3,306.934 U . S . A . . 168,069,635 U r a g u a y 1 . 8 3 7 . 1 8 ? TOTAL 456 . 283 .389 P r o v i s i o n was; a l s o made f o r a g r a d u a l s h i f t i n t h e e x p o r t q u o t a by r e d u c i n g t h a t a l l o c a t e d t o t h e U . S . A . and i n c r e a s i n g t h a t a l l o c a t e d t o Canada; and A u s t r a l i a . I t w i l l be n o t i c e d t h a t t h e U . S . S . H . and A r g e n t i n a a r e n o t i n c l u d e d i n t h i s l i s t . B o t h n a t i o n s were r e p r e s e n t -e d a t t h e n e g o t i a t i o n s , b u t A r g e n t i n a f r o m t h e o u t s e t was o p p o s e d t o c o l l a b o r a t i o n and t h e R u s s i a n d e l e g a t e a f t e r t a k i n g a most c o n s t r u c t -i v e i n t e r e s t t h r o u g h o u t t h e n e g o t i a t i o n s was u n a b l e t o a g r e e on t h e f i n a l p r o v i s i o n s - s i n c e h i s government demanded an e x c e s s i v e q u o t a (50 per c e n t more t h a n h e r a l l o c a t e d s h a r e ) , and r e m a i n e d i n t r a n s i g e n t d e s p i t e t h e w i l l i n g n e s s o f o t h e r n a t i o n s t o i n c r e a s e h e r s h a r e by a s 38 much a s 20' per- c e n t (10 m i l l i o n b u s h e l s ) . D u r i n g t h e n e g o t i a t i o n s , t h e c h i e f c o n t r o v e r s i a l i s s u e l a y i n t h e d e s i r e o f t h e U . S . g o v e r n m e n t , b a c k e d by C a n a d a , f o r t h e i n c l u s i o n o f some p o s i t i v e p r o v i s i o n t o c h e c k : 38 I n t e r n a t i o n a l Wheat A g r e e m e n t s , ( I n t e r n a t i o n a l . J o u r n a l o f A g r a r i a n A f f a i r s ) Op. C i t . . p . 6 - 105 -h i g h c o s t wheat s u b s i d i z a t i o n p r o g r a m s on t h e p a r t o f i m p o r t i n g n a t i o n s . The s e c o n d i s s u e w a s a r e s u l t o f t h e d e s i r e t o accommodate t h e r e c o m -m e n d a t i o n o f t h e F o o d and A g r i c u l t u r e O r g a n i z a t i o n t o make p r o v i s i o n f o r t h e ' s a l e o f p r o d u c e i n e x c e s s o f c o m m e r c i a l demand a t s p e c i a l p r i c e s f o r n u t r i t i o n a l p r o g r a m s . I n b o t h c a s e s v a r i o u s n a t i o n s w e r e n o t p r e -p a r e d t o c o u n t e n a n c e what t h e y c o n s i d e r e d an encroachment u p o n t h e i r n a t i o n a l au tonomy, t h o u g h t h e y were n o t opposed t o t h e p r i n c i p l e o f 39 i n d e p e n d e n t a c t i o n t o comply w i t h s u c h measures ; . The new wheat agreement h a s met w i t h a v a r i e d r e s p o n s e f r o m d i f f e r e n t a u t h o r i t i e s . The wheat t r a d e as; a w h o l e seems t o be s t r o n g l y opposed t o t h e Agreement b e c a u s e o f t h e e x t e n t o f government r e g u l a -40 t i o n o f t h e m i l l i n g t r a d e w h i c h i s an i n e v i t a b l e c o n c o m i t a n t . T h e r e h a s a l s o been q u i t e d e t a c h e d t h e o r e t i c a l c r i t i c i s m s s u c h a s t h a t p r e -41 42 s e n t e d b y P e d e r s o n , o r G o l a y , whose a r t i c l e s h a v e a l r e a d y been c i t e d . B o t h t h e s e w r i t e r s ; show; t h a t b e c a u s e t h i s I C A r e g u l a t e s t h e p r i c e a n d q u a n t i t y o f o n l y a p r o p o r t i o n o f t h e t o t a l vo lume o f i n t e r -n a t i o n a l wheat t r a d e , t h e agreement w i l l t e n d t o e x a g g e r a t e p r i c e s w i n g s i n t h e f r e e m a r k e t , a n d w i l l o p e r a t e i n e f f e c t , d i r e c t l y c o u n t e r t o i t s ; p r i c e s t a b i l i z i n g o b j e c t i v e s . The w h o l e v o l u m e o f wheat m o v e -ment i n i n t e r n a t i o n a l t r a d e i s ; c u r r e n t l y about 500,000,000 b u s h e l s . The 3 9 I b i d . , pp 7-8 40 See f o r example t h e two a r t i c l e s by D r . C l a r e B u r g e s s , D i r e c t o r o f C a r r ' s F l o u r M i l l s , E n g l a n d , a n d B.G.L . S t r a n g e , D i r e c t o r , S e a f l e S r e i n C o . L t d . o f C a n a d a , i n t h e I n t e r n a t i o n a l J o u r n a l  o f A g r a r i a n A f f a i r s . Op C i t . . p . 51-77. 41 P e d e r s o n , J . : The J u s t i f i c a t i o n o f Commodity Agreements 1 , p.. 40-50 ^ G o l a y , F r a n k : The I n t e r n a t i o n a l 'Wheat A g r e e m e n t , 1949, Op. C i t . P P - 442-463 _ 106 -agreement p r o v i d e d f o r 450»000,000 b u s h e l s f r o m t h e l a r g e s i g n a t o r y -e x p o r t i n g n a t i o n s , b u t i n p r a c t i c e w i t h a w o r l d p r o d u c t i o n o f 6-8,000,000, a much l a r g e r p r o p o r t i o n m o v i n g i n i n t e r n a t i o n a l t r a d e c o u l d be o u t s i d e t h a t q u a n t i t y o f wheat n e g o t i a t e d u n d e r t h e t e r m s o f t h e a g r e e m e n t . I f t h e f r e e m a r k e t p r i c e o f wheat f l u c t u a t e s , b e l o w t h e m i n -imum s e t - u p u n d e r t h e a g r e e m e n t , e x p o r t i n g c o u n t r i e s w i l l b e a t an a d v a n t a g e . I f s u c h an a d v a n t a g e i s p a s s e d on t o t h e g r o w e r * wheat a c r e a g e s w i l l i n c r e a s e , and t h i s ; w i l l d e p r e s s p r i c e s even f u r t h e r . R e g u l a t i o n t h e r e f o r e w i l l have a t e n d e n c y t o r u n d i r e c t l y c o u n t e r t o t h e n a t i o n a l s t a b i l i z i n g f o r c e s w h i c h t e n d t o o p e r a t e i n a f r e e p r i c i n g s y s t e m . R e p o r t s : on t h e c u r r e n t o p e r a t i o n s : o f t h e Wheat Agreement seem t o i n d i c a t e t h a t i t i s t o d a y r e l a t i v e l y i n e f f e c t i v e i n a l t e r - ; i n g o r i n f l u e n c i n g t h e p a t t e r n o f i n t e r n a t i o n a l t r a d e , o r n a t i o n a l 43 p r o d u c t i o n p o l i c i e s ; . The o v e r - r i d i n g c o n s i d e r a t i o n a t t h e p r e s e n t t i m e f o r a l l wheat i m p o r t i n g c o u n t r i e s , , i s t h e i r n e e d t o p r e s e r v e a b a l a n c e o f t r a d e a n d t o p u r c h a s e a s much wheat a s t h e y a r e a b l e f r o m s o f t c u r r e n c y a r e a s s u c h as1 A u s t r a l i a and F r a n c e . T h e r e h a v e c o n s e q u e n t -l y been c o n s i d e r a b l e p u r c h a s e s d u r i n g t h e p a s t two y e a r s , u n d e r b i l a t e r a l n e g o t i a t i o n s and a t p r i c e s , o u t s i d e t h e r a n g e o f t h e a g r e e m e n t . SiiTTimary and C o n e l u s i o n s : The h i s t o r y o f wheat r e g u l a t i o n i s a r e c o r d o f c o m p a r a t i v e f a i l u r e . B u t t h e v e r y many r e p e a t e d a t t e m p t s t o r e a c h an agreement 43 ' ' ~ S e e f o r example t h e R e v i e w o f t h e I n t e r n a t i o n a l . Commodity P r o b l e m s , (1950). by "the I n t e r i m C o o r d i n a t i n g Commit tee f o r I n t e r n a t i o n a l Commodity A r r a n g e m e n t s , U n i t e d N a t i o n s , , New Y o r k , J a n . 1951,p.42-43» - 107 -w o u l d i n d i c a t e t h e e x i s t e n c e ' o f r e a l p r o b l e m s , and t h e c o n t i n u e d b e l i e f t h a t an I C A m i g h t be a b l e t o make some p o s i t i v e c o n t r i b u t i o n t o w a r d s t h e i r s o l u t i o n s . B u t f a i l u r e i n i t s e l f c a n p o i n t o u t some ' v a l u a b l e l e s s o n s w h i c h h a v e n o t been a p p a r e n t i n t h e c o m m o d i t i e s h i t h e r t o s t u d i e d . The i n a b i l i t y t o s e p a r a t e e x p o r t i n g f r o m i m p o r t i n g n a t i o n s , a n d t h e n e c e s s i t y f o r i n c l u d i n g a l a r g e number o f p r o d u c i n g and c o n s u m i n g c o u n t r i e s i n any n e g o t i a t i o n s , h a s r e s u l t e d i n t h e r e b e i n g a c o n t i n -u e d d i v e r g e n c e o f i n t e r e s t s . A s t u d y o f t h e v a r i o u s c o n f e r e n c e s , t h e r e a s o n f o r t h e b r e a k d o w n o f ag reement s i n t h e p a s t , a n d t h e d i f f e r e n t c o n f l i c t i n g i s s u e s , l e a d s : us: t o t h e f o l l o w i n g t e n t a t i v e p o s t u l a t e s . I C A ' s i n t h e p a s t s u c c e e d e d o n l y where one n a t i o n a l o r s e c t i o n a l i n t e r e s t was d o m i n a n t - - w h e t h e r t h i s b e o r g a n i z e d p r o d u c e r s , o r a m o n o p s o n i s t i c b u y e r . The o r i g i n o f s u c h agreements^ i n t h e wheat t r a d e seemed t o h a v e b e e n r a t h e r more p o l i t i c a l t h a n e c o n o m i c , w i t h t h e c o n s e q u e n c e t h a t t h e i r s t a t e d o b j e c t i v e s t e n d t o be t o o c o m p r e -h e n s i v e and n e b u l o u s when c o n s i d e r e d i m t h e l i g h t o f t h e i r a c t u a l p r o -v i s i o n s . I n s t e a d o f t r y i n g t o g u a r a n t e e t o p e o p l e s e v e r y w h e r e a minimum o r r i s i n g s t a n d a r d o f s u b s i s t e n c e , e x a m i n a t i o n shows t h a t p a r t i c i p a t i n g n a t i o n s have been m o t i v a t e d by a d e s i r e t o promote n a t i o n a l s e l f - s u f f -i c i e n c y , t o o b t a i n s u f f i c i e n t f o r e i g n exchange t o m a i n t a i n evan a f a i r ba lance^ o f payments and t o a f f o r d t h e i r f a r m e r s a r e a s o n a b l e i n c o m e i n d e f i a n c e o f e c o n o m i c l a w s o f r e s o u r c e a l l o c a t i o n . The o r i g i n s o f t h e p r e s e n t w h e a t agreement and t h e n e g o t i a t i o n s w h i c h s t a r t e d i n 1941 show us. a l s o t h e e x t e n t t o w h i c h d i f f i c u l t i e s e x p e r i e n c e d d u r i n g t h e e a r l y 1930's h a v e c h a n n e l e d o u r t h i n k i n g w i t h - 108 -respect to i n t e r n a t i o n a l c o l l a b o r a t i o n i n the economic f i e l d . Though there i s ample evidence of the existence of problems before the great depression, the wheat producers* p a r t i c u l a r d i f f i c u l t i e s only became acute during the depression and.it i s t h i s period also which brought f o r t h a v e r i t a b l e crop of ICA's i n other commodities. The architects' of ICA's s t i l l tend to think i n terms of a recurrence of such a con-d i t i o n of stagnancy and resultant i n t e r n a t i o n a l trade wars. The; long run problems of i n t e r n a t i o n a l resource a l l o c a t i o n (comparative advantage) i n the production of wheat, and the short run problems of p r i c e i n s t a b i l i t y a r i s i n g from y i e l d v a r i a b i l i t y , both become clouded behind the issue of a possible recurrence of severe depression and i n t e r n a t i o n a l trade wars. The p a r t i c u l a r wheat problems^ might i n part be solved by w e l l planned i n t e r n a t i o n a l c o l l a b -oration, but become hedged about instead by purely n a t i o n a l i n t e r e s t s , and the i n s e c u r i t y born of such fear r e s u l t s i n the f a i l u r e of these agreements. (v) Sugar A survey of world sugar production and trade reveals a very s i m i l a r pattern to that which has characterized the problems r e l a t i n g to wheat. Sugar, l i k e wheat, i s produced by a large number of nations of wide geographic dispersion. Most of the important sugar importing nations, however, have regulated t h e i r domestic sugar trade i n order to f o s t e r a measure of s e l f - s u f f i c i e n c y from home production. The i n t e r n a t i o n a l trade i n t h i s commodity has: therefore been extensively regulated and c o n s t r i c t e d by diverse government r e s t r i c t i o n s . But the sugar industry reveals: such a wide range of problems that the h i s t o r y - 109 -o f i n t e r n a t i o n a l c o n t r o l seems, t o i l l u s t r a t e t h e d i v e r s i t y o f i n t e r -n a t i o n a l commodity agreements- more t h a n i t r e v e a l s - any p r i n c i p l e s o f g e n e r a l a p p l i c a b i l i t y . . M a r k e t C h a r a c t e r i s t i c s ^ A f t e r w h e a t , s u g a r i s t h e s e c o n d most i m p o r t a n t a g r i c u l t u r a l commodi ty i n i n t e r n a t i o n a l t r a d e . The l a r g e vo lume o f i n t e r n a t i o n a l 44 t r a d e i n s u g a r Cover o n e - t h i r d o f w o r l d ' s : p r o d u c t i o n ) i s a l l t h e m o r e s u r p r i s i n g when i t i s r e a l i z e d t h a t p r a c t i c a l l y no n a t i o n o f i m p o r t a n c e i n f o r e i g n commerce, i s c o m p l e t e l y dependent for i t s s u p p l i e s f r o m o u t -s i d e s o u r c e s . T h i s is? b e c a u s e t h e p r o d u c t i s o b t a i n e d f r o m two d i s t i n c t s o u r c e s . The s u g a r cane p l a n t o f t r o p i c a l r e g i o n s and t h e s u g a r b e e t p l a n t o f t e m p e r a t e zones ' . Though t h e l a t t e r i s a c o m p a r a t i v e l y r e c e n t and more e x p e n s i v e s o u r c e o f s u g a r , i t s p r o d u c t i o n h a s b e e n f o s t e r e d i n t h e c h i e f i m p o r t i n g c o u n t r i e s - i n t e m p e r a t e z o n e s , f o r a number o f r e a s o n s . I n h e r e n t e c o n o m i c f o r c e s i n t h e cane s u g a r i n d u s t r y w h i c h l e a d t o d i f f i -c u l t i e s f o r p r o d u c e r s h a v e been a m p l i f i e d by t h e n o n - e c o n o m i c f o r c e s e x p r e s s e d i n government r e g u l a t i o n o f s u g a r p r o d u c t i o n . The sugar eane p l a n t , w h i c h i s s t i l l t h e m a i n s o u r c e o f r a w s u g a r , i s a g i a n t p e r e n n i e l g r a s s , c l o s e l y r e l a t e d t o t h e bamboos b o t h 45 g e n e t i c a l l y and i n a p p e a r a n c e . O r i g i n a l l y i n d i g e n o u s t o I n d i a , c ane p r o d u c t i o n was c e n t r e d i n B r a z i l up t o t h e b e g i n n i n g o f t h i s c e n t u r y and t h e n C u b a . Sugar cane h a s s u b s e q u e n t l y become an i m p o r t a n t p r o d u c t o n c e more i n I n d i a where p l a n t b r e e d i n g w o r k i n C o i m b a t o r e h a s a c t u a l l y p r o v i d -I n 1948 £j^eorato?aS^p^ * ° ^ m * H i ° n " tons, 1948 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s , R e p o r t o f t h e I n t e r i m C o - o r d i n a t i n g Commit tee f o r I n t e r n a t i o n a l Commodity A r r a n g e m e n t s , U n i t e d N a t i o n s , New Y o r k , p . 4 1 . 45 P l a n t b r e e d e r s h a v e c r o s s e d s u g a r - c a n e w i t h c e r t a i n s p e c i e s o f w i l d bamboo i n o r d e r t o i m p a r t d e s i r a b l e c h a r a c t e r i s t i c s i n new c o m m e r c i a l s t r a i n s . - 110 -ed. t h e s t i m u l ' n s i f o r r e c e n t d e v e l o p m e n t s i n J a p a n e s e and A u s t r a l i a n p r o d u c t i o n . The i m p o r t a n c e o f s u g a r c a n e i n t h e economy o f c e r t a i n t r o p i c a l c o u n t r i e s i s d e m o n s t r a t e d by i t s p e r c e n t a g e c o n t r i b u t i o n t o t h e t o t a l v a l u e o f e x p o r t s be tween 1-933-37. a s g i v e n i n t h e f o l l o w i n g l i s t . B a r b a d o e s , 98 p e r c e n t ; M a u r i t i u s , , 95 p e r c e n t ; M a r t i n i q u e , 81 p e r c e n t ; F i j i I s l a n d s , 73 p e r c e n t ; P u e r t o R i c o , 66 p e r c e n t ; J a p a n ' s 47 S e a I s l a n d s , 64 p e r c e n t ; Cuba 75 p e r c e n t ; and H a w a i i r 59 pe r ' c e n t . M o s t o f t h e s e " s u g a r i s l a n d s " a r e h e a v i l y dependent u p o n i m p o r t s ; f o r most o f t h e i r f o o d s u p p l i e s , , and a r e t h e r e f o r e p a r t i c u l a r l y dependent upon s u g a r p r i c e s . Cane s u g a r i s a d a p t e d t o a p l a n t a t i o n economy s i n c e p r e p a r a -t i o n o f t h e p r o d u c t f o r m a r k e t r e q u i r e s , i n a d d i t i o n t o t h e e x t r a c t i o n o f t h e j u i c e f r o m t h e cane s t a l k s , an i n d u s t r o - c h e m i c & l p r o c e s s o f p u r i f i c a t i o n i n c e n t r a l i z e d m i l l s . I t i s t h e r e f o r e ; c h a r a c t e r i z e d by i n t e n s e : r e g i o n a l s p e c i a l i z a t i o n , l a c k o f a l t e r n a t i v e o p p o r t u n i t i e s 1 f o r employment and. a h i g h p r o p o r t i o n o f f i x e d c o s t s * A s t h e p l a n t i s a p e r e n n i a l , t h e p r a c t i c e o f ttratoonlngn ( a l l o w i n g new cane s t a l k s t o grow f r o m t h e r o o t s a f t e r t h e c r o p h a s been h a r v e s t e d ) ? ! c o u p l e d w i t h t h e i m m o b i l i t y o f l a b o u r , makes; p r o d u c t i o n c o s t s h i g h l y f l e x i b l e i n . n a t u r e , and t h e s u p p l y o f sugar- h i g h l y i n e l a s t i c i n t h e f a c e o f d e c l i n -i n g p r i c e s . I t c o s t s - l i t t l e t o go on p r o d u c i n g f o r two o r e v e n t h r e e y e a r s f r o m an a r e a once p l a n t e d , and when s u g a r p r i c e s d r o p , l a b o u r i s o b l i g e d t o a c c e p t a c o r r e s p o n d i n g f a l l i n w a g e s . B e e t s u g a r comes1 f r o m t h e t a p r o o t o f a b i e n n i a l p l a n t o f 47 S w e r l i n g , B . C . : I n t e r n a t i o n a l C o n t r o l o f S u g a r . 1918-41. S t a n f o r d U n i v e r s i t y P r e s s , C a l i f o r n i a , p-. 7 - I l l -m a r i t i m e o r i g i n s , b e l o n g i n g t o t h e f a m i l y o f C h e n o p o d i a e e a e . C o m m e r c i a l e x t r a c t i o n o f s u g a r b e e t was s t a r t e d by E u r o p e a n n a t i o n s : d u r i n g t h e N a p o l e o n i c W a r s . Thus, i n I850, c ane was s u p p l y i n g o v e r e i g h t y - f i v e p e r c e n t o f t h e w o r l d ' s : s u g a r . G o v e r n m e n t a l b e e t s u b s i d i e s d r o v e t h a t s h a r e down t o 34 P e r c e n t by 1900. S u b s e q u e n t r e v i t a l i z a t i o n o f t h e c a n e i n d u s t r y r e c a p t u r e d 75 p e r c e n t o f t h e w o r l d ' s s u p p l y , b u t t h e d e p r e s s -i o n o f t h e I9.3O's-with i t s ; r e n e w e d e m p h a s i s o n b e e t , d r o v e cane s u g a r 48 c o n t r i b u t i o n down t o 65 p e r c e n t by 1 9 3 9 B e e t p r o d u c t i o n h a s n o t t h e r e f o r e been t h e r e s u l t o f m i l i t a r y s e l f - s u f f i c i e n c y p o l i c i e s a l o n e , b u t a l s o , a s a d e s i r a b l e manner o f r e l i e v i n g u n d e r employment i n t h e a g r i c u l t u r a l i n d u s t r y , i t ha s been t h e r e s u l t o f d e p r e s s i o n p o l i c i e s o f d i r e c t s u b s i d i z a t i o n t o i n d u s t r y . The two most i m p o r t a n t s u g a r e x p o r t e r s : a r e Cuba a n d J a v a ; J a v a n e s e cane p r o d u c t i o n i s i n t e n s i v e w i t h c o m p a r a t i v e l y h i g h c o s t s ; and h i g h y i e l d s . Cuban cane p r o d u c t i o n i s ; by c o m p a r i s o n , e x t e n s i v e w i t h l o w y i e l d s a n d c o s t s . J a v a s u p p l i e s t h e E a s t e r n h e m i s p h e r e and 49 Cuba t h e W e s t . T a b l e 27 shows t h e c h i e f s o u r c e s o f sugar 1 i n t e r m s o f p r o d u c t i o n o n l y . W h i l e t h e J a p a n e s e E m p i r e i s s e l f - s u f f i c i e n t , and s u c h c o u n t r i e s ; a s B r i t a i n , C a n a d a , S w i t z e r l a n d and T u r k e y , a r e n e t i m p o r t e r s , c o u n t r i e s l i k e A u s t r a l i a , . S o u t h A f r i c a , P o l a n d a n d C z e c h o s l o v a k i a , o n l y e x p o r t t h e i r s u r p l u s e s o v e r d o m e s t i c r e q u i r e m e n t s . The w i d e s p r e a d s o u r c e s o f s u p p l y o f s u g a r , mean t h a t i n t h e l o n g r u n , t h e r e i s c o n s i d e r a b l e u p w a r d e l a s t i c i t y o f s u p p l y . 4.8 I b i d . . p . 11 49 Howe, J . W . F . : ( M a r k e t s . ' a n d M e n ) , Op. C i t . . p . 79 - 112 -This s i s . t y p i c a l o f a l l t h e p r i m a r y c o m m o d i t i e s so f a r s t u d i e d , a s a l s o i s t h e d i f f i c u l t y t h a t t h e i r i n d u s t r i e s e x p e r i e n c e i n c o n t r a c t -i n g s u p p l y when t h e demand d e c l i n e s . P o t e n t i a l i t i e s f o r p r o d u c t i o n e x p a n s i o n h a v e been d e m o n s t r a t e d by Cuba and J a v a d u r i n g t h e 1920's . The f o r m e r i n c r e a s e d h e r o u t p u t b y f i f t y p e r c e n t o r one m i l l i o n t o n s , be tween 1923-24 a n d 1927-28. Cuban p r o d u c t i o n i n c r e a s e d m o r e t h a n a m i l l i o n t o n s , o r t w e n t y - f i v e p e r i n t h e s i n g l e c r o p y e a r 1924-25-TABLE 27 OUTPUT OF' LEADING SUGAR-FRODUVING AREAS 1939 - 40 Cane Sugar 1 B e e t S u g a r 1. I n d i a ( b r o w n ) 3*2 2. I n d i a ( r e f i n e d ) 1.4 3 . Cuba . . . 2 . 8 4. J a v a 1.6 5- J a p a n e s e E m p i r e 1.3 6. B r a z i l . . . 1 . 2 7. P h i l i p p i n e s 1.0 8. A u s t r a l i a .0 .9 9. P u e r t o R i c o 0.9 10?. H a w a i i 0.8 11. S o u t h A f r i c a 0.5 12'. A r g e n t i n e 0.5 13. B . W . I , and G u i a n a . . 0 . 5 14. P e r u . . .0 .4 1. U . S . S . B 2.5 2 . Germany 2.3 3 . U n i t e d S t a t e s . . 1.5 4. P r a n c e .1.0 5 . C z e c h o s l o v a k i a .0 .5 6. G r e a t B r i t a i n 0.5 7. I t a l y 0.5 8. P o l a n d . . . 0 . 4 T o t a l . .9.2 T o t a l , 17. Q' S o u r c e : S w e r l i n g , B . C . I n t e r n a t i o n a l C o n t r o l o f S u g a r , 1918-41 ( S t a n f o r d U n i v e r s i t y P r e s s , C a l i f o r n i a ) , page 5» The demand f o r s u g a r h a s been h e a v i l y i n f l u e n c e d by s t a t e p o l i c i e s a n d n a t i o n a l i n t e r v e n t i o n , r a t h e r t h a n by consumer 's ' , c h o i c e . V i r t u a l l y e v e r y m a j o r c o n s u m i n g c o u n t r y i s . ah i m p o r t e r on b a l a n c e , a n d e v e r y one c o n t r o l s i t s i m p o r t s . Whether t h e s e l i m i t a t i o n s a r e i n t h e 50 S w e r l i n g , B .C . . . : Op. C i t . p . l6 - 113 -f o r m o f s i m p l e t a r i f f s o r c o m p l i c a t e d q u o t a a r r a n g e m e n t s , t h e r e t a i l p r i c e s - p a i d by consumers have b o r n e v e r y l i t t l e d i r e c t r e l a t i o n s h i p t o a c t u a l w o r l d s u g a r p r i c e s . I t was e s t i m a t e d t h a t i n 1939• i m p o r t . and c o n s u m p t i o n taxes', p a i d on s u g a r i n E u r o p e a v e r a g e d a r o u n d s e v e n 51 c e n t s ; p e r p o u n d , w h i l s t i n t h e U . S . A . r e t a i l p r i c e s ; a v e r a g e d two 52 c e n t s p e r pound h i g h e r t h a n w o r l d m a r k e t p r i c e s d u r i n g t h e p a s t d e c a d e . T a b l e 28 g i v e s ; a r o u g h c l a s s i f i c a t i o n o f p e r c a p i t a c o n s u m p t i o n l e v e l s ; be tween d i f f e r e n t n a t i o n s ; . C o u n t r i e s l i k e Sweden and t h e U . S . A . consume as; much a s o n e - h u n d r e d pounds; p e r p e r s o n p e r an num w h i c h i n d i c a t -e s t h a t many E u r o p e a n c o u n t r i e s w o u l d p r e s e n t a w i d e m a r k e t f o r i n c r e a s -ed; c o n s u m p t i o n i f p r i c e s ; w e r e a l l o w e d t o s e e k t h e i r w o r l d l e v e l . T A B L E 2S SUGAR CONSUMPTION' L E V E L S C o n s u m p t i o n o f o v e r 85 pounds; p e r c a p i t a , p e r annum C o n s u m p t i o n be tween 80 and 45 pounds per; annum Low C o n s u m p t i o n G r o u p A u s t r a l i a U n i t e d K i n g d o m U . S . A . and Canada S c a n d i n a v i a ; S w i t z e r l a n d Cuba S o u t h A f r i c a C e n t r a l E u r o p e B r a z i l A r g e n t i n a P e r u I n d i a C h i n a (3 pounds p e r c a p i t a ) S o u t h and E a s t • E u r o p e B a l k a n s U . S . S . R . S o u r c e : S u g a r S t a t i s t i c a l 3ulletin (Lamborn & C o . , New Y o r k ) . The U . K . and U . S . A . m a r k e t s a b s o r b between t h e m , s i x t y per-c e n t o f t h e w o r l d ' s s u g a r e x p o r t s . S t a t i s t i c a l i n v e s t i g a t i o n shows B l a c k , J . D . & T s o u , S . : ( I n t e r n a t i o n a l Commodity A g r e e m e n t ? ) Op. C i t . , p;. 529. S h e p h e r d , G.5.: ( A g r i c u l t u r a l P r i c e P o l i c y ) O p . C i t . . p . 83 - 114 -53 a l o w p r i c e e l a s t i c i t y o f demand f o r s u g a r i n t h e U . S . a n d E n g l a n d . The s h o r t p e r i o d demand f o r s u g a r i s t h e r e f o r e q u i t e i n e l a s t i c on a w o r l d l e v e l . I n t h e l o n g r u n t h e r e h a s been an u p w a r d s e c u l a r t r e n d i n s u g a r c o n s u m p t i o n l e v e l s , - w h i c h was a r r e s t e d o n l y by t h e d e p r e s s i o n d u r i n g t h e i n t e r - w a r y e a r s ; . L i k e ; t e a , t h e r e a r e s i g n s t h a t t h e v a s t p o t e n t i a l m a r k e t i n t h e O r i e n t i s , s l o w l y becoming a c c e s s i b l e . L i k e w h e a t , t h e r e a r e u n l i m i t e d p o t e n t i a l i t i e s f o r i n d u s t r i a l c o n s u m p t i o n o f s u g a r i f t h e p r i c e were l o w e n o u g h , a s a s o u r c e of : i n d u s t r i a l a l c o h o l , and i n t h e m a n u f a c t u r e o f y e a s t , g l y c e r i n e and v a r n i s h e s . The s u g a r t r a d e has. e x p e r i e n c e d w i d e f l u c t u a t i o n s i n p r i c e s , and p r i c e i n s t a b i l i t y h a s u n d o u b t e d l y b e e n a f a c t o r i n s t i m u l a t i n g -government i n t e r v e n t i o n , w h i c h h a s o f t e n r e s u l t e d i n h i g h - c o s t u n -economic s u r p l u s ; p r o d u c t i v e c a p a c i t y . The e x t e n t o f t h e s e p r i c e move-ments ; i s i l l u s t r a t e d by t h e p l u n g e i n s u g a r p r i c e s ; i n May 1920 i n New Y o r k , f r o m 22.5 c e n t s t o 3«6 c e n t s p e r pound by December o f t h e same y e a r . The s e v e r e d r o u t h o f 1922-23' i n C u b a l i k e w i s e c o n t r i b u t e d t o a 54 t h r e e - f o l d i n c r e a s e i n s u g a r p r i c e s . W h i l e t h e w o r l d s u g a r p r i c e ; c o u l d n e v e r be u n r e a s o n a b l y h i g h b e c a u s e o f t h e e x p a n s i b i l i t y o f s u g a r p r o d u c t i o n and t h e dependence o f t h e s p e c i a l i z e d cane p r o d u c i n g a r e a s on a l a r g e v o l u m e t o r e d u c e u n i t c o s t s , s u b - n o r m a l l y l o w l e v e l s h a v e been p o s s i b l e , 53 S c h u l t z , H e n r y : The T h e o r y and Measurement o f Demand ( C h i c a g o 193$) C h a p . V I and A l l e n , Roy C D . : and B o w l e y , A r t h u r L . : F a m i l y E x p e n d i t u r e , a S t u d y  o f i t s ; V a r i a t i o n ( L o n d o n , 1935), T a b l e B . pp.34-35 54 S w e r l i n g , B . C . , Op;. C i t . . p . 29 ' - 115 -Low p r i c e s : have i n f a c t commonly o c c u r r e d , because o f t h e h i g h r a t e o f t e c h n o l i g i c a l i n n o v a t i o n i n t h e i n d u s t r y , t h e m u l t i t u d e o f p r o d u c i n g c o u n t r i e s , and t h e c o m p l e t e ab sence o f a l t e r n a t i v e o u t l e t s : f o r l a b o u r r e s o u r c e s , A H i s t o r y o f I n t e r n a t i o n a l S u g a r .Agreements. ; I C A ' s i n t h e s u g a r t r a d e c a n o n l y be e v a l u a t e d i n t h e l i g h t o f a. b r i e f h i s t o r y o f t h e d e v e l o p i n g p a t t e r n o f w o r l d s u g a r p r o d u c t i o n , and t h e r e l e v a n t n a t i o n a l p o l i c i e s , o f i m p o r t a n t n a t i o n s . The h i s t o r y o f s u g a r l e a d s one t o a s k t h e q u e s t i o n w h e t h e r economic n a t i o n a l i s m c o u l d n o t be r e g a r d e d a s t h e f o r e m o s t and o n l y r e a l p r o b l e m i n t h e i n d u s t r y . The f o r e g o i n g d i s c u s s i o n o f t h e c o m m o d i t i e s m a r k e t c h a r a c t e r i s t i c s must t h e r e f o r e be- k e p t i n m i n d . Government s show a l o n g h i s t o r y o f s p e c i a l i n t e r e s t i n s u g a r . P r e f e r e n t i a l t a r i f f s i n Europe were i m p o s e d as e a r l y a s 1650, t o p r o -mote i m p e r i a l r e f i n e r i e s . C o l o n i a l t a r i f f p r e f e r e n c e s were a l s o i n t r o -55 d u c e d e a r l y i n t h e n i n e t e e n t h c e n t u r y . The two w o r l d wars , h a d a d e v a s t a t i n g e f f e c t oh i n t e r n a t i o n a l s u g a r t r a d e , and m i g h t a c t u a l l y he f o c u s e d u p o n a s t h e r o o t o f a l l t h e d i f f i c u l t i e s w h i c h h a v e been e x p e r i e n c e d d u r i n g t h e p a s t f o r t y y e a r s . The c o n t i n u e d e x p a n s i o n o f p r o t e c t e d and s h e l t e r e d m a r k e t s , and t h e growth- o f i m p e r i a l i z a t i o n , h a v e r e s u l t e d i n a p r o g r e s s i v e s h r i n k a g e o f t h e f r e e m a r k e t , u p o n w h i c h t h e l o w e s t c o s t p r i m a r y e x p o r t i n g n a t i o n s , h a v e d e p e n d e d . • - S u p p l i e s c u t o f f d u r i n g t h e two w a r s h a v e r e s u l t e d i n an a r t i f i c i a l s t i m u l a t i o n o f p r o d u c t i o n f r o m o t h e r s o u r c e s . The 55 ' ' " I b i d , p . 1 56 T a y l o r , H e n r y C : W o r l d T r a d e i n A g r i c u l t u r a l P r o d u c t s 1 Pp.. C i t . p . |3 - 116 -i n h e r e n t downward? i n e l a s t i c i t y o f s u p p l y f o r s u g a r has. s u b s e q u e n t l y been r e i n f o r c e d by n a t i o n a l i s t i c s u g a r p o l i c i e s . P r o d u c e r s h a v e been s h i e l d e d f r o m t h e f u l l i m p o r t o f l o w s u g a r p r i c e s : by t a r i f f s , and s u b -s i d i e s . , D u r i n g t h e i n t e r - w a r y e a r s , f r e e m u l t i l a t e r a l t r a d e i n s u g a r was: r e p l a c e d by i m p e r i a l t r a d e ( s u g a r e n j o y i n g a p r e f e r e n c e ) . t o t h e 57 e x t e n t o f two t h i r d s o f w o r l d e x p o r t s . I n p a r t i c u l a r one may c i t e t h e way i n w h i c h Cuba l o s t h e r s h a r e o f t h e U . S . m a r k e t d u r i n g t h e i n t e r war y e a r s , o w i n g t o t h e l a t t e r ' s i m p e r i a l p r e f e r e n c e p o l i c y and t h e way i n w h i c h J a v a i n t h e same p e r i o d s i m i l a r l y l o s t h e r c h i e f m a r k e t due t o I n d i a ' s p o l i c y o f n a t i o n a l s e l f - s u f f i c i e n c y . The f o l l o w i n g c o u n t -r i e s . s u c c e e d e d i n r e p l a c i n g f o r e i g n s u g a r a l m o s t w h o l l y b y s t i m u l a t i o n o f d o m e s t i c p r o d u c t i o n , d u r i n g t h e d e p r e s s i o n y e a r s ; C h i n a , T u r k e y , 58 E g y p t , E i r e , A u s t r i a , Sweden , E s t o n i a , L a t v i a and L i t h u a n i a . The two c h i e f i m p o r t i n g n a t i o n s , B r i t a i n and t h e U . S . A . , b o t h s t i m u l a t e d b e e t s u g a r p r o d u c t i o n a f t e r t h e 1914-18 w a r . B r i t a i n a l s o i n t r o d u c e d i m p e r i a l p r e f e r e n c e : i n 1919 and t h e U . S . A . s t i m u l a t e d cane p r o d u c t i o n i n h e r i s l a n d d e p e n d e n c i e s ; , ( H a w a i i , P u e r t o R i c o a n d t h e P h i l i p p i n e s ; ) by t h e t a r i f f i n c r e a s e s o f 1921 a n d 1922. The B r i t i s h p r e f e r e n c e s y s t e m l i n k e d more c o n s u m i n g t h a n p r o d u c i n g c o u n t r i e s , w h i l e t h e U . S . A . i m p e r i a l p r e f e r e n c e n e t w o r k l i n k e d more s u g a r p r o d u c i n g t h a n 59 c o n s u m i n g c o u n t r i e s . Thus i t i s n o t s u r p r i s i n g t h a t by 1940 t h e ' o n l y m a r k e t s i n w h i c h t r u l y f r e e c o m p e t i t i o n p e r s i s t e d were I r a n , S w i t z e r l a n d , New 57 I b i d . , p . 100 58 I b i d . . p . 95 59 S w e r l i n g , B . C . : Op. C i t . . p . 2 - 117 -Z e a l a n d , B r i t i s h M a l a y a and C h i l e . The e a r l y h i s t o r y o f i n t e r n a t i o n a l c o n t r o l s t a r t s l o g i c a l l y w i t h t h e s t r u g g l e f o r s u r v i v a l o f t h o s e l a r g e e x p o r t i n g n a t i o n s o u t s i d e t h e p r o t e c t i v e ' s h e l t e r o f t a r i f f s o r i m p e r i a l p r e f e r e n c e . These f r e e - m a r k e t e x p o r t i n g n a t i o n s ' h a v e b e e n t h e l o w e s t c o s t p r o d u c e r s o f s u g a r , and t h e i r s u r v i v a l , a t f i r s t s a f e g u a r d e d b y n a t u r a l p r o d u c t i v e a d v a n t a g e s , h a s s u b s e q u e n t l y b e e n t h e m a i n o b j e c t i v e o f i n t e r n a t i o n a l c o l l a b o r a t i o n . Our a t t e n t i o n must f i r s t be f o c u s e d upon C u b a s i n c e h e r n a t i o n a l e f f o r t s t o c o n t r o l sugar p r o d u c t i o n were t h e c o n s e q u e n c e o f a< w o r l d w i d e p r o b l e m Cc. f . t h e h i s t o r y o f B r a z i l i a n c o f f e e c o n t r o l ) . A f t e r h e r r e v o l t a g a i n s t S p a i n i n I896-98, t h e s u g a r i n d u s t r y was; b u i l t up; i n Cuba u n d e r t h e s t i m u l u s o f a r e c i p r o c i t y t r e a t y w i t h t h e '6b U . S . A . The f i r s t w o r l d war and t h e i m m e d i a t e p o s t war s u g a r f a m i n e i n E u r o p e a c c e l e r a t e d a t e r r i f i c e x p a n s i o n o f p r o d u c t i o n i n C u b a . E x c e s s c a p a c i t y became e v i d e n t by about 1924, and two y e a r s l a t e r ' t h e Cuban Government i n t r o d u c e d i t s f i r s t c r o p r e s t r i c t i o n s cheme . The g o v e r n -ment was o b l i g e d t o t a k e a c t i o n s i n c e e i g h t y p e r c e n t o f h e r e x p o r t t r a d e was s u g a r , a n d Cuba was a t t h a t t i m e s u p p l y i n g about one f i f t h o f t h e w o r l d ' s t o t a l p r o d u c t i o n , and t h e r e f o r e ; a p p e a r e d t o be; i n a . p o s i t i o n t o t a k e c o r r e c t i v e a c t i o n . The " V e r d e j a ; C r o p R e s t r i c t i o n B i l l ' ' , p a s s e d i n 1928, a c c o r d i n g l y d e c r e e d t h a t t e n p e r c e n t o f t h e 61 c u r r e n t c r o p was t o be l e f t u n c u t . W o r l d p r i c e s were i n i t i a l l y r a i s e d , b u t expanded p r o d u c t i o n i n J a v a a n d t h e U n i t e d S t a t e s s u g a r 60 ~ : ' ~ — " Howe, J . W . F . : " S u g a r " , The R o y a l E c o n o m i c S o c i e t y . S t u d i e s i n t h e A r t i f i c i a l C o n t r o l o f Raw M a t e r i a l S u p p l i e s , Memorandum K b . 23, O c t o b e r 1930, p . k 6 1 S w e r l i n g , B . C . : Op. C i t . . p . 35 - 118 -b e e t i n d u s t r y made Cuban r e s t r i c t i o n i n e f f e c t u a l a n d r e s t r i c t i o n was a c c o r d i n g l y abandoned f o r t h e 1927-28 c r o p . A bumper c r o p t h e f o l l o w -i n g y e a r c a u s e d s u c h a c u t e d i s t r e s s amongst p r o d u c e r s , h o w e v e r , t h a t t h e government s e t up a s i n g l e s e l l i n g agency t o m a r k e t t h e c r o p . T h i s was; d i s s o l v e d i n 1930* The I n t e r n a t i o n a l S u g a r Agreement o f I931.-3S : D u r i n g t h e y e a r s ' t h a t Cuba t o o k u n i l a t e r a l a c t i o n t o r e s t r i c t s u g a r p r o d u c t i o n she made s e v e r a l e f f o r t s t o r e a c h an i n t e r n a t i o n a l agreement f o r c o n t r o l l i n g t h e i n d u s t r y . A m e e t i n g b e t w e e n Cuban d e l e -g a t e s and r e p r e s e n t a t i v e s o f t h e P o l i s h , C z e c h and German s u g a r i n d u s -62 t r i e s was h e l d i n P a r i s i n 1927. Two more c o n f e r e n c e s were h e l d i n Warsaw and B e r l i n t h e f o l l o w i n g y e a r . However no agreement was r e a c h e d s i n c e i t was; f e l t t h a t Cuba was r e s p o n s i b l e f o r t h e s u r p l u s , and J a v a t h e o t h e r i m p o r t a n t l o w c o s t p r o d u c e r , , r e f u s e d t o c o u n t e n a n c e any r e s t r i c t i o n - s c h e m e s i n c e h e r d e v e l o p m e n t o f an I m p r o v e d v a r i e t y o f cane (POJ.2878) was m a k i n g e x p a n s i o n q u i t e p r o f i t a b l e . B y t h e end o f I929» E u r o p e a n beet p r o d u c t i o n was up t o p r e - w a r l e v e l s and J a p a n e s e and B r i t i s h t a r i f f p o l i c i e s ; were so r e s t r i c t i n g t h e m a r k e t f o r e x p o r t i n g n a t i o n s ; , t h a t e v e r y i m p o r t a n t p r o d u c i n g n a t i o n was amenable t o some f o r m o f i n t e r n a t i o n a l a g r e e m e n t . The c o n c e r n o f A m e r i c a n c a p i t a l i n t e r e s t s i n t h e Cuban i n -d u s t r y l e d t o a n a l i g n m e n t b e t w e e i U n i t e d S t a t e s ' i n s u l a r p r o d u c e r s and C u b a . I n 1930 u n d e r t h e c h a i r m a n s h i p o f Thomas L . C h a d b o u r n e , a 62 I b i d . , p . 4 ° -- 119 -c o m m i t t e e p r o d u c e d a p l a n f o r d i v i d i n g t h e U . S . m a r k e t be tween t h e s e p r o d u c e r s and f o r t h e v o l u n t a r y l i m i t a t i o n o f e x p o r t s i n . 1931* These p r o p o s a l s were i n t h e n a t u r e o f a g e n t l e m e n ' s agreement and were n o t embodied i n any w r i t t e n document , f o r f e a r o f a n t i - t r u s t p r o c e e d -i n g s , on t h e p a r t o f t h e U n i t e d S t a t e s ' G o v e r n m e n t . However t h e Chadbourne Agreement as i t came t o be known, d i d g o v e r n Cuban a c t i o n i n t h e f o l l o w -i n g y e a r and a l s o f o r m e d t h e b a s i s , f a r t h e 1931 I n t e r n a t i o n a l A g r e e m e n t . T h i s agreement was t h e r e s u l t o f n e g o t i a t i o n s begun i n 1930 between J ava , and C u b a , i n A m s t e r d a m . I t was i n e f f e c t an e x t e n s i o n o f t h e C h a d b o u r n e . p l a n , b e i n g an agreement b e t w e e n t h e o r g a n i z e d s u g a r i n d u s t r i e s ; o f t h e p a r t i c i p a t i n g c o u n t r i e s , l e g i s l a t i v e s u p p o r t o f - . -government s : ( c . f . The I n t e r n a t i o n a l T e a R e g u l a t i o n A g r e e m e n t ) . T a b l e 29 shows t h e e x p o r t quotas ; a s a l l o c a t e d u n d e r t h e A g r e e m e n t . TABLE 29 1st Y e a r 2nd Y e a r 3rd Y e a r 4th Y e a r 5th Y e a r Cuba 655 805 855 855 855 J a v a 2,300 2,400 2,500 2,600 2,700 Germany 500 350'' 300 300 300 P o l a n d 308,812 Hungary 84,100 B e l g i u m 30,275 C z e c h o s i o v a k i a 1 570,817 S o u r c e : S w e r l i n g , B . C . , I n t e r n a t i o n a l C o n t r o l o f S u g a r , 1918-41 ( S t a n f o r d U n i v e r s i t y , C a l i f o r n i a ) , page 44« The c o m b i n e d q u o t a o f t h e n i n e u l t i m a t e a d h e r e n t s t o t h e agreement was o n l y 100,000; t o n s b e l o w t h e i r I929-3O s a l e s , w h i c h h a d been p a r t i c u l a r l y 63 I b i d . . pp.. 41-45 - 120 -heavy. Java's: quota was over-generous and Cuba's somewhat r e s t r i c t -ed, so that' i n 1933 • the l a t t e r was allowed an upward r e v i s i o n of her . 65 quota, whilst Java's quota was; reduced to 1,500,000 tons. Because of large e x i s t i n g accumulated stocks between s i g -natory countries, the agreement designated c e r t a i n quantities of stocks* as; surplus, the release of which were to be charged against export quotas. There were no pr i c e provisions i n the agreement. The 1931 Agreement may be described as e f f e c t i v e i n having reduced accumulated stocks of sugar from 12.4 m i l l i o n tons: i n 1931 to l e s s than 9 m i l l i o n tons i n 1935* Moreover the aggregate production of these countries declined by 6,400,000 tons during t h i s period. However' world output declined by only 1,700,000 tons and domestic out-66 put i n the. U.S.A. increased by 4»°00,000 tons during the samepperiod. The agreement f a i l e d to solve the problem of excess capacity, o± to improve price; levels- m a t e r i a l l y during the f i v e years of i t s oper-ation, because i t was apparent that the problems of the industry could not be solved by exporting countries; alone> and that the n a t i o n a l i s t i c p o l i c i e s of the main consuming countries; s t i l l dominated the industry. The 1931 Sugar Agreement i s therefore an i n t e r e s t i n g contrast alongside the Stevenson rubber agreement. Whilst c r i t i c s of the l a t t e r point out how producer- interests: had succeeded i n sustaining i n e f f i c i e n t product-ion through monopolistic action, the sugar agreement f a i l e d even to maintain the output of low-cost producers i n the face of the growing; 6-4 I b i d , p. 45 65 I b i d , p. 49 66 Black and Tsou: International Commodity Agreements) Op. C i t . P. 529 - 121 -s t r e n g t h o f economic n a t i o n a l i s m i n t h e m a i n c o n s u m i n g c o u n t r i e s . The 1937 I n t e r n a t i o n a l S u g a r Agreement The w o r l d s u g a r i n d u s t r y was i n a s t a t e o f p r o g r e s s i v e d e t e r i o r a t i o n d u r i n g t h e l a t e : 1 9 3 ° ' s s o t h a t an i n c r e a s i n g number o f s u g a r p r o d u c i n g and c o n s u m i n g n a t i o n s became i n t e r e s t e d i n a r r i v -i n g a t some f o r m o f i n t e r n a t i o n a l a g r e e m e n t . By 1937 i t was e s t i m a t -e d t h a t n a t i o n a l s u b s i d i e s : t o t h e e x t e n t o f one b i l l i o n d o l l a r s were b e i n g h a n d e d o u t a n n u a l l y t o e n c o u r a g e s u g a r p r o d u c t i o n . The W o r l d M o n e t a r y and E c o n o m i c C o n f e r e n c e h e l d i n 1933 r e c o g n i z e d t h e u n s a t i s -f a c t o r y s t a t e o f t h e i n d u s t r y and t h e i n a b i l i t y o f t h e Chadbourne-g r o u p o f c o u n t r i e s t o meet t h e d i f f i c u l t i e s a d e q u a t e l y . Though l a i s s e a - f a i r e was t h e " l e i t m o t i f . 0 o f t h e 1933 C o n f e r e n c e , t h e y a d v o c a t -e d some f o r m o f j o i n t g o v e r n m e n t a l a c t i o n f o r c e r t a i n p r i m a r y i n d u s t -r i e s : and a s p e c i a l c o m m i t t e e c o n s i d e r e d Cuban and B r i t i s h d r a f t p r o -67 p o s a l s f o r s t a b i l i z i n g w o r l d s u g a r p r o d u c t i o n . Cuba w i s h e d f o r p r o v i s i o n s t h a t w o u l d m a i n t a i n t h e s t a t u s : quo i n t h e i n d u s t r y . B r i t a i n , i n t h e f a c e o f t h e t h e n e x i s t i n g s u r p l u s c a p a c i t y ( p r o d u c t i o n was t e n m i l l i o n t o n s i n e x c e s s o f c o n s u m p t i o n ) , recommended a p l a n b a s e d on an a m p l i f i c a t i o n o f t h e Chadbourne A g r e e m e n t , w h i c h was. r e j e c t e d because ; Cuba f e l t she was; d i s a d v a n t a g e d u n d e r s u c h terms; . The C o n f e r e n c e c o n v e n e d i n L o n d o n i n 1937 w a s , h o w e v e r , t h e d i r e c t r e s u l t o f t h e r e c o m m e n d a t i o n o f t h e W o r l d M o n e t a r y and. E c o n o m i c F o n f e r e n c e , and r e s u l t e d i n - t h e I n t e r n a t i o n a l Sugar A g r e e m e n t , w h i c h h a s been e x t e n d e d by p r o t o c o l u n t i l t h e p r e s e n t d a y . ^ The o r i g i n a l members 67 : ~ ~ ~ S w e r l i n g , B . C . : Op. C i t . p . 52-53 68 1950' R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s , I n t e r i m C o - o r d i n a t i n g C o m m i t t e e f o r I n t e r n a t i o n a l Commodity A r r a n g e -m e n t s , ( U n i t e d N a t i o n s , New Y o r k , J a n . 1951), A p p e n d i x C , p . 53 - 122 -o f t h e 1937 Agreement were A u s t r a l i a , B e l g i u m , B r a z i l , C u b a , C z e c h o -s l o v a k i a , D o m i n i c a n R e p u b l i c , F r a n c e , H a i t i , N e t h e r l a n d s , P e r u , P h i l i p p i n e s , P o l a n d , P o r t u g a l , U n i o n . o f S o u t h A f r i c a , U . K . a n d U . S . A . , and Y u g o s l a v i a ' . S i n c e i t s i n c e p t i o n , C h i n a , Germany, H u n g a r y , I n d i a 6 9 and R u s s i a ; h a v e d r o p p e d o u t . U n l i k e t h e 1931 Agreement t h i s was a government s p o n s o r e d a r r a n g e m e n t w i t h an o f f i c i a l l y a p p o i n t e d a d m i n -i s t r a t i v e S u g a r C o u n c i l w h i c h was r e p r e s e n t a t i v e o f i m p o r t e r and e x p o r t e r i n t e r e s t s . The p r o v i s i o n s o f t h e agreement a r e b o t h c o m p r e -h e n s i v e and a m b i t i o u s . They i n c l u d e a s e r i e s o f e x p o r t q u o t a s , l i m i t s on s t o c k h o l d i n g s : w i t h i n t h e c h i e f e x p o r t i n g c o u n t r i e s , and a n u n d e r t a k i n g by t h e i m p o r t i n g c o u n t r i e s n o t t o u s e any a r t i f i c i a l c o n t r o l m e a s u r e s t o expand p r o d u c t i o n and t o a l l o w e x p o r t i n g n a t i o n s t o s u p p l y w h a t e v e r 70; demands^ m i g h t d e v e l o p . E x p o r t quotas , a r e a l l o c a t e d on t h e b a s i s o f a s t r i c t d e l i m i t a t i o n o f t h e " f r e e " w o r l d m a r k e t . I n 1937 "the r e q u i r e -71 m e n t s o f t h i s f r e e m a r k e t a g g r e g a t e d 3*^70,000 t o n s . The a c t u a l , a l l o c a t i o n o f quota s : i n t h e 1937 Agreement was1 t o be r e a c h e d by a l o n g p r o c e s s o f b a r g a i n i n g , and w o u l d be s u b j e c t t o r e v i s i o n a n n u a l l y . T h i s p r o v i s i o n was an improvement on t h a t o f t h e Chadbourne Agreement w h i c h made no a l l o w a n c e f o r a downward a d j u s t m e n t o f q u o t a s . The I n t e r n a t i o n a l 69 I n t e r n a t i o n a l O r g a n i z a t i o n w h i c h t h e U . S . p a r t i c i p a t e s i n , 1949 U . S . Depar tment o f S t a t e P u b l i c a t i o n , 3655 ( F e b . 1950). 70 The f u l l t e x t o f t h e I n t e r n a t i o n a l S u g a r Agreement o f 1937 i s g i v e n i n t h e I n t e r n a t i o n a l L a b o u r O r g a n i z a t i o n ' s P u b l i c a t i o n , I n t e r - g o v e r n m e n t a l Commodity C o n t r o l A g r e e m e n t s , M o n t r e a l , 1943* 71 S w e r l i n g , B . C . : Op. C i t . p . 57 - 123 -S u g a r C o u n c i l r e g u l a t i n g t h e agreement was empowered t o r e d u c e a l l q u o t a s by f i v e p e r c e n t i n t h e f i r s t two y e a r s , i f n e c e s s a r y . T h e r e was: n e v e r any s p e c i f i c p r o v i s i o n f o r m a i n t a i n i n g a p a r t i c u l a r p r i c e l e v e l . I n o p e r a t i o n t h e Agreement h a s p r o b a b l y n e v e r been v e r y s i g -n i f i c a n t . F a i l u r e t o r a t i f y was a s t u m b l i n g b l o c k i n 1937 w h i l e i n t h e f o l l o w i n g y e a r t h e t h r e a t o f war was a l r e a d y a c t i n g as a p r i c e s t i m u l a n t as- w e l l as s t r e n g t h e n i n g n a t i o n a l i s t i c p r o d u c t i o n s p o l i c i e s . D u r i n g t h e s e c o n d w o r l d w a r , Cuba b e n e f i t e d e n o r m o u s l y f r o m t h e f a c t t h a t J a v a n e s e p r o d u c t i o n was c u t o f f by t h e J a p a n e s e and she h a s a g a i n r e -72 c a p t u r e d a s u b s t a n t i a l p r o p o r t i o n o f t h e W o r l d ' s s u g a r t r a d e , The d e v a s t a t i o n o f C e n t r a l E u r o p e a n b e e t p r o d u c t i o n s t i m u l a t e d p o s t war s u g a r p r o d u c t i o n i n t h e cane p r o d u c i n g a r e a s , so t h a t t h e I n t e r n a t i o n a l Sugar C o u n c i l e s t i m a t e d t h a t by 195° t h e r e w o u l d be an e x c e s s i n s u g a r s u p p l i e s a v a i l a b l e f o r t h e " f r e e " m a r k e t o f o v e r one m i l l i o n m e t r i c t o n s 73 by December 1950* However t h e o u t b r e a k o f h o s t i l i t i e s i n K o r e a h a s r a p i d l y a l t e r e d t h e s i t u a t i o n , and e x p o r t q u o t a s h a v e e v e n h a d t o be r a i s e d i n t h e f a c e o f r i s i n g p r i c e s . I n t h e o p i n i o n o f most c r i t i c s , i n t e r n a t i o n a l c o n t r o l o f t h e s u g a r i n d u s t r y h a s b e e n f r e e o f t h e many f a u l t s o f many o f t h e o t h e r commodi ty a g r e e m e n t s . I t ha s a p p e a r e d t o c o n s i d e r f a i r l y , b o t h consumer and p r o d u c e r i n t e r e s t s , and f a r f r o m r e d u c i n g t h e vo lume o f i n t e r n a t i o n a l t r a d e , t h e s e agreements h a v e sought t o p r e v e n t J a v a a n d C u b a , b o t h l o w c o s t p r o d u c e r s , f r o m b e i n g p r o g r e s s i v e l y s q u e e z e d o u t I948 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s , Op. C i t . . p . 41» shows how Cuban p r o d u c t i o n expanded f r o m 3«5 m i l l i o n t o n s i n ' 1940-41 t o 5.7 m i l l i o n tons , i n 1947-48 1950 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s , Op. C i t . . p . 34 - 124 -o f t h e s u g a r m a r k e t s . The h i s t o r y o f r e g u l a t i o n i n t h e i n t e r n a t i o n a l f i e l d h a s however t e n d e d t o p o i n t up t h e i n e f f e c t i v e n e s s o f s u c h c o l l a b -o r a t i o n i n t h e f a c e o f n a t i o n a l p o l i c i e s . Summary and C o n c l u s i o n s : The s u g a r i n d u s t r y i s b e s e t b y p r o b l e m s o f e x t r e m e p r i c e i n -s t a b i l i t y and a downwards e l a s t i c i t y o f s u p p l y . S u f f e r i n g amongst p r o -d u c e r s i s p a r t i c u l a r l y a c u t e i n s u c h a n i n d u s t r y w h e r e many- p r o d u c i n g t e r r i t o r i e s a r e h i g h l y s p e c i a l i z e d , h a v e no o t h e r d e v e l o p e d i n d u s t r i e s , and depend upon d i s t a n t m a r k e t s f o r a l m o s t t h e i r e n t i r e p r o d u c t i o n . These i n h e r e n t p r o b l e m s h a v e b e e n o b s c u r e d by p r o b l e m s common t o t h e w h o l e w o r l d i n t h e t w e n t i e t h c e n t u r y , n a m e l y , t h e d i s t u r b i n g dynamic e f f e c t s o f t e c h n o l o g i c a l a d v a n c e and t h e more s e r i o u s i m p a c t s o f two w a r s and a s e v e r e d e p r e s s i o n . Out o f t h e l a t t e r h a p p e n i n g s h a v e g rown f e a r s o f n a t i o n a l i n s e c u r i t y and f e a r s o f u n e m p l o y m e n t , f o r e i g n exchange d i f f i c u l t i e s , and t h e a r t i f i c i a l c r e a t i o n o r sudden l o s s o f m a r k e t s . The r e s u l t h a s been a w i s h f o r n a t i o n a l i n s u l a t i o n f r o m s u c h e x t e r n a l d i s r u p t i o n s , , a n d a d r i v e t o a c h i e v e t h e maximum, amount o f economic a u t a r c h y and s e c u r i t y . N a t i o n a l ag reement s h a v e been t h e c h i l d n o t t h e f a t h e r o f g o v e r n m e n t a l i n t e r f e r e n c e i n t h e s u g a r i n d u s t r y . They h a v e assumed t h e r o l e o f a b r i d g e f o r t h e gap be tween i n c o m p a t i b l e n a t i o n a l p o l i -c i e s , b u t t h e p r e s e n t d i s t u r b e d c o n d i t i o n i n t h e w o r l d g i v e s f a r g r e a t e r s t r e n g t h t o n o n - e c o n o m i c p o l i c i e s , and h a s made t h e r e c o r d o f a c h i e v e m e n t o f s u c h I C A ' s r e l a t i v e l y o b s c u r e . I h o u g h t h e r e a r e s i m i l a r i t i e s be tween t h e r e c o r d s o f i n t e r -n a t i o n a l wheat and s u g a r t r a d e , t h e d i r e c o n s e q u e n c e s o f u n e c o n o m i c - 125 -p o l i c i e s h a s b e e n f a r more a p p a r e n t i n t h e c a s e o f s u g a r . Y e t t h e i n d u s t r y h a s t a k e n no more p o s i t i v e m e a s u r e s t h a t i n t h e c a s e o f w h e a t . The s i g n i f i c a n c e o f t h e U . S . A . and B r i t a i n i n t h e w o r l d t r a d e m i g h t i n p a r t be t h e key t o t h i s w e a k n e s s . These two n a t i o n s c o m b i n e d , c o n t r o l , o v e r h a l f t h e w o r l d ' s s u g a r t r a d e , y e t each i s h e a v i l y c o m m i t t e d t o a p o l i c y o f i m p e r i a l p r e f e r e n c e and p r o t e c t e d m a r k e t s e n t i r e l y a t v a r i a n c e w i t h l i b e r a l t r a d e i d e a s . I n t h e c a s e o f w h e a t , w i t h a s h a r p e n e d p o l i t i c a l d i v i s i o n between c o n s u m i n g and p r o d u c i n g n a t i o n s , t h e e f f e c t o f t r a d e r e s t r i c t i o n s a n d n a t i o n a l i s t i c p o l i c i e s c a n be more o p e n l y a c k n o w l e d g e d , and i n t e r n a t i o n a l n e g o t i a t i o n s h a v e , o f t e n a t t e m p t -ed a q u i t e b o l d a p p r o a c h . ( v i ) B e e f Ho s t u d y o f I C A ' s w o u l d be c o m p l e t e w i t h o u t same m e n t i o n o f b e e f s i n c e t h i s commodi ty h a s become a s i g n i f i c a n t i t e m i n o v e r s e a s t r a d e w i t h t h e deve lopment , o f r e f r i g e r a t i o n , and i t has; b e e n s u b j e c t t o an i n t e r n a t i o n a l agreement a t one t i m e . W o r l d t r a d e i n l i v e c a t t l e i s v e r y l i m i t e d , m a i n l y b e t w e e n c o n t i g u o u s c o u n t r i e s s u c h as Canada a n d t h e U . S . A . , o r E i r e and B r i t a i n . The meat t r a d e o f t h e w o r l d h a s h o w e v e r , been t r u l y g l o b a l . Consump-t i o n i s l a r g e l y c e n t r e d i n t h e U n i t e d K i n g d o m w h i c h b e f o r e t h e l a s t w a r , a c c o u n t e d f o r &0 p e r c e n t o f a l l b e e f i m p o r t s , 94 p e r c e n t o f 74 t h e m u t t o n , and 72 p e r c e n t o f t h e p o r k w h i c h e n t e r e d t h e w o r l d t r a d e . The e n t i r e i n t e r n a t i o n a l meat m a r k e t was s u b j e c t t o d e l i b e r -a t i o n s ; by t h e League o f N a t i o n s E c o n o m i c Commit tee i n 1933» w h i c h 74 T a y l o r , H e n r y C : Op C i t . . p . 152 - 126 -e v e n t u a l l y r e p o r t e d t o t h e C o u n c i l " t h a t i t r e g a r d e d an i n t e r n a t i o n a l 75 agreement n e c e s s a r y t o s o l v e t h e p r o b l e m s o f t h e meat e x p o r t m a r k e t n However n o t h i n g t r a n s p i r e d u n t i l B r i t a i n t o o k i n d e p e n d e n t a c t i o n i n 1937. B e f o r e t h i s t i m e , h e r p o l i c y o f i m p e r i a l p r e f e r e n c e h a d r e s u l t -ed i n a s t i m u l a t i o n o f e x p o r t s f r o m A u s t r a l i a and New Z e a l a n d , whose n e t e x p o r t s i n c r e a s e d b y 36 p e r c e n t b e t w e e n 1924 t o 1928 and 1934 t o 1938. The S o u t h A m e r i c a n c o u n t r i e s on t h e o t h e r h a n d saw t h e i r i m p o r t s d r o p o f f by an a v e r a g e o f 621,000,000 pounds o r 30 p e r c e n t d u r i n g t h e 76 same p e r i o d * The 1937 B e e f C o n f e r e n c e ('or agreement i n t h e l a n g u a g e o f •'• t h i s s t u d y ) was- an o u t g r o w t h o f t h e O t t a w a agreement o f 1932» and was c o n s e q u e n t l y d e s i g n e d t o g i v e i m p e r i a l p r e f e r e n c e t o D o m i n i o n p r o d u c e r s w h i l s t a t t h e same t i m e p r o t e c t i n g B r i t i s h f a r m e r s . The agreement was r a t i f i e d on J a n u a r y 1,, 1937 and i t c o v e r e d " a l l f o r m s o f b e e f , v e a l , 77 e d i b l e o f f a l s t h e r e o f , and l i v e c a t t l e f o r s l a u g h t e r " 1 . A r g e n t i n a , and B r a z i l a c c e d e d t o t h e agreement i n t h e same y e a r , and U r a g u a y i n 1939* The e s s e n c e o f t h e c o n f e r e n c e was t o a p p o r t i o n t h e U . K . m a r k e t be tween t h e m a j o r e x p o r t i n g c o u n t r i e s v i z . A r g e n t i n a , A u s t r a l i a , U r a g u a y , New Z e a l a n d , E i r e and B r a z i l . D e c i s i o n s on o b t a i n i n g q u o t a s 75 League o f N a t i o n s . Document . 1933» I I > 1938. p p . 4 f o l l o w i n g 76 T a y l o r , H . C . : Op. C i t . , p . l6>2 77' W r i g h t , M . E . : " O r g a n i z e d M a r k e t i n g o f E x p o r t C o m m o d i t i e s " , F o r e i g n A g r i c u l t u r e , I X , ( N o v . 1945)• were to be unanimous, and the objective was to s t a b i l i z e beef prices' and imports at around the l e v e l of ten cents per pound. The actual average p r i c e f or the f i r s t three years of the scheme's operation, 78 was one-quarter cent under this; g o a l . The Beef Conference had i t s headquarters; i n London and the U.K. government appointed a sp e c i a l o f f i c i a l to represent the smaller supplying countries. I t s operations; were i n e f f e c t i v e a f t e r the out-break of war. During the time of i t s existence however, i t function-ed smoothly, member nations always being able to agree on export quotas. I t i s i n t e r e s t i n g to compare the wartime inter-American coffee agreement, where a large import was; also responsible f o r sponsoring and re g u l a t i n g such an arrangement. In each case the importing govern-ment wasonot motivated d i r e c t l y by the general i n t e r e s t of i t s consum-ing p u b l i c . Higher prices were; acceptable to the U.S.A. i f they bene-f i t e d her L a t i n American neighbours. Higher beef p r i c e s were acceptable to the B r i t i s h government i f they afforded the domestic producers some security and gave preference to dominion i n t e r e s t s - B r i t a i n was a c t u a l l y faced with the problem of r e c o n c i l i n g the c o n f l i c t i n g interests' of c o l o n i a l or dominion areas;, her domestic producers, the consumer, the meat trade, and the public treasury. A not d i s s i m i l a r c o n f l i c t o f i n t e r e s t s has hampered the sugar p o l i c i e s of both B r i t a i n and the U.S.A.' MISCELLANEOUS ICA's: In the i n t e r e s t s of b r e v i t y , though ostensibly as a g r i c u l t u r a l 78 Black and Tsou: (International Commodity Agreements), Op. C i t . , p-528 - 128 -e c o n o m i s t s , we s h a l l make l i t t l e more t h a n a p a s s i n g r e f e r e n c e t o i n t e r n a t i o n a l r e g u l a t i o n o f t h e t i n i n d u s t r y , v a r i o u s a g r e e m e n t s f o r t h e c o n s e r v a t i o n o f m a r i n e r e s o u r c e s , and o t h e r r a w m a t e r i a l ' s a g r e e -m e n t s . ( v i ) Tin The t i n i n d u s t r y h a s been s u b j e c t t o c o n t i n u o u s r e g u l a t i o n f r o m I 93 I t o I946. I n M a r c h 1950, t h e U n i t e d N a t i o n s I n t e r i m C o - o r d i n -a t i n g Commit tee f o r I C A ' s , a f t e r c o n s i d e r i n g t h e r e p o r t by a t i n s t u d y g r o u p , recommended t h e c o n v e n i n g o f a c o n f e r e n c e t o draw up a new t i n 79 a g r e e m e n t . T h e r e have c o n s e q u e n t l y b e e n many a p o l o g i s t s ; and c r i t i c s 80 o f t i n c o n t r o l . B r i t i s h and D u t c h i n t e r e s t s i n t h e f a r E a s t a n d i n B o l i v i a h a v e been a b l e t o d o m i n a t e t h e i n d u s t r y . T e c h n o l o g i c a l advance ( d e v e l o p m e n t o f modern t i n d r e d g e s and b e t t e r e x t r a c t i o n m e t h o d s ) h a s t e n d e d t o p r o d u c e e x c e s s c a p a c i t y , w h i c h h a s been c a r e f u l l y p r e s e r v e d by v e r y h i g h p r i c e s w h i c h i n t u r n have r e s t r i c t e d t i n c o n s u m p t i o n . The p r o d u c t h a s u n i q u e m e t a l u r g i c a l q u a l i t i e s , w h i c h make i t an i n v a l -u a b l e i n g r e d i e n t o f m a n y . a l l o y s w h i c h i n t u r n a r e o n l y a p a r t o f some o t h e r f i n a l m a n u f a c t u r e d p r o d u c t . The p o s i t i o n o f r u b b e r i n r e l a t i o n t o a u t o m o b i l e s i s ; i n d e e d a n a l o g o u s . P r i c e e l a s t i c i t y o f t h e demand f o r 79 1950 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s , O p . C i t . . A p p e n d i x D . , 80 P« 58. See f o r example t h e p r o p a g a n d a o f t h e T i n P r o d u c e r s A s s n . " I n t e r n a t i o n -a l T i n C o n t r o l & B u f f e r S t o c k s , L o n d o n , 1944, and t h e c r i t i c i s m s o f : E a s t h a m ; " R a t i o n a l i z a t i o n i n t h e T i n I n d u s t r y " , " R e v i e w o f E c o n o m i c S t u d i e s : , 1936-37. I V ( L o n d o n S c h o o l o f E c o n o -m i c s ) ; M e y e r s ; : "The I n t e r n a t i o n a l T i n C o n t r o l S c h e m e " , J o u r n a l o f B u s i n e s s o f t h e U n i v e r s i t y o f C h i c a g o , A p r i l 1937, X : Rowe„ J . W . F . ( M a r k e t s & Men) Op C i t . . p . 182.. - 129 -t i n i s t h e r e f o r e v e r y l o w , t h o u g h s h i f t s o f t h e demand i n r e s p o n s e t o f l u c t u a t i o n s i n b u s i n e s s , a c t i v i t y , make p r i c e s v e r y v o l a t i l e . T i n c o n s u m p t i o n has been s e r i o u s l y r e s t r i c t e d b y t h e a c t i v i -t i e s o f i n t e r n a t i o n a l r e g u l a t i o n , and t h e i n d u s t r y * i s o b v i o u s l y s u b j e c t t o a c o n s i d e r a b l e d e g r e e o f m o n o p o l i s t i c c o n t r o l b e c a u s e o f t h e h i g h degree o f c o n c e n t r a t i o n o f B r i t i s h f i n a n c i a l i n t e r e s t s i n t h e s m e l t i n g and r e f i n i n g f a c i l i t i e s w i t h i n t h e i n d u s t r y . The p o s t war boom o f 1920 showed t h a t t i n s h a r e d w i t h many o t h e r r a w m a t e r i a l s p r o d u c i n g i n d u s t r i e s a s t r o n g t e n d e n c y t o w a r d s o v e r -c o m p e n s a t i o n i n t h e m a t t e r o f p r i c e - i n d u c e d c a p a c i t y a d j u s t m e n t . E x c e s s c a p a c i t y l e d t h e r e f o r e t o a c u t e d i s t r e s s i n t h e i n d u s t r y , when t h e c r a s h came i n 1929, and i n t e r n a t i o n a l c o n t r o l was an outcome o f t h e d e p r e s s -i o n , as' ha s been t h e c a s e i n many o f t h e o t h e r c o m m o d i t i e s s t u d i e s . T h a t government s u p p o r t was: r e a d i l y o b t a i n e d e m p h a s i z e d t h e f a c t t h a t t i n was m a i n l y p r o d u c e d by e c o n o m i c a l l y b a c k w a r d c o u n t r i e s w h i c h were h e a v i l y dependent on t h a t i n d u s t r y . The c o m p a r a t i v e s u c c e s s o f c o n t r o l c a n be a t t r i b u t e d i n p a r t t o t h e s h a r p p o l i t i c a l s e p a r a t i o n between p r o d u c e r and c o n s u m i n g i n t e r e s t s : . T h i s h i s t o r y o f t i n c o n t r o l i s a d d i t i o n a l l y i n t e r e s t i n g because f r o m t i m e t o t i m e b u f f e r s t o c k s o r t i n p o o l s were f o r m e d , o s t e n s i b l y w i t h t h e o b j e c t o f s t a b i l i z i n g p r i c e s . I n e f f e c t , t h e y became p r i c e r a i s i n g d e v i c e s f o r t h e b e n e f i t o f consumers t o r e d u c e t h e i r t i n s t o c k s whenever t h e C o n t r o l scheme c r e a t e d a r e s e r v e p o o l , i n o r d e r t o m a i n t a i n p r i c e s and l i m i t t h e i r l i a b i l i t i e s . Whenever t h e vo lume o f demand e x p a n d e d , t h e b u f f e r s t o c k s were n o t a d e q u a t e t o p r e v e n t s u b s t a n t i a l p r i c e r i s e s . 1 - 130 -K n o r r i n his^ s t u d y o f t i n u n d e r t h e a u s p i c e s o f t h e F o o d 81 R e s e a r c h I n s t i t u t e , has: p o i n t e d o u t t h a t t h e r e i s roam f o r c o - o p e r -a t i o n b e t w e e n t i n p r o d u c i n g and t i n c o n s u m i n g c o u n t r i e s w i t h a v i e w t o p l a n n i n g d i s - i n v e s t m e n t i n t h e i n d u s t r y , a n d m o d e r a t i n g e x c e s s i v e p r i c e f l u c t u a t i o n s by a n i n t e l l i g e n t b u f f e r s t o c k scheme. H o w e v e r , he r a i s e s d o u b t s a s t o t h e p o l i t i c a l p o s s i b i l i t i e s o f t h e f o r m e r and t h e a b i l i t y o f t h e l a t t e r t o f u n c t i o n i n t h e p r e s e n c e o f s u c h c o n c e n -t r a t e d and p o w e r f u l f i n a n c i a l i n t e r e s t s . . He c o n c l u d e d , t h e r e f o r e * t h a t a f r e e t i n m a r k e t i s p r o b a b l y t h e b e s t s o l u t i o n , even i f f ' a c o u r -ed by d e f a u l t . The r e a d j u s t m e n t o f p r o d u c t i v e c a p a c i t y n b y t h e way o f unhampered c o m p e t i t i o n w i l l be a h a r s h and c r u e l and l e n g t h y p r o -82 cess-, b u t i t w i l l w o r k " , he c o n c l u d e s . ( v i i i ) M i s c e l l a n e o u s Agreement s I n a d d i t i o n t o t h e I C A ' s f o r t h e s e v e n i m p o r t a n t s t a p l e s a l r e a d y d i s c u s s e d , a v a r i e t y o f o t h e r s h a v e d e a l t w i t h ' l e s s i m p o r t a n t c o m m o d i t i e s , f r e q u e n t l y on a t e c h n i c a l o r m o r a l , r a t h e r t h a n e c o n o m i c a l b a s i s . F o u r s u c h a g r e e m e n t s c o n c e r n i n g m a r i n e r e s o u r c e s may be summar-i z e d as t e c h n o l o g i c a l i n n a t u r e , w i t h o b j e c t i v e s o f c u r b i n g d e p l e t i o n 83 and p r o m o t i n g r e p l e n i s h m e n t . The l o n g e s t l i v e d o f s u c h ag reement s c o n c e r n e d t h e p r e s e r v a t i o n o f f u r s e a l s i n t h e N o r t h e r n P a c i f i c and was be tween t h e U n i t e d S t a t e s , B r i t a i n , R u s s i a and J a p a n . 81 K n o r r , K . E . : T i n u n d e r C o n t r o l ( F o o d R e s e a r c h I n s t i t u t e ) , S t a n f o r d g 2 U n i v e r s i t y , C a l i f o r n i a , 1944. P * 314* K n o r r , K . E . : Op. C i t . , p . 295. 83 F o r a v e r y c o m p r e h e n s i v e d e s c r i p t i o n and a n a l y s i s o f t h e s e a g r e e m e n t s , see T o m a s e v i c h , J o z o : I n t e r n a t i o n a l ag reement s on c o n s e r v a t i o n of :  M a r i n e r e s o u r c e s . F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d U n i v e r s i t y , 1944 297 p a g e s - 131 -A s e c o n d , o f much g r e a t e r e c o n o m i c s i g n i f i c a n c e c o n c e r n s t h e agreement be tween t h e U . S . A . and Canada f o r t h e c o n s e r v a t i o n o f P a c i f i c h a l i b u t . T h e r e h a v e a l s o b e e n s i m i l a r ag reement s c o v e r i n g t h e F r a s e r R i v e r S o e k e y e Sa lmon f i s h i n g , and on a much b r o a d e r i n t e r -n a t i o n a l s c a l e , a t t e m p t s t o r e g u l a t e t h e w h a l i n g i n d u s t r y . On a m o r a l p l a n e t h e r e h a v e been i n t e r n a t i o n a l c o n v e n t i o n s and agreement s a i m e d a t r e s t r i c t i n g and r e g u l a t i n g t h e i n t e r n a t i o n a l t r a d e i n n a r c o t i c s t o p r e v e n t t h e s e r i o u s abuses t o w h i c h t h e s e commo-84 d i t i e s a r e s u b j e c t . We m i g h t c o n c l u d e t h i s c h a p t e r by m e n t i o n i n g t h a t t h e r e h a s been a r e c o r d o f s u c c e s s f u l i n t e r n a t i o n a l c o - o p e r a t i o n i n t h e w o r l d ' s w o o l m a r k e t , p a r t i c u l a r l y i n terms- o f a l l o c a t i n g s u p p l i e s be tween t h e A l l i e s d u r i n g t h e w a r , and i n t h e p o s t - w a r d i s p e r s a l o f a c c u m u l a t e d s t o c k s . W o r l d c o t t o n p r o b l e m s a r e a l s o v e r y s i m i l a r t o t h o s e o f c o f f e e , w i t h expanded p r o d u c t i o n i n o t h e r c o u n t r i e s s t i m u l a t e d by and a t t h e expense o f t h e U n i t e d S t a t e s , w h i c h i s t h e w o r l d ' s f o r e m o s t p r o d u c e r and t h e n a t i o n w h i c h h a s t a k e n a c t i v e r e g u l a t o r y m e a s u r e s . D e s p i t e t h e f o r m a t i o n o f an I n t e r n a t i o n a l C o t t o n A d v i s o r y C o m m i t t e e i n 1939 w h i c h mee t s f o r a n n u a l r e v i e w s t o d i s c u s s w o r l d c o t t o n p r o b l e m s , no agreement h a s e v e r been p r o d u c e d , t h o u g h s e v e r a l member n a t i o n s h a v e 85 a d v o c a t e d t h e d e s i r a b i l i t y o f s u c h an a g r e e m e n t . I t w o u l d be i n t e r -84 D a v i s : , J o s e p h : " E x p e r i e n c e u n d e r I n t e r g o v e r n m e n t a l Commodity Agree-r m e n t s , 1902-45, The J o u r n a l o f P o l i t i c a l Exonomy. J u n e 194&, V o l . L T V , N o . 3 : p p . 210-212 85 R e p o r t o f t h e 4 t n M e e t i n g o f t h e I n t e r n a t i o n a l C o t t o n A d v i s o r y Comm-i t t e e , U . S . Depar tment o f S t a t e . B u l l e t i n , V o I . X I I I , 1945. ( W a s h i n g t o n , D . C . ) - 132 -e s t i n g t o e x p a t i a t e on t h e s i m i l a r i t y o f p r o b l e m s be tween t h e c o t t o n and o t h e r i n d u s t r i e s , a r i s i n g f r o m t h e d e v e l o p m e n t o f s y n t h e t i c s u b - • s t i t u t e s . And a l s o t o expand t h e theme o f t h e r e p e r e u s s i o n a r y e f f e c t s o f n a t i o n a l u n i l a t e r a l p o l i c i e s when t h e commodi ty c o n c e r n e d i s : one o f t h e "ibaisici- s t a p l e s i n i n t e r n a t i o n a l t r a d e . However t h e m a t e r i a l ^ a l r e a d y p r e s e n t e d s h o u l d o b v i a t e t h e n e c e s s i t y f o r s u c h f u r t h e r e x a m -i n a t i o n . M o r e p o s i t i v e c o n c l u s i o n s w i l l be d e r i v e d i n a s u b s e q u e n t c h a p t e r . . We- s h a l l c o n t e n t o u r s e l v e s h e r e w i t h o b s e r v i n g t h a t t h e r e i s a c h a r a c t e r i s t i c p a t t e r n o f d i s t u r b a n c e s ; and g r e a t h a r d s h i p i n t h e p r i m a r y i n d u s t r i e s . T h a t each commodi ty h a s u n i q u e p r o p e r t i e s and p r o b l e m s , w h i c h h a v e l e d t o a v a r i a t i o n b o t h i n t h e e m p h a s i s and t h e s u c c e s s o f a t t e m p t s a t i n t e r n a t i o n a l r e g u l a t i o n . T h a t t h e s u c c e s s -f u l I C A ' s s t u d i e d a p p e a r i n danger o f f o s t e r i n g s e c t i o n a l , i n t e r e s t s w h i c h become synonymous w i t h t h e i r p e r s i s t e n c e on a. s e m i - p e r m a n e n t b a s i s : . The most u n s u c c e s s f u l I C A ' s have a p p e a r e d t o have f o u n d e r e d on t h e r o c k s o f n a t i o n a l s o v e r e i g n t y s i n c e t h e y i n v o l v e d a s u b s t a n t i a l p r o -p o r t i o n o f consumer and i m p o r t e r i n t e r e s t s : and were u n a b l e t o a t t a i n i n t e r n a t i o n a l c o l l a b o r a t i o n f o r t h e f a i r l y s e v e r e r e m e d i a l measures ' r e q u i r e d . C H A P T E R I V THE POSITION TODAY: Opinion of international bodies and current thinking as to the potential contri-bution of I C A's. Opinions of International Bodies The f i r s t continuous impression of international economic policy and objectives may be gained from a study of the several inter-national conferences called by the League of Nations during the 1920's. Details of these conferences show that while they were able to make l i t t l e positive contribution''', they were aimed at freeing international trade from the growing shackles of restriction, tariffs, quotas and subsidies, which became increasingly evident during that period. They were accordingly based on a philosophy of liberal capitalism, and did not consider increased governmental control a desirable solution. The World Monetary & Economic Conference held in 1933, however, showed a considerable change of emphasis. It has already been noticed that the conference, which was convened with the object of limiting governmental restrictions and liberalizing trade, considered that the special difficulties of international trade in primary commodities did justify governmental interference. The conference advocated joint action in the following words: "Some of us (the Preparatory Commission of Experts) have felt that a greater freedom of international trade is hot the sole remedy for the present crisis, that the crisis has revealed profound disorganization of production and distribution and that, on this point also, joint action by governments is necessary.n2 •See for example the account given by BfcCiure, Wallace, World  Prosperity. MacMillan Co., New York. ;League of Nations "Monetary & Economic Conference". Draft Annotated  Agenda, Geneva, 1933, p.31 - 134 -Besides being directly responsible for recommending ICA's and convening conferences which produced such agreements for wheat and sugar, the 1933 World Conference approved the existing tea and tin control schemes. Their approval of tin control was couched in the following terms; "The Sub-Committee considers that the existing scheme of control is framed upon sound lines; that i t is in accord with the principles which have been accepted by this conference as those which should govern the framing of plans for the co-ordination of production and consumption; that i t has worked smoothly in actual practice for a period of over two years; and that i t has been largely successful in achieving its main objectives. b S One can only infer that this committee was heavily influenced by the propaganda of the Tin Producers1 Association. At the instance of Sir Philip Cunliffe-Lister a set of conditions were laid down to govern the formation of ICA's and to guide the producers who sponsored such agreements.^ These ^League of Nations "Monetary & Economic Conference". Beports approved by the Conference on July 27th, 1933, and Resolutions adopted by the Bureau & Executive Committee, C.435. BIL220, II (Conf,M.E.22 (1)) (London, July 27, 1933), p.28 Quoted from Lawrence, Oliver "The International Control of Rubber" Commodity Control in the Pacific Area, edit. W.L.Holland, Stanford Univ. Press, pp.423-24. - 135 -c o n d i t i o n s a r e i n c l u d e d i n A p p e n d i x A , f o r c o m p a r i s o n a l o n g w i t h t h e c r i t e r i a and c o n d i t i o n s l a i d down i n t h e F o o d a n d A g r i c u l t u r e and I n t e r n a t i o n a l T r a d e C h a r t e r s o f t h e U n i t e d N a t i o n s O r g a n i z a t i o n * I n s u m m a r i z i n g t h e p o s i t i o n o f t h e 1933 C o n f e r e n c e we s h o u l d r e c o g n i z e t h a t i t was h e l d a t a t i m e when s e v e r e w o r l d - w i d e d e p r e s s i o n w a s a n o v e r w h e l m i n g p r o b l e m , a n d when i n t e r - g o v e r n m e n t a l r e s t r i c t i v e measure s w e r e e a g e r l y p o u n c e d u p o n as a p o s i t i v e means o f m e e t i n g t h e d i f f i c u l t y . I t i s i n t e r e s t i n g t o n o t i c e a l s o , how t h e e m p h a s i s was p l a c e d on t h e p r o d u c e r s 1 needs and i n t e r e s t s , a n d t h a t consumer r e p r e s e n t a t i o n , a n d p r o v i s i o n f o r e x p a n d i n g p r o d u c t i o n a n d l o w e r i n g p r i c e s were g i v e n o n l y p e r f u n c t o r y c o n s i d e r a t i o n i n o u t l i n i n g a d e s i r a b l e f o r m f o r s u c h I C A ' s I We may f o l l o w t h e t h r e a d b y c o n s i d e r i n g a g a i n t h e f i n d i n g s o f t h e L e a g u e o f N a t i o n s * s p e c i a l s t u d y o f r a w m a t e r i a l s p r o b l e m s w h i c h was c o m p l e t e d i n 1937. I n t h e r e p o r t w h i c h consummated t h i s s t u d y , t h e s p e c i a l c o m m i t t e e a d v o c a t e d i n t e r - g o v e r n m e n t a l r e g u l a t o r y a g r e e m e n t s f o r s o l v i n g t h e r a w m a t e r i a l s p r o b l e m . B u t some r e c o g n i t i o n o f t h e d a n g e r s o f . d o m i n a t i n g p r o d u c e r s * i n t e r e s t s was made b y t h e s p e c i a l emphas i s w h i c h was g i v e n t o g o v e r n m e n t c o n t r o l a n d r e g u l a t i o n . A s o r t o f s u b l i m e f a i t h i n t h e f o r e s i g h t a n d i n t e g r i t y o f g o v e r n m e n t s i s m a n i f e s t e d i n t h e i r s t a t e m e n t t h a t : " t h e power o f d e t e r m i n i n g t h e d e g r e e o f r e s t r i c t i o n i s p l a c e d i n t h e hands o f a u t h o r i t i e s who c a n l o o k b e y o n d t h e i m m e d i a t e i n t e r e s t s o f t h e p r o d u c e r s t o t h e i r u l t i m a t e i n t e r e s t s , a n d a l s o t o t h o s e o f t h e w o r l d a t l a r g e . " 5 Report o f t h e C o m m i t t e e f o r t h e S t u d y o f t h e P r o b l e m of Raw M a t e r i a l s , league of N a t i o n s , A.27.1937.IIB, Geneva 1937, pp. 18-19 - 136 -The International Labour Organization of the United Nations has given considerable attention to the problem of raw materials as i t affects employment of human resources. As this organization is one of the few functional surviving bodies which the United Nations inherited from the League of.Nations, we might logically consider next the viewpoint of this international bodyThe problems of underemployment in the primary industries was considered so important by the ILO that i t made a special study of ICA*s« Their report, published in 1943,^ has been an invaluable reference to students of ICA*s since i t contains the f u l l text of every important agreement up to that time. Like most international publications, i t is however largely factual and makes no very extensive criticisms of these agreements. Perhaps the outstanding fact about this report is its definite advocacy of a buffer stock scheme to mitigate the effects of price instability, which will be examined in greater detail at the end of the chapter* The HO in 1943 set up the following criteria for ICA_*s. "Commodity control policy should promote the constant availability of adequate supplies at prices -which give a reason-able return to the efficient producer and are held sufficiently-stable to afford him protection against erratic swings of major dimensions, but do not involve the exaction from the consumer of monopoly profits, or the payment by him of prices held at unduly high levels to maintain the profitability of high-cost capacity",7 ^International Labour Office, Inter-governmental Commodity Control Agreements, Montreal, 1943B 7IBID, page - 1S7 -"The Conference considers that the United Nations should initiate concerted action designed to ensure the constant availability to a l l purchasers of adequate supplies of such commodities at prices which give a reasonable return to the efficient producer and are held sufficiently stable- to afford protection against major short-term fluctuations in supply or demand; and that such international agree-ment (a) should provide for adequate representation of consumers as well as producers, representing both importing and exporting countries, in a l l authorities responsible for the determination and application of policy, and (b) should aim to assure to a l l workers, including the self-employed, engaged in the production of the commodities con-cerned, fair remuneration, satisfactory working conditions and adequate social security protection, having regard to the general standards in the countries concerned^"8 The support of the International Labour Organization of such government agreements has been consistent throughout* Oneemight venture to say that collective action and government or state regular tion are the primary tools of a l l forms of labour organization* However, an honest attempt has been made to consider economic criteria, and the above quotations while revealing the very comprehensive yet nebulous objectives which such organizations tend to set up," demonstrates also a positive advance in thinking from the simple emphasis of earlier international pronouncements* The Food and Agriculture Organization (hereinafter referred to as FAO) of the United Nations is a special International Agency, more directly concerned with the problems of primary producers* Ever since the preliminary conferences between nations, which led to the final creation of FAO considerable attention has been given to the particular problems of excessive price gyrations and chronic surpluses ^ n t ernational Labour Office, Official Bulletin, June 1st, 1944, p*96 - 138 -and ICA's have been considered as a desirable means of counteracting these difficulties. The f u l l text of the relevant ideas and desirable g criteria set up by the FAO in relation to this problem, is given in Appendix A. These resolutions represent the acme of present inter-national direction and purpose, and their emphasis of the inherent dangers of such regulatory agreements is well demonstrated in their provision for adequate publicity, consumers' representation, and for recognition of desirable long run objectives. These latter include the expansion of consumption levels, and freedom between nations for production of these vital commodities to be developed in those regions which are more fitted for cheap and efficient production. The objectives and viewpoint of the FAO have not, however, escaped criticism, and there are grounds for believing that there has been considerable conflict between the viewpoint of the FAO and other international bodies, and that the former, because of its humanitarian bias, has been inclined to overlook the essential economic goals of ICA's. An understanding of these differences can be achieved by a brief consideration of the high ideals and aims of the FAO. Born in part out of President Roosevelt's four freedoms, and with a legacy of ideas from the League of Nations' International Food Program, launched in 19S5, the FAO has considered primarily "Freedom from Want" and the "Marriage of health and agricultureConsequently, the historic Hot Springs Conference of the FAO in 1945 had the impressive aims of United National Conference on Food & Agriculture -International Conciliation, Sept. 1943, Carnegie Endowment for International Peace, New York. - 139 -searching for the ways of supplying sufficient food of the right kind for a l l peoples while simultaneously providing producers with a stable and satisfactory reward. It is not altogether surprising, therefore, that one critic has written that: "The United Nations' Conference on Food and Agriculture was convoked with diverse and somewhat contradictory purposes and insufficient preparation the conference turned out to be l i t t l e more than ashuffling about of ideals; an attempt to put them in order. The FAO has advocated ICA's but endeavoured to widen their role by envisaging them as permanent bodies with the additional function of supervising or conducting special "nutritional sales"-of surplus foodstuffs to needy countries at concessional prices. Gilpin points out that to talk of the 'planned disposal' of surpluses over a number of years i s , however, unrealistic, since surpluses are short run phenomena and undesirable. The FAO is in effect confusing the problem of ineffective demand in these needy, countries with surplus production, and Professor Gilpin feels that the FAO could make a more realistic approach by the open advocacy of a two-price system for the undernourished "backward" countries Mention should also be made of producers' organizations and, in particular, the International Federation of Agricultural Producers, which represents the interests of farmers, and functions as a medium for international co-operation and liaison. The Inter-national Federation, hereinafter referred to as IFAP, was formed 1 0Feis, Herbert, The Sinews of Peace. Harper & Bros., New York & London, 1944, pp.204-5 Gilpin, A.C. "The Place of State Buying and Selling in Free World Trading" Proceedings of Sixth International Conference of Agricultural Economists. Oxford University Press 1948. p.175 - 140 -In 1945 subsequent to a goodwill tour of the British National Farmers' Union, when its president, Sir James Turner, visited the United States and the Dominions and proposed the formation of an International Body. The IFAP^ has always advocated producer regulation of the marketing of primary products and has been a firm supporter of ICA's. It can claim credit for being largely responsible for nursing the present wheat agreement into existence and for giving continual publicity to 15 the problems of potential food surpluses. There is ample evidence that the IFAP is concerned only with the producers' interests, however, and dominated as i t is by farmers' organizations in the United States, and to a lesser extent Canada and Britain, this bias is revealed at times in a tragically provincial outlook. Hr. Davie, in representing the National Council of Farmer Cooperatives has said: "There has been a growing concern oh the part of the American farm organizations regarding the attitude of the United States Government, particularly the State Department, on matters affecting foreign trade of farm products. This is particularly true with respect to the activities of the State Department in planning (sic) the FAO and the ITO."14 'Davie, John H. "The International Federation of Agricultural Producers," Paper presented at the amrnal meeting of the American Farm Economic Association, Wisconsin, Sept. 11th, 1947. 'See for example the report of the 3rd Annual Conference of the IFAP in Guelph, Ontario, as given in the Farmer & Stock Breeder. June 7th, 1949, p.1427 ,4Davie, John M. "The International Federation of Agricultural Producers," Op. Cit.. p.1101 - 141 -The United Nations International Trade Organizations (hereinafter referred to as ITO), though not yet a functional body, is universally regarded as the final international authority on problems relating to foregin trade, and particularly ICA's. The purpose and direction of the ITO can be appreciated from a consideration of some.of the ideals laid down in 1941 in the Atlantic Charter which epitomized the objectives of the allies when the opportunity came to rebuild a better world.^ Some of the economic goals included, in the words of the Charter, are as follows: "The enjoyment i n a l l States ...... of access, on equal terms to the trade and to the raw materials of the world which are needed for -their economic prosperity; the fullest collaboration between a l l nations in the economic field with the object of securing, for a l l , improved labour standards, economic adjustment and social security." The ITO Charter Is itself built upon an underlying philosophy of liberal capitalism. It does, however, make allowance of almost every type of government control and intervention in the field of international trade in its efforts to recognize the profoundly disturbed conditions in the world today and to provide a framework,of 16 rules which would not be completely anachronistic. Amongst the concessions to a doctrine of free trade and private enterprise, the ITO Havana Charter advocates ICA's. The actual relevant text of the ITO Charter-is presented in Appendix A, and is also examined more See for example, Brown, William A. The United States and the  Restoration of World Trade. Brookings Institute, p.54 For a discussion of this problem, see Viner, Jacob "Conflicts of Principle in Drafting a Trade Charter" Foreign Affairs. July 1947, pp. 612-28 - 142 -c r i t i c a l l y i n C h a p t e r V , The s t a t e m e n t o f o b j e c t i v e s , a n d t h e p r o v i s i o n s g i v e n , do m e r i t t h e c l o s e s t s c r u t i n y * Though s e e m i n g l y b r i e f and l a c k i n g i n p r e c i s i o n , i t w i l l be f o u n d t h a t t h e C h a r t e r h a s c o n c i s e l y r e c o g n i z e d t h e i n h e r e n t d i f f i c u l t i e s amongst p r i m a r y p r o d u c e r s , a n d d e f i n e d t h e c o n d i t i o n s u n d e r w h i c h I C A t s m i g h t be h e l p f u l . The p o s s i b l e d a n g e r s o f s u c h r e g u l a t i o n a r e p r o t e c t e d b y p r o v i s i o n s f o r f u l l p u b l i c i t y a t a l l s t a g e s o f i n t e r - g o v e r n m e n t a l c o n s u l t a t i o n and f o r f u l l consumer r e p r e s e n t a t i o n , and p r o v i s i o n of v e r y s t r i c t e c o n o m i c c r i t e r i a b e f o r e a g r e e m e n t s o f a r e s t r i c t i v e n a t u r e a r e a l l o w e d . S u c h a g r e e m e n t s w h i c h p r e s u m a b l y m i g h t i n v o l v e p r o d u c t i o n r e s t r i c t i o n and t h e u s e o f e x p o r t q u o t a s , a r e d e s c r i b e d as " c o n t r o l a g r e e m e n t s " and may b e u s e d o n l y when t h e r e i s e v i d e n c e o f e x i s t i n g o r p o t e n t i a l "burdensome s u r p l u s e s " c a u s i n g a c u t e d i s t r e s s t o s m a l l p r o d u c e r s , o r when t h e r e a r e c o n d i t i o n s o f c h r o n i c u n e m p l o y -1 7 ment or-ounder-^employaent amongst t h e p r o d u c e r s i n s u c h i n d u s t r i e s * The c h a r t e r makes a l l o w a n c e f o r e c o n o m i c g o a l s b y p r o v i d i n g f o r e x p a n s i o n o f c o n s u m p t i o n and p r o d u c t i o n , and opt imum r e s o u r c e a l l o c a t i o n . I n summary, t h e p r o v i s i o n s o f t h e ITO c h a r t e r w i t h r e g a r d t o I C A * s w o u l d i n d i c a t e t h a t t h e y a r e r e g a r d e d a s emergency measure s t o d e a l w i t h s p e c i a l d i f f i c u l t i e s , t h e i r a i m b e i n g t o remove t h e d i f f i c u l t i e s , i f p o s s i b l e , a n d t h e n go o u t o f e x i s t e n c e . T h i s i s i n c o n t r a s t t o t h e FAO w h i c h seems t o r e g a r d I C A * s a s a d e s i r a b l e p e r m a n e n t f e a t u r e o f i n t e r n a t i o n a l t r a d e . G i l p i n , A . C . , The P l a c e o f S t a t e B u y i n g and S e l l i n g i n F r e e W o r l d T r a d i n g " , O p . c i t p p . 1 6 7 * 1 7 0 - 143 -This section might fittingly be concluded by a brief consideration of present international activities* The Interim Co-ordinating Committee for International Commodity Arrangements, (hereinafter referred to as ICCICA), has. been set up at the request of both the ITO and the FAO pending the establishment of 18 the ITO as a functional body* ICCICA acts? therefore as a co-ordinating and supervisory body for international commodity agreements, and i t has served to facilitate intergovernmental consultation, since its formation in 1947* The principles laid down in the Havana Charter of the ITO are accepted as the guiding rules for ICCICA,. which is consequently concerned with ensuring the proper procedure before any ICA is brought into being* This is achieved by emphasis on the following five provisions. 1. Adequate study of the commodity before action* 2. Protection of "the interests of all countries. 3* Adequate representation of consumer interests. 4* Expansionist approach. Agreements of a restrictive nature are limited to quite rigid conditions* 5* Provision for adequate publicity of commodity problems. The actual mechanics of commodity regulation will consist in the future of the following three phases: 1 9 Formation of a study group of interested countries to investigate the commodity. 2b Calling of a Commodity Conference comprising al l the interested governments, before any ICA can be formulated. Review of International Conmodity Problems. Report of the Interim Co-ordinating Committee for International Commodity Arrangements, United Nations, New York, Feb* 1950 pp. 1-5. - 144 -5 . S e t t i n g up o f a Commodity C o u n c i l t o b e r e s p o n s i b l e f o r a d m i n i s t r a t i n g t h e I C A 1 ^ I C C I C A has s u p p o r t e d a n d c o - o r d i n a t e d t h e a c t i v i t i e s o f w o o l , r u b b e r a n d t i n s t u d y g r o u p s w h i c h have b e e n f o r m e d w i t h i n t h e p a s t s e v e r a l y e a r s a n d i t ha s a l s o c o n s i d e r e d t h e r e p o r t s a n d a c t i v i t i e s o f t h e I n t e r n a t i o n a l W h e a t C o u n c i l , t h e I n t e r n a t i o n a l C o t t o n A d v i s o r y C o m m i t t e e , a n d t h e I n t e r n a t i o n a l Tea C o m m i t t e e e I t i s i n t e r e s t i n g t o n o t e , a l s o , t h a t t h e r e c e n t a c u t e r a w m a t e r i a l s h o r t a g e s , o c c a s i o n e d b y t h e w a r i n K o r e a , and v a r i o u s g o v e r n m e n t p o l i c i e s o f s t o c k - p i l i n g , l e d t o a n i n t e r n a t i o n a l m a t e r i a l s c o n f e r e n c e b e i n g Of) h e l d e a r l y i n 1 9 5 1 * The U n i t e d S t a t e s , U n i t e d K i n g d o m a n d F r e n c h Governments a n n o u n c e d t h a t t h e y w o u l d i n v i t e o t h e r g o v e r n m e n t s o f p r o d u c i n g a n d c o n s u m i n g c o u n t r i e s t o j o i n i n c r e a t i n g " S t a n d i n g I n t e r n a t i o n a l Commodity G r o u p s " . I n i t i a l l y s i x s u c h commodi ty c o m m i t t e e s have b e e n c r e a t e d , m a i n l y c o n c e r n e d w i t h b a s e m e t a l s , a n d t h e s t a p l e n a t u r a l f i b r e s . The p u r p o s e o f t h e s e c o m m i t t e e s i s t o c o n s i d e r and recommend t o g o v e r n m e n t s " t h e s p e c i f i c a c t i o n w h i c h s h o u l d be t a k e n , i n t h e ca se o f e a c h c o m m o d i t y , i n o r d e r t o e x p a n d p r o d u c t i o n , i n c r e a s e a v a i l a b i l i t y , c o n s e r v e s u p p l i e s , - and a s s u r e t h e most e f f e c t i v e d i s t r i b u t i o n s 2 ^ " 1948 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s . R e p o r t o f t h e I n t e r i m C o - o r d i n a t i n g C o m m i t t e e f o r I n t e r n a t i o n a l Commodi ty A r r a n g e m e n t s . U n i t e d N a t i o n s , New Y o r k 8 F e b , 1 9 5 0 » p p . l«=*5 t ^ I n t e r n a t i o n a l M a t e r i a l s C o n f e r e n c e S e e k s S o l u t i o n t o W o r l d Commodi ty S h o r t a g e s " , F o r e i g n T r a d e , V o l v B ^ - N o / 2 5 2 , June Sy 1 9 5 1 . p p . 1 0 0 4 * 0 7 . - 145 -( i i ) National Attitudes and Opinions of Various Experts One might next consider the problem of ICA's from a different angle, by attempting to reveal something of national attitudes and viewpoints. In doing so one must recognize the problem of international cartels In general, since the issue on a national basis becomes essentially one of a l l forms of control, versus private enterprise. This i s perhaps best revealed in a contrast between the thinking and economic philosophies of the two great English-speaking countries, the United States and Britain, which between them dominate both world trade and a large part of internation-al policy. Eric Johnston has drawn the following contrast: "Americans are opposed to a monopolized country or a cartellized world, whether the control i s exercised by p r i -vate or by o f f i c i a l bureaucrats. In Britain, both extreme right and extreme l e f t , look forward complacently to extensive nationalization of industries, large and often controlling government participation in private business,, increased public planning and financing, and cartel arrangements for dividing and sharing world markets;."' 2^ The o f f i c i a l British viewpoint is well presented in 23 the PEP Broadsheet on postwar planning, which envisages: a whole network of ICA's, in the future. It i s hoped that such agreements would raise consumption levels generally, ensure free access to raw materials, f a c i l i t a t e international trade, reduce econ-omic- fluctuations, and promote f u l l employment. This unduly opti-mistic British view point is reflected in other quarters of which such a leading scientific journal as Nature might be cited.An edit-o r i a l 22 Johnston, Eric, America Unlimited, Garden City, 1944 PP» 212-13 23 • . "Commodity Control Schemes", PLANNING No. I74, July 29,1941 issued by PEP, London. - 146 -s u g g e s t s t h a t p r o v i s i o n f o r s u b s t a n t i a l consumer r e p r e s e n t a t i o n and p u b l i c s u p e r v i s i o n o f I C A ' s s h o u l d i n t h e f u t u r e remove t h e two m a i n p a s t c r i t i c i s m s , v i z , - t h a t p r i c e s w e r e m a i n t a i n e d a t a n u n r e a s o n a b l y h i g h l e v e l , w h i l s t i n e f f i c i e n t p r o d u c t i o n was a l l o w e d 24 t o p e r s i s t . I t i s f u r t h e r s u g g e s t e d t h a t b e c a u s e o f t h e n e e d f o r s u c h I C A ' s a f t e r t h e w a r a n i n t e r n a t i o n a l " r a w m a t e r i a l s u n i o n " be 25 s e t up as a c o - o r d i n a t i n g b o d y . R e p r e s e n t a t i v e s o f t h e U n i t e d S t a t e s r e v e a l q u i t e a s t r i k i n g e v o l u t i o n a r y p a t t e n n o f t h i n k i n g f r o m i n d i f f e r e n c e and m i s t r u s t , t o i n t e n s e e n t h u s i a s m f o r s u c h c o n t r o l s i n some q u a r t e r s . I t ha s a l r e a d y b e e n i n d i c a t e d I n t h e s t u d y o f w h e a t , t h a t t h e U n i t e d S t a t e s D e p a r t m e n t o f A g r i c u l t u r e was s t r o n g l y i n f a v o u r o f I C A ' s i n c e r t a i n c o m m o d i t i e s . S t a t e m e n t s b y s u c h r e p r e s e n t a t i v e s a s L J l , . W h e e l e r show t h a t a d e f i n i t e r o l e f o r I C A ' s was e n v i s a g e d i n t h e p o s t 26 w a r w o r l d . I n a n a r t i c l e o n a g r i c u l t u r a l s u r p l u s e s i n t h e p o s t -w a r p e r i o d , he a d v o c a t e s i n d i v i d u a l commodi ty ag reement s e x t e n d e d e v e n t o o p e r a t e as i n t e r n a t i o n a l b u y i n g and s e l l i n g c o r p o r a t i o n s , 27 A n o t h e r commenta tor on U . S . a g r i c u l t u r a l p o l i c y n o t e s t h a t t h e D e p a r t m e n t o f A g r i c u l t u r e a d v o c a t e d b u f f e r s t o c k s i n c o n j u n c t i o n 2 ^ A T U R E , V o l . 1 4 8 , N o , 3 7 5 S , N o v . 8 , 1 9 4 1 . 2 5 I b i d « p , 5 4 3 26 See f o r a r t i c l e b y W h e e l e r , L e s l i e A , " A g r i c u l t u r a l S u r p l u s e s i n t h e P o s t w a r W o r l d " , F o r e i g n A f f a i r s . 0 c t , 1 9 4 1 , V 6 1 . 2 0 , N o . l , 2 7 G o r d o n , M a r g a r e t S , " T h e A m e r i c a n E c o n o m i c R e v i e w , S e p t . 1 9 4 6 V o l b X X X V I , N o , 4 , P a r t 2 , p . 6 0 5 . 5 - 147 -with commodity agreements. Yet i n 1933 when the World Monetary and Economic Conference appointed a special committee to consider the problem of raw materials supplies and fluctuating prices, the United States did not even consider i t worth while to appoint a representa-28 tive to s i t on this committee. Chapter six of the ITO Charter dealing with ICA's was, however, "inserted and ardently defended" by the U.S, Government..^ These apparent contradictions^ can be readily understood in the light of United States experience with foreign control of two of her v i t a l raw materials, t i n and rubber. The excessive price fluctuations and occasional very high prices which accompanied the control of these two commodities, caused much resentment amongst manufacturers. Federal policy with respect to domestic cartels and industrial combinations indicates the high degree of public feeling against possible monopolistic extortion. The revelation made during the last war of the activities of cartels involving American corpora-tions, also revealed the way i n which such combinations had been used to further Nazi Germany's war aims. Public feeling, therefore, s t i l l runs very high i n the matter of international cartels. Hexner points out, however, that cartels are actually essentially business agreements. They are not based on any underlying philosophy, collective psychic structure, or p o l i t i c a l v o l i t i o n . What looks like Feis, Herbert, Op.cit. p.229 Pederson, JjJrgen,' "The Justification of Commodity Agreements", International Wheat Agreements, International Journal of  Agricultural Affairs, Vol.1, No.3. Sept.1949 - 148 -v o l i t i o n i s a c t u a l l y the resultant compromise of e s s e n t i a l l y separate (frequently b a s i c a l l y c o n f l i c t i n g ) i n t e r e s t s and ends. He also states that Nazi Germany i n u l t i m a t e l y condemning c a r t e l s r i g h t l y judged that they were not dominated by p o l i t i c a l v o l i t i o n of any s o r t . One might t e n t a t i v e l y state a t t h i s stage that the United States government i s probably making a f a l s e d i s t i n c t i o n i n condemning c a r t e l s and supporting ICA's so strongly. The d i s t i n c t i o n between the two may not be so profound, and c e r t a i n l y consumer representation appears often i n e f f e c t i v e i n governmental agreements, and the comprises which are necessitated i n t h e i r c r e a t i o n often divorces the f i n a l agreement from any recognizable p o l i t i c a l or economic doctrines. There might therefore be some j u s t i f i c a t i o n f o r the aphorism that " C a r t e l s are commodity agree-ments the United States does not l i k e : commodity agreements are 32 c a r t e l s the United States approves", which was made by one c r i t i c during the negotiations f o r the d r a f t i n g of an ITO Charter, We might l o g i c a l l y proceed to consider the views of some of the leading experts and c r i t i c s of ICA's. Black argues that 3°Hexher, E r v i n , International C a r t e l s . U n i v e r s i t y of N. Carolina Press, p.161. 5 L T b i d . p.,148 32 J Quoted by Bidwell, Percy W., and Diebold, William, "The United States and the International Trade Organization", I n t e r n a t i o n a l  C o n c i l i a t i o n , March 1949, Carnegie Endowment f o r I n t e r n a t i o n a l Peace, New York, p.221. - 149 -p r o d u c e r s ' c a r t e l s w i l l i n e v i t a b l y r e c u r b e c a u s e o f p o w e r f u l g r o u p i n t e r e s t s amongst p r i v a t e b u s i n e s s . He t h e r e f o r e t h i n k s t h a t s u c h f o r c e s w h i c h l e a d t o i n t e r n a t i o n a l c o l l a b o r a t i o n , s h o u l d be b r o u g h t o u t i n t o t h e open and f o r g e d i n t o v i s i b l e l i n k s b y government c o n t r o l and r e g u l a t i o n , " He a l s o b e l i e v e s t h a t s u c h I C A ' s s h o u l d be c o n -t i n u o u s l y f u n c t i o n i n g o r g a n i z a t i o n s arid n o t t e m p o r a r y e x p e d i e n t s s i n c e " t h e most e f f e c t i v e t r e a t m e n t o f c h r o n i c s u r p l u s e s i s p r e v e n t a - " t i v e a n d a n t i c i p a t o r y."34 A number o f w r i t e r s , : c o n s i d e r t h a t I C A ' s a r e a d e s i r a b l e s o l u t i o n t o r a w m a t e r i a l s p r o b l e m s , b y d e f a u l t , s i n c e i n t h e i r a b s e n c e , e c o n o m i c a n a r c h y r e i g n s , . S u c h may be c o n s i d e r e d an. e x t r e m e v i e w , i n n o r m a l t i m e s , b u t no d o u b t e x p l a i n s t h e u n d e r l y i n g p h i l o s o p h y o f a good many p r o p o n e n t s o f I C A ' s d u r i n g t h e d e p t h s o f t h e d e p r e s s i o n . S i r D a n i e l H a l l i n d i s c u s s i n g i n t e r n a t i o n a l commodi ty c o n t r o l , s u g g e s t e d t h a t " t h e i n c r e a s i n g e x t e n t o f s t a t e c o n t r o l and i n t e r -v e n t i o n i s m e r e l y a m a n i f e s t a t i o n o f t h e o n l y means o f a p p l y i n g t h e b r a k e s t o t h e d i s r u p t i o n s c a u s e d b y r a p i d t e c h n o l o g i c a l a d v a n c e s . " ^ I n a n o t u n l i k e m a n n e r , Rowe seems t o r e g a r d I C A ' s a s an i n e v i t a b l e e v o l u t i o n a r y o u t g r o w t h o f human p r o g r e s s and c o n s c i o u s e f f o r t t o c o u n t e r a c t t h e d i s t u r b i n g e f f e c t s o f w a r s and d e p r e s s i o n s . ' ^ " T S S U , ' S t a n l e y & B l a c k , J . D . , " I n t e r n a t i o n a l " Commodi ty A g r e e m e n t s " , The Q u a r t e r l y J o u r n a l o f E c o n o m i c s , A u g u s t 1940, p .5 3 0 . 3 4 I b i d , p,549 5 5 H a l l , S i r D a n i e l , " T h e P a c e o f P r o g r e s s " McRede L e c t u r e , M a r c h . 4, 1935, Cambr idge U n i v e r s i t y P r e s s , o w e , J . W . F . , M a r k e t s and M e n , C a m b r i d g e U n i v e r s i t y P r e s s , 1935 - 150 -On t h e o t h e r s i d e , t h e r e a r e a number o f w r i t e r s who v i e w p a s t e x p e r i e n c e w i t h I C A 1 s a n d c o n s i d e r them t o be i n h e r e n t l y -e v i l , and b e l i e v e t h a t new a t t e m p t s t o f o r m commodi ty ag reement s w i l l r e v e r t o n l y t o t h e b a d t r a d i t i o n a l p a t t e r n s o f t h e i n t e r - w a r 37 38 y e a r s , W a l l a c e i n r e v i e w i n g c e r t a i n commodi ty s t u d i e s makes t h e a n a l o g y o f I C A 1 s t o a new Magna C a r t a w h i c h s e t s up i n s t e a d o f a n a b s o l u t e m o n a r c h , a f e u d a l r u l e b y b a r o n s . T h u s , I C A , ' s e n l i s t t h e s u p p o r t o f g o v e r n m e n t s , b u t t h e r e s u l t i s s t i l l " g o v e r n m e n t f o r t h e p r o d u c e r , b y t h e p r o d u c e r and o f t h e p r o d u c e r ; " t h e r e r e m a i n s no e f f e c t i v e c o n s i d e r a t i o n o f t h e u l t i m a t e consumer' 1 s i n t e r e s t s . 39 40 W r i t e r s s u c h as E l l i o t and S c h w e n g e r a d v o c a t e t h e f o r m a t i o n o f I C A ' s i n the p o s t w a r p e r i o d as a n e c e s s a r y means o f c o n t r o l l i n g s u r p l u s e s and r e b u i l d i n g i n t e r n a t i o n a l t r a d e . E l l i o t c o n s i d e r s i n t e r n a t i o n a l a g r e e m e n t s as a v a l u a b l e a d j u n c t t o t h e p o l i c y o f t h e FAO a n d b e l i e v e s t h a t b y c o n c e n t r a t i n g u p o n . i n d i v i d u a l commodi ty p r o b l e m s and d r a w i n g up r e l a t i v e l y s i m p l e a g r e e m e n t s b a s e d on a g r e e d i m p o r t and e x p o r t q u o t a s , t h e c o n f l i c t b e t w e e n n a t i o n a l s o v e r e i g n t y and t h e d e l e g a t i o n o f i n t e r n a t i o n a l power might be r b s o l v e d . 3 7 G o r d o n , M a r g a r e t S , " I n t e r n a t i o n a l A s p e c t s o f A m e r i c a n . A g r i c u l t u r a l P o l i c y " , O p , c i t . t p . 6 0 6 . 3 % a l l a c e , B e n j a m i n B . The A m e r i c a n E c o n o m i c R e v i e w , V o l . X X X V M a r c h , 1 9 4 5 , p . 1 9 8 5 9 E l l i o t . F . F . " R e d i r e c t i n g W o r l d A g r i c u l t u r a l P r o d u c t i o n and T r a d e T o w a r d B e t t e r N u t r i t i o n " , J o u r n a l o f F a r m E c o n o m i c s , V o l . X X V I , F e b r u a r y 1 9 4 4 , N o . l . ^ S c h w e n g e r , R o b e r t B ; " W o r l d A g r i c u l t u r a l P o l i c i e s and t h e E x p a n s i o n ' o f T r a d e " , J o u r n a l o f F a r m E c o n o m i c s . V o l » X X V I I , F e b . 1 9 4 5 , N o . l . - 151 -Schwenger i s able to show how an o v e r a l l p o l i c y of l i b e r a l i z i n g Trade and removing trade b a r r i e r s , can s t i l l be consistent with and complementary to, i n t e r n a t i o n a l i n t e r v e n t i o n i n a l i m i t e d sphere. He further points out that i f the world could be main-tained i n a state of f u l l employment, and that i f nationa l s e l f -s u f f i c i e n c y did not con t i n u a l l y replace economic goals, there would then be no need f o r the " i n t e r v e n t i o n i s t " approach. ICA's he f e e l s , should be regarded as temporary measures and care should be taken that they are designed only to terminate the maladjust-ments which made them necessary and that they should be withdrawn as soon as t h i s has been done. Mason s i m i l a r l y emphasizes the probable, surpluses that w i l l a r i s e when conditions return to 41 normal a f t e r the disruptive e f f e c t s of the war. Though he believes i n a l i b e r a l trade p o l i c y and a ndnimum of government intervention, he considers that the surplus problem w i l l n e c e s s i -tate i n t e r n a t i o n a l commodity a c t i o n and cannot be l e f t to the harsh forces of l a i s s e z - f a i r e . Most of the best-known w r i t e r s i n the f i e l d of a g r i c u l t u r a l economics are s c e p t i c a l about the a b i l i t y of ICA 1s to overcome the many inherent p i t f a l l s , and while admitting that they might play a very u s e f u l r o l e , they sound a note of caution. T.W, Schultz does not think i n d i v i d u a l commodity agreements ei t h e r d e s i r -able or necessary i f some e f f e c t i v e c o u n t e r c y c l i c a l p o l i c y could be d e v i s e d . ^ Though t h i s would probably be so, i t seems to be begging ^f i a s o n , Edward S. "The Future of Commodity Agreements", i n Food f o r the World, edited by T.W. Schultz, Univ. Chicago. Press. 42 Schultz, T.W., "Food, A g r i c u l t u r e and Trade", Journal of Farm  Economics. Vol..XXIX, Feb. 1947, Nb.l - 152 -t h e i s s u e . B o t h S c h u l t z and J o h n s o n p a y c o n s i d e r a b l e a t t e n t i o n t o t h e p r o b l e m o f p r i c e i n s t a b i l i t y and t h e p o s s i b i l i t y o f b u f f e r s t o c k s chemes , o r o t h e r c o u n t e r - c y c l i c a l m e a s u r e s . J o h n s o n , l i k e S c h u l t z , does n o t f a v o u r i n d i v i d u a l commodity a g r e e m e n t s , s i n c e h i s e m p h a s i s i s u p o n s t a b i l i z a t i o n . B o t h w r i t e r s a r e a t t r a c t e d b y a p r o p o s a l o f V i n e r , f o r a n " I n t e r n a t i o n a l Employment S t a b i l i z a t i o n F u n d . " ^ T h e y r e a s o n t h a t s u c h a c o u n t e r - c y c l i c a l measure w o u l d be f a r more e f f e c t i v e t h a n t h e p r e s e n t W o r l d B a n k o r t h e I n t e r -n a t i o n a l M o n e t a r y F u n d . J o h n s o n ' s a n a l y s i s o f b u f f e r s t o c k schemes w i l l be c o n s i d e r e d i n t h e l a t t e r p a r t o f t h i s c h a p t e r . One m i g h t c o n c l u d e t h i s r e v i e w o f d i f f e r e n t c r i t i c s b y c o n s i d e r i n g f i n a l l y some o f t h e o b s e r v a t i o n s o f J o s e p h D a v i s who has s t u d i e d s u c h p r o b l e m s f o r s e v e r a l d e c a d e s . I n t h e m a i n , h i s v i e w p o i n t i s one o f d o u b t and s c e p t i c i s m . He f e e l s t h a t I C A ' s i n t h e p a s t have o f t e n b e e n o v e r - a m b i t i o u s i n s cope a n d o b j e c t i v e s . I n p r a c t i c e , he s t a t e s " s t a b i l i z a t i o n o f p r i c e s " has commonly meant b o o s t i n g o f p r i c e s above e q u i l i b r i u m l e v e l s . " P r o d u c t i o n c o n t r o l " has meant a t t e m p t e d r e s t r i c t i o n s o f a c r e a g e o r o u t p u t , a n d " f a i r s h a r e s i n w o r l d t r a d e " have r e s u l t e d f r o m b a r g a i n i n g w i t h h i s t o r i c a l a v e r a g e s , r a t h e r t h a n w i t h r e s p e c t t o c u r r e n t a b i l i t y a n d w i l l i n g n e s s t o c o m p e t e . ^ D a v i s has e v e n q u e s t i o n e d t h e p r e m i s e s u p o n w h i c h t h e 43 See V i n e r , J a c o b " I n t e r n a t i o n a l F i n a n c e i n t h e P o s t W a r W o r l d " , J o u r n a l o f P o l i t i c a l E c o n o m y , V o l , LV, A p r i l 1947, p p . 106-7 V i n e r ' s p r o p o s a l , w h i c h i s riot e l a b o r a t e d , e n v i s a g e s a n a g e n c y endowed w i t h g r e a t f i n a n c i a l r e s o u r c e s and empowered t o c o n d u c t a n t i - c y c l i c a l i n v e s t m e n t o p e r a t i o n s . 44 D a v i s , J o s e p h S . " I n t e r n a t i o n a l Commodi ty A g r e e m e n t s i n t h e P o s t War W o r l d " , A m e r i c a n E c o n o m i c R e v i e w , V o l . X X X I I N o . l , P a r t 2, p.401. - 153 -need f o r ICA's are commonly based. He considers that much more needs to be known about the basic productive conditions surrounding i n d i v i d u a l commodities and the actual extent of t h e i r i n e l a s t i c i t y . He does consider, however, that there might be an important r o l e f o r ICA's to play i n the future as i s demonstrated by the concluding statement i n one of h i s a r t i c l e s . ^ n I regard as hopeful the search for' methods of i n t e r -n a t i o n a l co-^operation, agreement, and even re g u l a t i o n that w i l l genuinely promote peaceful progress of the world economy. But i n t h i s realm, as i n others, we should avoid the temptation to premature commitments f o r the period following the post-war t r a n s i t i o n period. A proper f i e l d f o r ICA's i n a world of peace can presumably be found. Yet too much of current'thinking i s v i t i a t e d by carryovers from the decade of the 1 9 3 0 's, when desperate e f f o r t s to combat depression were accompanied by wide-spread economic measures i n preparation f o r war." T)avis, J . S , "International Commodity Agreements i n the Post War World^" from' Post 7far Economic Problems, edited by Seymour E. H a r r i s , McGraw-Hill, 1943 , Chapter XVIII. TJavis, J . S . " I n t e r n a t i o n a l Commodity Agreements i n the Post War World," Pp.. c i t . , p.403. - 15k -( i i i ) B u f f e r S t o c k P r o p o s a l s M e n t i o n ha s a l r e a d y b e e n made i n d i f f e r e n t p a r t s o f t h i s s t u d y , o f t h e p r o b l e m o f y i e l d v a r i a b i l i t y , and t h e r e s u l t a n t p r i c e i n s t a b i l i t y , w h i c h p r o d u c e s g r e a t h a r d s h i p among p r i m a r y p r o d u c e r s f r o m t i m e t o t i m e . P r i c e i n s t a b i l i t y a l s o makes p r o -d u c t i o n p l a n n i n g and demand f o r e c a s t i n g a d i f f i c u l t i f n o t i m p o s s i b l e t a s k . ' I t i s t h e r e f o r e one o f t h e c o n t r i b u t o r y f a c t o r s t o p r o d u c e r s p r o d u c t i o n c y c l e s w h i c h a r e d e s c r i b e d i n t h e o p e n i n g c h a p t e r . I t i s a l s o o b v i o u s t h a t p r i c e u n c e r t a i n t y m i l i t a t e s a g a i n s t t h e f u l l e s t a n d mos t e f f i c i e n t u t i l i z a t i o n o f p r o d u c t i v e f a c t o r s . The i d e a o f a c c u m u l a t i n g p h y s i c a l s t o c k s o f a c o m m o d i t y , as a s t a b i l i z a t i o n r e s e r v e , c o n s e q u e n t l y has c o n s i d e r a b l e t h e o r e t i c a l v a l i d i t y . I t has a l r e a d y b e e n s e e n t h a t t h e U n i t e d S t a t e s and B r a z i l i a n c r o p s t a b i l i z a t i o n p o l i c i e s w e r e i n e f f e c t i n t e n d e d as b u f f e r s t o c k schemes * The t e r m s e v e r n o r m a l - g r a n a r y a n d v a l o r i -z a t i o n a r e b o t h e s s e n t i a l l y embodiments o f t h e same o b j e c t i v e a n d m e c h a n i s m s . The l a s t p a r t o f t h i s c h a p t e r i s d e v o t e d t o a c o n -s i d e r a t i o n o f t h i s p r o b l e m a n d some o f t h e p r o p o s a l s w h i c h have b e e n made t o remedy t h e c a u s e s o f p r i c e i n s t a b i l i t y . The i d e a o f u s i n g a b u f f e r s t o c k o r e q u a l i z a t i o n r e s e r v e s t o c k s t o m i t i g a t e t h e e f f e c t s o f u n p r e d i c t a b l e f l u c t u a t i o n s i n s u p p l y o r demand i s b y no means n e w . I t may have i t s o r i g i n s j i i n w a r t i m e e x p e r i e n c e s , when t h e c o n s e q u e n c e s o f s c a r c i t y became p a r t i c u l a r l y s i g n i f i c a n t . A s e a r l y as 1780 a n e v e r - n o r m a l g r a n a r y ^ 7 47 The W o r k s o f t h e L a t e S i r James S t e u a r t , V o l . V . , L o n d o n , 1 8 0 5 . - 155 -p r o p o s a l was made b y S i r James S t e u a r t i n h i s " D i s s e r t i o n on t h e P o l i c y o f G r a i n , w i t h v i e w t o a p l a n f o r p r e v e n t i n g s c a r c i t y o r e x o r b i t a n t p r i c e s i n t h e common m a r k e t s o f E n g l a n d " , On an i n t e r -n a t i o n a l s c a l e , v a r i o u s s p e c i a l s t u d i e s a n d i n v e s t i g a t i o n s u n d e r t h e a e g i s o f t h e League o f N a t i o n s , have a l s o p r o p o s e d b u f f e r s t o c k ' schemes as a p a r t i a l s o l u t i o n t o g e n e r a l e c o n o m i c i n s t a b i l i t y a n d p r o b l e m s i n t h e f i e l d o f r a w m a t e r i a l s , i n p a r t i c u l a r . Thus a s p e c i a l c o m m i t t e e f o r the s t u d y o f r a w m a t e r i a l s p u b l i s h e d t h e d e t a i l s o f a b u f f e r s t o c k scheme i n i t s r e p o r t w h i c h came o u t i n 48 1937, A b o u t t h e same t i m e one o f t h e f i r s t t h e o r e t i c a l d i s -49 c u s s i o n s o f s u c h a p r o p o s a l was p u b l i s h e d b y B e n j a m i n G r a h a m . A n a r d e n t p r o p o n e n t o f s u c h i n t e r n a t i o n a l s t a b i l i z a t i o n s c h e m e s , Graham' s more m a t u r e p r o p o s a l s w i l l be c o n s i d e r e d s u b s e q u e n t l y . L o r d K e y n e s may a l s o be c o n s i d e r e d a s one o f t h e o r i g i n a l t h i n k e r s i n t h i s s p h e r e . H i s s t u d i e s o f s h o r t - r u n d i s e q u i l i b r i a , l e d h i m t o c o n s i d e r t h e p o t e n t i a l a n t i - c y c l i c a l e f f e c t o f s u c h c o m m o d i t y - s t o r a g e s c h e m e s . I t c a n r e a d i l y be a p p r e c i a t e d t h a t s t a b i l i z a t i o n o p e r a t i o n s amongst a number o f d i f f e r e n t b a s i c c o m m o d i t i e s ; i f c o n d u c t e d on a n i n t e r n a t i o n a l s c a l e and i n a c l o s e l y r e l a t e d m a n n e r , c o u l d have t h e e f f e c t o f c r e a t i n g a c o m m o d i t y c u r r e n c y s t a b i l i z e r . I n h i s T r e a t i s e on M o n e y , ^ ° K e y n e s d e v e l o p s t h e i d e a o f commodi ty money . He d e f i n e s s u c h as b e i n g " c o m p o s e d o f a c t u a l u n i t s 48 League o f N a t i o n s . O f f i c i a l N o . A . . 27. 1937, I I B , , Geneva 1937. Page 20. . ^ G r a h a m , B e n j a m i n , S t o r a g e and S t a b i l i t y , 1937. 50 K e y n e s , J * M , , T r e a t i s e on M o n e y , V o l , 1 . , L o n d o n , 1930. - 15'6 -o f a p a r t i c u l a r f r e e l y o b t a i n a b l e , n o n - m o n o p o l i z e d c o m m o d i t y ( o r o f w a r e h o u s e w a r r a n t s f o r a c t u a l l y e x i s t i n g u n i t s o f t h e c o m m o d i t y ; e . g . , U . S . g o l d c e r t i f i c a t e s ) w h i c h happens t o h a v e ' b e e n c h o s e n f o r t h e f a m i l i a r p u r p o s e s o f money, b u t t h e s u p p l y o f w h i c h i s g o v e r n e d , l i k e t h a t o f any o t h e r c o m m o d i t y , b y s c a r c i t y a n d c o s t o f p r o d u c t i o n . 1 1 ' I n 1938 K e y n e s c o n t r i b u t e d a n a r t i c l e t o t h e E c o n o m i c J o u r n a l p r o p o s i n g a s t o r a g e p o l i c y o f f o o d s t u f f s a n d r a w m a t e r i a l s f o r t h e B r i t i s h E m p i r e , w i t h c o m b i n e d d e f e n s e a n d p r i c e s t a b i l i z i n g o b j e c t i v e s . I n t h i s a r t i c l e he d e v e l o p s t h e t h e s i s t h a t u n d e r f r e e l y c o m p e t i t i v e c o n d i t i o n s t h e r e i s a n i n h e r e n t t e n d e n c y f o r i n d i v i d u a l e n t r e p r e n e u r s n o t t o h o l d s u f f i c i e n t s t o c k s o f r a w m a t e r i a l s , t o b e a b l e e f f e c t i v e l y t o c o u n t e r a c t s u p p l y a n d demand f l u c t u a t i o n s . " T h e c o m p e t i t i v e s y s t e m " , he s a y s , " a b h o r s t h e e x i s -t e n c e o f s t o c k s , w i t h a s s t r o n g a r e f l e x a s n a t u r e a b h o r s a v a c u u m , b e c a u s e s t o c k s y i e l d a n e g a t i v e r e t u r n i n t h e m s e l v e s . " Ke r e g a r d s i t " a s a n o u t s t a n d i n g f a u l t o f t h e c o m p e t i t i v e s y s t e m , t h a t t h e r e i s n o t s u f f i c i e n t i n c e n t i v e t o the I n d i v i d u a l e n t e r p r i s e t o s t o r e s u r p l u s s t o c k s and m a t e r i a l s , so a s t o m a i n t a i n c o n t i n u i t y o f o u t p u t a n d t o a v e r a g e , a s f a r a s p o s s i b l e , p e r i o d s o f h i g h a n d l o w d e m a n d , " F r o m 1938 t o 1945 a s p e c i a l i n v e s t i g a t i o n o f b u s i n e s s c y c l e s was c o n d u c t e d u n d e r the o r i g i n a l s p o n s o r s h i p o f t h e L e a g u e o f N a t i o n s . I n i t s f i n a l c o m p r e h e n s i v e r e p o r t w h i c h o u t l i n e s t h e 5 a T b i d . , p , 7 . 5 2 K e y n e s , J . M . , " T h e ' P o l i c y o f Government S t o r a g e o f F o o d s t u f f s a n d Raw M a t e r i a l s " , E c o n o m i c J o u r n a l , 1 9 3 8 . 5 5 L e a g u e o f N a t i o n s R e p o r t , " E c o n o m i c S t a b i l i t y i n t h e P o s t - W a r -W o r l d " , P a r t I I , League o f N a t i o n s , . G e n e v a , 1945 C h a p t e r 1 9 , p . 3 1 5 . - 157 -u n s o l v e d d i f f i c u l t i e s , r a t h e r t h a n d r a w i n g a n y d e f i n i t e c o n c l u s i o n s , s u g g e s t i o n i s a g a i n made f o r e s t a b l i s h i n g a b u f f e r s t o c k scheme t o s t a b i l i z e raw m a t e r i a l p r i c e s T h i s p r o p o s a l e n v i s a g e s a n e s s e n t i a l l y c o u n t e r - c y c l i c a l s cheme , l a r g e l y a u t o m a t i c i n o p e r a t i o n . The p l a n was t o be f i n a n c e d b y q u o t a s u b s c r i p t i o n s f r o m member n a t i o n s , , p l u s b o r r o w i n g . S p e c i f i c a l l y , i t was s u g g e s t e d t h a t s u c h a n a g e n c y m i g h t " t a k e as i t s s t a n d a r d t h e a v e r a g e p r i c e f o r t h e p r o c e d i n g e i g h t t o t e n y e a r s a n d announce t h a t i t i s p r e p a r e d : ( 1 ) To b u y any q u a n t i t y when t h e m a r k e t f a l l s t o , s a y , 20 p e r c e n t b e l o w - t h e s t a n d a r d p r i c e , and ( 2 ) t o s e l l when t h e p r i c e r i s e s t o 20 p e r c e n t above the s t a n d a r d ; u n d e r s u c h a n a r r a n g e m e n t p r i c e s m i g h t f l u c t u a t e 20 p e r c e n t above o r b e l o w a g i v e n l e v e l b u t n o t m o r e . I f t h a t l e v e l w e r e a m o v i n g a v e r a g e i t w o u l d t e n d t o a d j u s t i t s e l f t o l o n g - r u n changes i n demand and s u p p l y . E v e n so w i d e a m a r g i n w o u l d r e p r e s e n t a g r e a t advance t o w a r d s s t a b i l i t y o v e r p a s t e x p e r i e n c e . " Though t h e r e i s no m e n t i o n o f a n y b u f f e r s t o c k p r o p o s a l s i n t h e ITO C h a r t e r , b o t h t h e I L 0 and FAO have p r o p o s e d s u c h a s cheme . 54 I n i t s 1943 r e p o r t on I n t e r g o v e r n m e n t a l Commodi ty A g r e e m e n t s , t h e H O p r o p o s e d an i n t e r n a t i o n a l a g e n c y t o b u y a n d s e l l r a w p r o d u c t s t h a t a r e p r o m i n e n t i n i n t e r n a t i o n a l t r a d e , w i t h t h e o b j e c t i v e o f r e d u c i n g s h o r t - t e r m f l u c t u a t i o n s i n p r i c e s . T h i s " r e p o r t a l s o i m p l i e s t h a t s u c h commodi ty s t o c k s w o u l d p l a y a v a l u a b l e c o n t r i b u t o r y r o l e i n d e f e n s e p r o g r a m s . The FAO has c o n c e r n e d i t s e l f w i t h s u c h s t a b i l i z i n g I n t e r n a t i o n a l L a b o u r O f f i c e , " I n t e r g o v e r n m e n t a l Commodi ty C o n t r o l A g r e e m e n t s , M o n t r e a l , 1 9 4 3 , p p . x i i i - x i v . - 158 -schemes since its origins. Thus a buffer stock proposal was made at the United Nations Conference on Food and Agriculture at Hot Springs in 1943» when a Charter for the FAO was drawn up. The idea, largely under the inspiration of Lord Keynes, was proposed by the Chairman of the British Delegation, who explained its objectives in the following words: "It should aim at combining a short period stabilization of prices with a long period price policy which balances supply and demand and allows a steady rate of expansion to the most efficient producers. It should be possible to achieve these aims through variation in the price at which the authority controlling the buffer stock is a buyer and seller."55 The proposals later became elaborated under the direction of Lord Boyd Orr so that by 1946 a detailed plan for a World Food Board was presented.56 ^t was suggested that this board conduct a series of price stabilizing operations by buying and selling a number of commodities for which buffer stocks would be held. It was also suggested that i t would be able to pass into consumption any possible over-accumulation of the stockpile (such as would jeopardize price maintenance), by sales at sub-standard prices with financial loss to contributors to the enabling fund.57 nOrr ,s Plan", as i t came to be called, was rejected, but the idea was retained and the FAO subsequently produced its most elaborate plan for an International Commodity Clearing House. The central theme was retained throughout, that of an operating fund contributed on a quota basis by ~ 3 United Nations Conference on Food & Agriculture, Hot Springs, Va., May 18 - June 3, 1948, Final Act and Section Reports, Washington, D.C., 1943, pp. 59-60. 56 United Nations Food and Agricultural Organization - Proposals for a World Food Board, Washington, D.C., July 5, 1946. Bermet, M.K., International Commodity Stockpiling as an Economic Stabilizer* Food Research Institute, Dec, 1949, p. 184. - 159 -member nations, and used to buy and sell commodities in international trade with the objective of stabilizing prices. The World Food Board was also intended to establish a food reserve adequate for any emergency that might arise through failure of crops in any part of the world,^ The plan for a commodity clearing house included provision that the buying and selling corporation should make special sales and long-term loans to needy nations out of stocks which were to be considered surplus. The FAO's 1949 proposals were universally rejected by member nations at the fifth annual conference held in November, 1949^ Though the opposition to this scheme might point out the conflict between national sovereignty and international delegation of authority, the FAO proposals might also be criticized on theoretical grounds, for being altogether too embracing in their objective, and for obscuring the essential function of such an international agency, with supererogatory directives. During this period a number of individual authorities, i n considering and discussing post war plans, suggested buffer stock operations. Most of such proposals were, however, not detailed and did not go further than suggesting that such operations should be regarded as supplementary to other international counter-cyclical measures, and could be best conducted by some form of international commodity^ O o r world Trade Board,^ The French Banker, Andre Istel also proposed the organiza-62 tion of separate corporations which would conduct buying and selling of strategic raw materials. He develops an interesting thesis, that 5 s Schultz, T.W., Production and Welfare of Agriculture, New York, MacIUllan - Q Co., 1949, p. 198 Farmer & Stockbreeder, London, Sept. 7th, 1949 - gives details of this conference on p. 2495. 60 Hansen, Alvin H., "World Institutions for Stability and Expansion, Foreign Affairs, Vol. 22, No. 2, Jan. 1, 1941, p. 253. 61 Ellio t t , F.E. "A Proposed World Trade Board for Expanding International Trade", Journal of Farm Economics, Vol. XXVII, Aug. 1945, No. 3 62 Istel, Andre', "Equal Access to Raw Materials", Foreign Affairs Apr. 1942 Vol. 20, No. 3 . - 160 -concentration in the manufacturing industries, with increased govern-mental control and taxation, has made industrial production costs more rigid and caused price fluctuations in raw materials to be much more disruptive in effect upon the entire economy. This article, however, only tentatively suggests that an international commodity corporation might be formed. The first really detailed proposal was made by W. Riefler who was actually a prominent member of the special League of Nations Committee which investigated economic stability in the post-war world. A year after the publication of this report, Rieller published his own proposals together with some interesting arguments in support of the need for stabilization 6 3 operations, and a rebuttal of previous tentative criticisms. Riefler defines buffer stocks as: "publicly directed agencies organized and equipped to purchaee, store, and sell durable, storable commodities in recurrent demand in such a way as to mitigate fluctuations i n their prices, in the employment and income of their producers, and in their costs to fabricators, dealers and dis t r i -butors." He envisions a scheme with greater financial backing than the world bank, operating only in the markets for durable, homogenous and cheaply storable commodities, and able to be self-supporting. Such an international agency would have to be safeguarded from excessive stock accumulation, by powers to enter into negotiations with member nations to help them organize production control. It would not be compelled to continue purchasing operations i f stocks of any one commodity exceeded, say, a three years average movement of that commodity in international trade. Riefler, W.W. "A Proposal for an International Buffer Stock Agency", The Journal of Political Economy, Dec, 1946 Vol. LTV, No. 6, PP. 538-546. - 161 -Perhaps the most refined proposals for an international buffer stock, are contained in Benjamin Graham's suggestions for commodity stockpiling as an economic stabilizero^ As his ideas have been subject to an exhaustive critical analysis by the Food Research gc Institute, i t is not necessary in this study to do more than summarixe the principal issues* Graham's idea is essentially that of conducting operations that would affect the price of a group of commodities rather than each commodity separately. He develops the concept of a commodity Unit comp-rised of fifteen or more of those basic commodities most important in international, trade which are relatively durable and convenient to store* The contents or proportions of the various commodities in the unit would remain fixed over considerable periods of time. Actual products would not be bought, the transaction being either i n warehouse receipts or 'futures1• National currencies would be issued in exchange for these warehouse receipts representing a fixed quantity of specified storable commodities. Currencies would be redeemable in the same commodity unit, so that the plan is analogous to the operation of the gold standard in pre-1914 overseas trade. With such a commodity reserve in operation, an increase in the demand for money would eixpress itself in an accumulation of raw materials. The scheme also contemplates special price support in the form of individual ICA's for any particular commodity which is in chronic over-supply or in an especially weak position. Purchases and sales 64 Graham, Benjamin, World Commodities and World Currency, New York and London, 1944. ^ Bennet, M.K. and Associates (International Commodity Stockpiling as an Economic Stabilizer), Op. Cit. - 162 -by t h e i n t e r n a t i o n a l a g e n c y , - e x c e p t a s m o d i f i e d d b y o p e r a t i o n s u n d e r i n t e r n a t i o n a l , commodity a g r e e m e n t s , w o u l d be of.' commodity u n i t s , i . e . , o f a s u c c e s s i o n o f ' b a s k e t s . 1 o f t h e i n c l u d e d c o m m o d i t i e s , p r e d e t e r m i n e d w i t h r e s p e c t t o t h e q u a n t i t i e s o f e ach w i t h i n t h e b a s k e t ; The scheme was t o be r e l a t i v e l y a u t o m a t i c so t h a t p u r c h a s e s f o r t h e s t o c k p i l e w o u l d o c c u r whenever t h e c r u c i a l i n t e r n a t i o n a l p r i c e i n d e x ( o r , t o e x p r e s s i t i n a n o t h e r way , t h e p r i c e o f t h e commodity u n i t ) t o u c h e d any n u m e r i c a l v a l u e b e l o w 95 a Q ( i w o u l d c o n t i n u e u n t i l t h a t index , n u m e r i c a l l y e x c e e d e d 95 • S a l e s w o u l d become o b l i g a t o r y whenever t h e i n d e x h a d r i s e n above 105 and w o u l d c o n t i n u e u n t i l t h e i n d e x f e l l b e l o w 105. Graham e m p h a s i z e s t h a t t h e p l a n i n v o l v e s no s p e c i f i c l i m i t a t i o n s upon t h e p r i c e f l u c t u a t i o n s ; o f i n d i v i d u a l i t e m s w i t h i n t h e commodity u n i t . I n h i s p r o p o s a l s , he t e n t a t i v e l y s u g g e s t s t h a t w h e a t , c o r n , c o t t o n , w o o l , r u b b e r , c o f f e e , t e a , s u g a r , t o b a c c o , p e t r o l e u m , c o a l , , wood p u l p , p i g i r o n , c o p p e r and t i n , be i n c l u d e d i n t h e commo-d i t y b a s k e t . He a l s o e s t i m a t e s t h a t t h e c a p i t a l r e q u i r e m e n t s o f s u c h an agency c o u l d e a s i l y be t w e n t y b i l l i o n d o l l a r s . The a v e r a g e s t o r a g e expenses , a r e e s t i m a t e d t o amount t o a y e a r l y c o s t o f 100 t o 150 m i l l i o n d o l l a r s ( a t 2! p e r c e n t p e r annum) . These c o s t s c o u l d , h o w e v e r , be c o v e r e d i n w h o l e o r i n p a r t by t h e d i f f e r e n c e i n p r i c e s b e t w e e n w h i c h t h e agency bought and s o l d f r o m t h e s t o c k p i l e . The scheme i s . , o f c o u r s e , n o t d e s i g n e d s i m p l y t o h o l d w i t h i n s p e c i f i e d l i m i t s , t h e f l u c t u a t i o n s o f a p a r t i c u l a r c o m p o s i t e i n t e r n a t i o n a l p r i c e o f a b a s k e t o f s e l e c t e d raw m a t e r i a l s . Graham - 163 -i n t e n d s t h a t i t s h o u l d u l t i m a t e l y c o n t r i b u t e t o t h e e c o n o m i c w e l f a r e o f t h e w o r l d t h r o u g h s t a b i l i z i n g f o r e i g n e x c h a n g e , s t a b i l i z i n g p r i c e s and h e l p i n g t o w a r d s a b a l a n c e d e x p a n s i o n o f t h e w o r l d ' s o u t p u t and c o n s u m p t i o n o f u s e f u l g o o d s . The F o o d R e s e a r c h I n s t i t u t e c a u t i o u s l y e n d o r s e s G r a h a m ' s p r o p o s a l s w i t h a few m o d i f i c a t i o n s . Shaw c o n t r i b u t e s a c r i t i c a l a n a l y -66 s i s o f t h e p l a n o f f i n a n c e embodied i n t h e scheme, and c o n c l u d e s t h a t Graham's : e m p h a s i s upon t h e m o n e t a r y s t a b i l i z i n g e f f e c t s ; o f t h e scheme d e t r a c t s - f r o m t h e v a l i d i t y o f i t s o r i g i n a l i n t e n t i o n . He s t a t e s ; t h e f o l l o w i n g m a i n o b j e c t i o n s . . 1. The i m p l i c a t i o n t h a t change i n t h e w o r l d a g g r e g a t e o f m o n e t a r y r e s e r v e s i s a lways ; a sound a n t i d o t e f o r e c o n o m i c i n s t a b i l i t y i s no t a c c e p t a b l e . 2 . I n s o f a r as; r e d i s t r i b u t i o n o f m o n e t a r y r e s e r v e s and money b a l a n c e s : c o r r e c t s e c o n o m i c i n s t a b i l i t y , t h e p r o p o s e d t e c h n i q u e ^ a p p e a r s t o be t o o s p e c i a l i z e d f o r i n c o r p o r a t i o n i n t h e e x i s t i n g m o n e t a r y 67 s t r u c t u r e ' . The I n s t i t u t e ' s ; s t u d y al3o q u e s t i o n s t h e f e a s i b i l i t y o f 6& d e a l i n g i n ' f u t u r e s ' on an i n t e r n a t i o n a l s c a l e . I t i s a l s o p o i n t e d 66 Edward S. Shaw, C h a p t e r I I I , o f I n t e r n a t i o n a l Commodity S t o c k p i l i n g as an E c o n o m i c S t a b i l i z e r , Op. c i t . 67 I b i d . , pp 43-44 68 B e n n e t , M .K . Op. C i t p . 115. -.164 out t h a t s t o c k p i l i n g f o r d e f e n s e p u r p o s e s i s : n o t c o m p a t i b l e w i t h t h e r e a l o b j e c t i v e s o f t h e p r o p o s a l . B e c a u s e o f h i g h s t o r a g e c o s t s i t i s a l s o s u g g e s t e d t h a t c o a l , p e t r o l e u m and p i g i r o n b e e x c l u d e d f r o m t h e 69 commodity u n i t , I n c o n c l u s i o n , t h i s s t u d y warns t h a t s u c h a n i n t e r -n a t i o n a l agency " w o u l d n o t be an a p p r o p r i a t e d e v i c e f o r i n a u g u r a t i o n d u r i n g p e r i o d s o f i n t e r n a t i o n a l t e n s i o n o r o f a d j u s t m e n t f r o m w a r t i m e d i s r u p t i o n . " H o w e v e r , i t i s c o n s i d e r e d . t h a t t h e p l a n c o u l d make an e f f e c t i v e c o n t r i b u t i o n t o c o u n t e r - c y c l i c a l p o l i c y , i f o p e r a t e d i n c o n -70 j u n c t i o n w i t h o t h e r d e v i c e s s u c h as. m o n e t a r y and f i s c a l m a n i p u l a t i o n s . 71 J o h n s o n a l s o examines B e n j a m i n Graham's ' p r o p o s a l s . He r e c o g -n i z e s t h e v a l u e o f t h e i r p o t e n t i a l c o n t r i b u t i o n i n s t a b i l i z i n g t h e a b s o l u t e f a l l i n t h e a v e r a g e p r i c e o f r a w m a t e r i a l s d u r i n g a d e p r e s s i o n . I n t h e p a s t r a w m a t e r i a l p r i c e s have t e n d e d , on t h e a v e r a g e , t o f a l l by a t l e a s t 50 P e r c e n t d u r i n g a d e p r e s s i o n . Ho\ fever , J o h n s o n p o i n t s , ou t t h a t s u c h a scheme w o u l d n o t m i t i g a t e t h e e f f e c t s : o f e r r a t i c u n p r e d i c t a b l e changes i n s u p p l y and demand d u r i n g p e r i o d s when t h e p r i c e l e v e l i s r e a s o n a b l y s t a b l e . S h o r t r u n i n s t a b i l i t y p e c u l i a r t o i n d i v i d u a l , p r o d u c t s , w i l l have t o be r e d u c e d by o t h e r t e c h n i q u e s s u c h as, c r o p i n s u r a n c e o r c o m p e n s a t o r y p r i c e p a y m e n t s . He a l s o n o t e s t h a t i f t h e p l a n i s t o a c h i e v e p r i c e s t a b i l i z a t i o n , i t w i l l t e n d t o r e s t r i c t 69. ^ I b i d . , p . 103. 7°' . . -I b i d . , p . 150 f o l l o w i n g 71 J o h n s o n , D. Gale :- T r a d e and A g r i c u l t u r e ' 195° - J o h n W i l e y & S o n s , • I n c . , New Y o r k , e s p e c i a l l y p p . 3J|0-151. 165 -c o n s u m p t i o n ! d u r i n g d e p r e s s i o n s and expand i t d u r i n g p e r i o d s o f 72 p r o s p e r i t y . T h e r e i s : a w i d e d i v e r g e n c e o f o p i n i o n as y e t om t h e s u b j e c t o f b u f f e r s t o c k s , w h i c h i s n o t s u r p r i s i n g when i t i s remembered t h a t . t h e c o n c e p t i s o n l y r e c e n t l y d e v e l o p e d and as y e t - l a r g e l y u n t r i e d . T h e r e a r e t h o s e who q u e s t i o n t h e f e a s i b i l i t y o f s u c h s c h e m e s . W i c k i z e r and F e i s - who h a v e b o t h been q u o t e d i n t h i s s t u d y m i g h t be c l a s s i f i e d as; b e l o n g i n g t o t h i s g r o u p . F e i s q u e s t i o n s , s p e c i f i c a l l y , i n d i v i d u a l , b u f f e r s t o c k schemes', p o i n t i n g o u t t h a t any s u c h agency w o u l d i n e v i t -a b l y be c r i t i c i z e d whenever i t r e l e a s e d ( s o l d s t o c k s ) and c a u s e d p r i c e s t o d e c l i n e . He f e e l s t h a t t h e r e w o u l d be " c o n t i n u o u s ' p r e s s u r e f o r m a i n t e n a n c e o f a p r i c e p r o t r a c t e d l y h i g h e r t h a n t h a t w h i c h w o u l d 73 c l e a r t h e m a r k e t . " He a l s o t h i n k s t h a t n a t i o n a l p r i c e s u p p o r t schemes; w o u l d u p s e t b u f f e r 1 s t o c k o p e r a t i o n s , and t h a t g r e a t d i f f i c u l -t i e s : w o u l d be e n c o u n t e r e d w i t h t h o s e r a w m a t e r i a l s f o r w h i c h t h e r e i s a s y n t h e t i c s u b s t i t u t e . 74 W i c k i z e r , i n h i s s t u d i e s o f t e a a n d c o f f e e , d o u b t s t h e f e a s i b i l i t y o f i n d i v i d u a l , b u f f e r s t o c k o p e r a t i o n s , and p o i n t s o u t t h e _ I b i d . . pv 147. 73 F e i s - , H e r b e r t S i n e w s o f P e a c e . H a r p e r B r o s i , L o n d o n & New Y o r k , 1944» P« 235» and a l s o by t h e same a u t h o r , "Raw M a t e r i a l s  P r i c e s ; & C o n t r o l s " i n P r o c e e d i n g s o f t h e Academy o f P o l i t i -c a l S c i e n c e . J a n . , 1945t P« 43? 74 W i c k i z e r , V . D. The W o r l d C o f f e e Economy, w i t h s p e c i a l r e f e r e n c e t o C o n t r o l Schemes , F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d and T e a u n d e r I n t e r n a t i o n a l R e g u l a t i o n . F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d . - 166 -g r e a t p r a c t i c a l d i f f i c u l t i e s where t h e p r o d u c t i s n o t homogenous and n o t e a s i l y d e f i n a b l e i n t o g r a d e s . He q u o t e s t h e I n t e r n a t i o n a l T e a C o m m i t t e e ' s " R e v i e w o f t h e T e a R e g u l a t i o n Scheme, 1933-1943° a s s t a t i n g : "As : a means o f c o n t r o l l i n g p r i c e s a ' b u f f e r p o o l ' i s r e g a r d e d as an i n s t r u m e n t l i a b l e t o much a b u s e " . T h e r e a r e a g a i n t h o s e who want t o make b u f f e r s t o c k s t h e p r i n c i p a l o r even t h e o n l y i n s t r u m e n t f o r e q u i l i b r a t i n g p r o d u c t i o n and c o n s u m p t i o n o f r a w p r o d u c t s . T . W . S c h u l t z and J o h n s o n seem t o i n c l i n e t o t h i s v i e w . A g a i n , t h e r e a r e t h o s e who, t h o u g h f a v o u r i n g b u f f e r - s t o c k o p e r a t i o n s as a means o f m i t i g a t i n g s h o r t - t e r m f l u c t u a t i o n s i n r a w - p r o -d u c t p r i c e s , c l a i m t h a t , a t l e a s t i n r e g a r d t o t h e s o - c a l l e d s u r p l u s p r o d u c t s , s u c h o p e r a t i o n s w o u l d n o t s u f f i c e t o w a r d o f f w i d e s p r e a d d i s t r e s s among p r o d u c e r s i n e x p o r t i n g c o u n t r i e s . They a c c o r d i n g l y f e e l t h a t i n d i v i d u a l commodity agreements : w o u l d be a v a l u a b l e a d j u n c t . The League o f N a t i o n s ; a n d t h e I n t e r n a t i o n a l L a b o u r O r g a n i z a t i o n h a v e e x p r e s s e d s u c h o p i n i o n s , a l s o W. R i e f l e r , B e n j a m i n Graham and K . E . . 75 K n o r r seem t o s u p p o r t s u c h v i e w s . The g r e a t body o f o p i n i o n i s , h o w e v e r , u n d e c i d e d and many e c o n o m i s t s h a v e p o i n t e d o u t t h e i n h e r e n t d i f f i c u l t i e s as w e l l as; t h e p o s s i b l e s h o r t c o m i n g s o f b u f f e r s t o c k s chemes . I n r e c a p i t u l a t i o n and summary o f t h e above d i s c u s s i o n , t h e r e i s ; s o l i d t h e o r e t i c a l s u p p o r t f o r t h e c o n c e p t o f a b u f f e r s t o c k scheme t o d i m i n i s h p r i c e f l u c t u a t i o n s , by h o l d i n g a r e s e r v e a g a i n s t sudden i n c r e a s e s i n demand o r c o n s t r i c t i o n s i n s u p p l y . P u r c h a s e and. 75 K n o r r K . E . , W o r l d R u b b e r & i t s R e g u l a t i o n , p p . I5O-I51. - 16? - . s t o r a g e o p e r a t i o n s c a n a l s o s e r v e t o p r e v e n t sudden p r i c e d e c l i n e s when t h e s u p p l y c a n n o t o t h e r w i s e be r e g u l a t e d . . H o w e v e r , t h e r e a r e numerous p r a c t i c a l d i f f i c u l t i e s a r i s i n g f r o m s u c h schemes . B e c a u s e t h e o p e r a t i o n o f a b u f f e r s t o c k w o u l d a f f e c t t h e p r i c e r e l a t i o n s h i p as: be tween raw m a t e r i a l s and m a n u f a c t u r -ed p r o d u c t s , we s h o u i d see: t h e s e e f f e c t s d u r i n g a b u s i n e s s c y c l e . D u r i n g a "boom" p r o d u c e r s ' r e a l i n c o m e w o u l d be r e d u c e d , b u t d u r i n g a d e p r e s s i o n t h e y w o u l d be o v e r c o m p e n s a t e d . P r o c e s s o r s , on t h e o t h e r h a n d , w o u l d make w i n d f a l l p r o f i t s d u r i n g a boom, b u t w o u l d see t h e i r d i f f i c u l t i e s i n c r e a s e d d u r i n g a d e p r e s s i o n . T h e r e w o u l d c o n s e -q u e n t l y be a t e n d e n c y t o w a r d s s h i f t s i n p r o d u c t i o n o f t h e s e b u f f e r c o n t r o l l e d c o m m o d i t i e s d u r i n g a d e p r e s s i o n ; and d u r i n g booms, s h i f t s 7& away t o p r o d u c t s n o t so c o n t r o l l e d w o u l d be even g r e a t e r . The e x t e n t t o w h i c h b u f f e r s t o c k o p e r a t i o n s u c c e e d e d i n s t a b i l i z i n g f a r m p r i c e s w o u l d a l s o e x a g g e r a t e the ; d e g r e e t o w h i c h t h e income o f i n d i v i d u a l f a r m e r s would , f l u c t u a t e as a r e s u l t o f v a r i a t i o n s i n y i e l d s . T h i s d i f f i c u l t y c a n , h o w e v e r , be overcome i n p a r t by h a v i n g a f a i r l y w i d e m a r g i n be tween t h e p r i c e l e v e l a t w h i c h b u y i n g and s e l l i n g o p e r a t i o n s : a r e c o n d u c t e d . I n c o n c l u s i o n , i t seems t h a t t h e r e i s room f o r a s t o r a g e p o l i c y t o even out s u p p l y v a r i a t i o n s and as an a d d i t i o n t o c o u n t e r Z a g l i t s , O s c a r . " I n t e r n a t i o n a l P r i c e C o n t r o l t h r o u g h B u f f e r ' S t o c k s " , J o u r n a l o f F a r m E c o n o m i c s V o l . X X V I I I May I946 N o . 2, P . 419. - 168! -c y c l i c a l , m e a s u r e s * B u t s u c h a. p o l i c y s h o u l d p r e f e r a b l y be one b a s e d on i n d i v i d u a l c o m m o d i t i e s and s u p p l e m e n t e d by i n d i v i d u a l I C A ' s . The p r o p o n e n t s : o f a commodi ty c u r r e n c y seem t o l a y t o o much emphas i s on t h e s o l i d b a c k i n g o f t h i s t y p e o f c u r r e n c y , a f a c t o r o f p u r e l y p s y c h o -77 l o g i c a l i m p o r t . T h e r e i s danger o f t r y i n g t o a c h i e v e t o o much t h r o u g h one m e c h a n i s m . The demand f o r c o n s u m p t i o n r a w m a t e r i a l s c a n be s t a b i l i z e d o n l y i f i n d u s t r i a l a c t i v i t y i s s t a b i l i z e d . I t would , be dangerous- i n t h e p r e s e n t s t a t e o f o u r k n o w l e d g e t o t h i n k t h a t i n d u s -t r i a l , f l u c t u a t i o n s a r e a l w a y s i n i t i a t e d by movements i n r a w m a t e r i a l s p r i c e s . Those who put a l l t h e i r e m p h a s i s on s t a b i l i z i n g f a r m e r s ' i n c o m e s and a d v o c a t e c o m p r e h e n s i v e commodity u n i t o p e r a t i o n s , seem n o t v e r y f a r r e m o v e d f r o m a g r i c u l t u r a l f u n d a m e n t a l i s t s i n t h e i r a p p r o -a c h , b e l i e v i n g t h a t s u c h w i l l s o l v e t h e w o r l d ' s t r a d e : and d e p r e s s i o n p r o b l e m s . S i m i l a r l y t h o s e who do n o t t h i n k t h a t i n d i v i d u a l commodity c o n t r o l ag reement s w i l l be n e e d e d w i t h a n e f f e c t i v e b u f f e r s t o c k agency , , f a i l t o c o n s i d e r t h e l o n g r u n e f f e c t s : o f a downward p r i c e t r e n d i n t h e f a c e o f an i n e l a s t i c s u p p l y , and t h e e x t e n t o f government i n t e r v e n t i o n , e s p e c i a l l y i n t h e c a s e o f t h o s e c o m m o d i t i e s i n " c h r o n i c o v e r s u p p l y " . ( i v ) Summary and C o n c l u s i o n s We h a v e s een t h a t t h e p o t e n t i a l r o l e o f i n t e r n a t i o n a l commodi ty ag reement s has; come t o r e c e i v e ' g r o w i n g a t t e n t i o n amongst i n t e r n a t i o n a l b o d i e s . The i n h e r e n t d i f f i c u l t i e s a s b o r n e o u t by p a s t e x p e r i e n c e , h a v e been w e l l c o n s i d e r e d and a c a r e f u l a t t e m p t h a s been 77 C a l s o y a s , C D . "Commodity C u r r e n c y & Commodity S t o r a g e " - , The A m e r i c a n  Economic R e v i e w . V o l . X X X V I I I , J u n e 1948, N o . 3, p.345. - 169 -made i n f o r m u l a t i n g g u i d i n g p r i n c i p l e s f o r t h e f u t u r e o p e r a t i o n o f s u c h I C A ' s t o g u a r d a g a i n s t s u c h d i f f i c u l t i e s . The e x t e n t o f p o l i t i c a l , i m p l i c a t i o n s ; and d i f f e r e n c e s i n t h e o p e r a t i o n o f s u c h agreements ; i s a l s o a p p a r e n t . The p r o b l e m s o f I C A ' s ; a r e n o t c o n f i n e d t o t h e r e a l m o f e c o n o m i c s b u t r a i s e p o l i t i c a l i s s u e s o f l i b e r a l i s m v e r s u s s o c i a l i s m and s t a t e c o n t r o l . I s s u e s o f e c o n o m i c a n d p o l i t i c a l s i g n i f i c a n c e c a n n o t e a s i l y be d i s c u s s e d a c c o r d -i n g t o t h e " e i t h e r - o r " p a t t e r n o f r e a s o n i n g . The c h o i c e i s n o t b e t w e e n t h e " ' i m p e r s o n a l d i s c i p l i n e o f t h e m a r k e t " o r t h e a r b i t r a r y d i r e c t i o n o f a few i n d i v i d u a l s ; . I t i s : n e c e s s a r y t o b r i d g e t h e gap be tween t h e d e s i r a b l e r e s u l t s o f l a i s s e z f a i r e i n an u n i m p e d i n g s o c i e t y and s t a t e c o n t r o l o r u n i l a t e r a l n a t i o n a l a c t i o n s . I n t e r n a t i o n a l c o l l a b o r a t i o n i s t h e b e s t b r i d g e t h a t h a s y e t been d e v i s e d . S u c h i n t e r n a t i o n a l c o l l a b o r a t i o n h a s come w i t h o u t c o n s c i o u s s u p p o r t o r i n t e r v e n t i o n o f g o v e r n m e n t s i n many o f t h e c a r t e l s t h a t were formed b e f o r e t h e s e c o n d W o r l d W a r . S u c h agreements ; a r e n o t i n h e r e n t l y e v i l , , a n d e x p e r i e n c e a l s o sho?irs u s t h a t government r e g u l a -t i o n i s j u s t a s l i k e l y t o s u f f e r f r o m t h e same f a u l t s a s i n t e r n a t i o n a l c a r t e l s . The h i s t o r y o f I C A ' s : i n t h e i h t e r - w a r . p e r i o d d e m o n s t r a t e s c l e a r l y t h a t even government c o n t r o l does n o t p r e v e n t h i g h c o s t p r o d u c -e r s f r o m b e i n g s h e l t e r e d , p r i c e s f r o m b e i n g r a i s e d , o r t h e i n t e r e s t s o f c o n s u m i n g c o u n t r i e s f r o m r e c e i v i n g s c a n t a t t e n t i o n . M o r e o v e r , p o l i t i c a l f a c t o r s ; o u t s i d e ; t h e r e a l m o f i n t e r n a t i o n a l c o n t r o l m i g h t s t i l l be a n i n h i b i t i n g f o r c e . R e s t r i c t e d s u g a r and t e a c o n s u m p t i o n i n t h e c h i e f c o n s u m i n g c o u n t r i e s , due t o n a t i o n a l f i s c a l and d e f e n c e p o l i c i e s , , a r e o u t s i d e t h e c o n t r o l o f I C A ' s . S i m i l a r l y , we have s e e n i n t h e s t u d y o f c o f f e e , t h a t p o l i t i c a l c o n s i d e r a t i o n s may o v e r r i d e t h e i n t e r e s t s ; o f t h e - 170 -g e n e r a l c o n s u m e r , even where t h e i m p o r t i n g n a t i o n i s i n a c o n t r o l l i n g p o s i t i o n . An e x a m i n a t i o n o f t h e o p i n i o n s o f a number o f d i f f e r e n t e x p e r t s e f f e c t i v e l y e x p o s e s -the f a l l a c y o f t h e " t e l ack o r w h i t e " r e a s o n i n g o f a n t a g o n i s t s and a p o l o g i s t s . The i s s u e s a r e n o t c l e a r l y d e f i n e d . Agreements ' i n t h e p a s t h a v e n o t a l l been e n t i r e l y e v i l , a n d f a i l u r e has- o f t e n been due t o c i r c u m s t a n c e s ^ b e y o n d t h e power o f p r e s e n t i n t e r n a t i o n a l c o - o p e r a t i o n . N e i t h e r c a n we s a f e l y r e g a r d I C A . ' s a s a p a n -a c e a f o r f u t u r e w o r l d harmony and t h e b e t t e r m e n t o f m a n k i n d . . The p o s s i b l e v a l u e t o s u c h agreements , has, y e t t o be d e c i d e d , and t h e y w i l l n o t be a b l e t o p l a y a s i g n i f i c a n t r o l e u n t i l more k nowledge and u n d e r s t a n d -i n g i s o b t a i n e d o f t h e p r o b l e m s u n d e r l y i n g raw m a t e r i a l s p r o d u c t i o n . D e s i r a b l e economic and s o c i a l g o a l s c a n o n l y be r e a l i z e d t h r o u g h s u c h ag reement s i f opt imum a l l o c a t i o n o f r e s o u r c e s i s t h e c e n t r a l o b j e c t i v e and i f t h e i n v i o l a b l e economic l a w s w h i c h w o u l d u l t i m a t e l y r e a l i z e s u c h a g o a l a r e n o t d e n i e d . CHAPTER V . THE PIACE FOR COMMODITY AGREEMENTS I N WORLD TRADE ( i ) E x i s t e n c e o f R e a l . P r o b l e m s i n C e r t a i n P r i m a r y I n d u s t r i e s . I n t e r n a t i o n a l p l a n n i n g c a n h a v e s u c h w i d e s p r e a d r e p e r c u s s i o n a r y e f f e c t s t h a t n o p r o p o s a l s may s a f e l y be f o r m u l a t e d w i t h o u t a v e r y c o n s c i o u s a w a r e n e s s o f u l t i m a t e o b j e c t i v e s . P r i v a t e e n t r e p r e n e u r s may r i g h t l y be q u e s t i o n e d a s t o w h e t h e r t h e y a r e r e m a i n i n g w i t h i n t h e l a w o f t h e i r c o u n t r y i n t h e p o l i c i e s t h a t t h e y f o l l o w . G o v e r n m e n t s , h o w e v e r , i r r e s -p e c t i v e , o f t h e i r c o n s t i t u t i o n , may be j u s t l y c h a l l e n g e d as t o what e x t e n t • • b> t h e y a r e f o l l o w i n g i d e a l s ( a n d p o l i c i e s ) r e l a t e d t o t h e w e l f a r e o f t h e i n t e r n a t i o n a l communi ty as a w h o l e . I t i s a c c o r d i n g l y n e c e s s a r y a t t h i s j u n c t u r e t o r e c o n s i d e r d e s i r a b l e e c o n o m i c g o a l s and o b j e c t i v e s i n o r d e r t o be a b l e t o a s s e s s t h e c o m p a t i b i l i t y a n d p o s s i b l e u t i l i t y o f l . C . A ' s . : The u l t i m a t e g o a l i n t h e m a t e r i a l s e n s e s h o u l d be t o i n c r e a s e w o r l d p r o s p e r i t y i n t e r m s o f i n c r e a s e d i n c o m e p e r ' c a p i t a . More s p e c i f -i c a l l y , t h e g o a l embraces a . d e s i r e t o i n c r e a s e t h e vo lume o f t r a d e and c o n s u m p t i o n o f raw m a t e r i a l s . T h i s c a n o n l y be a c h i e v e d b y g i v i n g , p r o d u c t i v e r e s o u r c e s t h e f u l l o p p o r t u n i t j r t o d e v e l o p a n d expand i n t h e most p r o f i t a b l e a r e a s , and b y e n d e a v o u r i n g t o l o w e r t h e p r i c e o f t h e p r o d u c t s t h e y p r o d u c e a t e v e r y a v a i l a b l e o p p o r t u n i t y . I n c h a p t e r 1, i t was shown t h a t c e r t a i n i n h e r e n t c h a r a c t e r i s t i c s i n t h e p r o d u c t i o n and t r a d e i n p r i m a r y p r o d u c t s l e a d s t o d i f f i c u l t i e s i n p r o d -u c t i o n a d j u s t m e n t s i n r e s p o n s e t o changes I n m a r k e t c o n d i t i o n s . The most s e r i o u s m a n i f e s t a t i o n o f t h e s e d i f f i c u l t i e s l i e s i n t h e two p h e n -omena o f e x c e s s i v e p r i c e i n s t a b i l i t y and c h r o n i c s u r p l u s p r o d u c t i v e c a p a c i t y . B o t h c o n d i t i o n s a r e d e t r i m e n t a l t o t h e r e a l i z a t i o n o f t h e economic g o a l s s t a t e d a b o v e . F l u c t u a t i n g p r i c e s p r e v e n t e n t r e p r e n e u r s - 172 -f r o m b e i n g a b l e t o p l a n p r o d u c t i o n i n t e l l i g e n t l y a n d l e a d t o o v e r and u n d e r p r o d u c t i o n w h i c h p e r p e t u a t e s t h e p r i c e i n s t a b i l i t y . S u r p l u s p r o d u c t i v e c a p a c i t y o f t e n r e s u l t s i n u n d e r - e m p l o y m e n t , i n e f f i c i e n t u se o f p r o d u c t i v e r e s o u r c e s , and a r e s i s t a n c e t o i m p r o v e m e n t s b r o u g h t b y t e c h n o l o g i c a l c h a n g e . T h e r e c a n , t h e r e f o r e , be a d e f i n i t e r o l e f o r I C A ' s t o p l a y i n t h e r e a l i z a t i o n o f o u r d e s i r a b l e e c o n o m i c g o a l , i n s o f a r as s u c h a r e e m e n t s c a n be e f f e c t i v e i n l e s s e n i n g p r i c e i n s t a b i l i t y , e l i m i n a t i n g redundaint c a p a c i t y , a n d I n f a c i l i t a t i n g p r o d u c t i o n a d j u s t m e n t s a s m a r k e t c o n d i t i o n s c h a n g e . ( i i ) Weakness o f P a s t A g r e e m e n t s . H a v i n g e s t a b l i s h e d t h a t t h e r e i s a r e a l need f o r I C A ' s i t i s p o s s i b l e t o examine t h e e f f i c a c y o f p a s t a g r e e m e n t s i n t h e l i g h t o f t h e s e needs a n d o u r u l t i m a t e o b j e c t i v e s . I t s h o u l d be e v i d e n t f r o m t h e c a s e s t u d i e s i n c h a p t e r s 2 and 3 t h a t s u c h a g r e e m e n t s i n t h e p a s t h a v e b e e n s u b j e c t t o many w e a k n e s s e s , a n d t h a t each d i f f e r s i n some r e s p e c t w i t h r e g a r d t o t h e manner i n w h i c h i t has i n f l u e n c e d t h e i n d u s t r i e s c o n c e r n e d . P a s t ag reement s h a v e shown a t e n d e n c y t o f o s t e r s e c t i o n a l i n t e r e s t s , a n d t o p e r s i s t e v e n when t h e i r need I s no l o n g e r v i t a l . B o t h t h e s e f a u l t s c a n be e a s i l y r e m e d i e d b y s p e c i f i c p r o v i s i o n s i n t h e c o n s t i t u t i o n o f f u t u r e I C A ' s . T h i s w i l l become a p p a r e n t i n o u r s u b s e q u e n t c o n s i d e r a t i o n o f t h e ITO p r o v i s i o n s f o r f u t u r e I C A ' s . T h e r e a r e , h o w e v e r , t w o o t h e r weaknes se s w h i c h become a p p a r e n t i n t h e s t u d y o f p a s t commodi ty a g r e e m e n t s w h i c h a r e much more s i g n i f i c a n t . These a r e ( i ) t h e u se o f e x p o r t q u o t a s , a n d ( i i ) h i g h p r i c e o b j e c t i v e s . ( i i i ) Use o f E x p o r t Q u o t a s . I n e v e r y s i n g l e commodi ty e x a m i n e d , e x p o r t q u o t a s h a v e b e e n t h e most i m p o r t a n t o r e v e n t h e o n l y d e v i c e u s e d t o r e g u l a t e t h e p r i m a r y - 173 -industries for which agreements have been evolved. They have, in effect, been a means of distributing the hardship amongst producers, which arises when markets are artificially restricted or when productive capacity outstrips effective demand. An export quota is patently a device to prevent production from responding to a price rise rather than by an increase in output. . As such, i t nullifies a major function of prices and can be effective as a mech-anism for the realization of higher prices. An export quota likewise shelters the less efficient producers when the demand declines since they retain a fixed share of the market which would otherwise be encroached upon by lower cost and more efficient producers. Export quotas have served to maintain in operation many of the higher cost rubber plantations, tin mines and tea gardens. They have thereby fostered the continued existence of redundant productive capacity. It is also apparent, however, that such quotas have afforded the only protection for low cost efficient producers in the face of imperialistic •and nationalistic policies. This has been so on the case of both sugar and beef. (iv) High Price Objectives. Though in many instances ICA's have contained no explicit price goals or provisions, in almost every case the raising of price levels has been an implied objective. This is understandable in view of the very low price levels which have commonly prevailed during the depression when many of these industries adopted ICA's. However, such objectives are incompatible with our ultimate economic goals of expanding consumption of raw materials and raising the level of real incomes, since high prices tend to restrict consumption, upset the balance of trade, and stimulate excess productive capacity. It has been argued that high prices will stabilize agricultural - 174 -I n c o m e s , a n d t h a t l o w p r i c e s have f o r c e d i m p o r t i n g c o u n t r i e s t o impose t r a d e b a r r i e r s a n d t o s u b s i d i z e home p r o d u c t i o n . I t ha s i n f a c t b e e n . h i g h p r i c e s w h i c h have s t i m u l a t e d p r o d u c t i o n t o a r t i f i c i a l l e v e l s , and w h i c h a g g r a v a t e d t h e s i t u a t i o n s o f s u r p l u s e s i n c e r t a i n p r i m a r y p r o d u c t s . I n c h a p t e r 1, t h e l o w income e l a s t i c i t y o f many o f t h e b a s i c f o o d s t a p l e s was d e s c r i b e d . T h i s c h a r a c t e r i s t i c adds f u r t h e r s u p p o r t t o • t h e a rgument a g a i n s t h i g h p r i c e o b j e c t i v e s s i n c e s u c h w i l l r e d u c e t h e l e v e l o f r e a l i n c o m e s . Expanded c o n s u m p t i o n o f p r i m a r y p r o d u c t s c a n , m o r e o v e r , o n l y be b r o u g h t a b o u t b y k e e p i n g p r i c e l e v e l s l o w , s i n c e t h e demand i s h e a v i e s t i n t h e l o w e s t i n c o m e g r o u p s whenever t h e income e l a s t i c i t y o f t h e p r o d u c t i s l e s s t h a n u n i t y . S i m i l a r l y , t h e d e v e l o p -ment o f s y n t h e t i c s u b s t i t u t e s f o r r u b b e r a n d t h e n a t u r a l f i b r e s s u p p o r t s t h e a r g u m e n t s i n f a v o u r o f l o w p r i c e l e v e l s . H i g h p r i c e s o r r e s t r i c t e d s u p p l i e s h a v e s t i m u l a t e d the. o r i g i n a l d e v e l o p m e n t o f s u c h p r o d u c t s . I n many c a s e s s y n t h e t i c p r o d u c t s a r e t a k i n g a n i n c r e a s i n g s h a r e o f t h e m a r k e t b e c a u s e o f t h e c o n t i n u e d h i g h p r i c e l e v e l s w h i c h have p r e v a i l e d f o r t h e n a t u r a l p r o d u c t s . - The d e c l i n e o f t h e s i l k i n d u s t r y has p r e s a g e d t h e . p o s s i b i l i t y o f a s i m i l a r d e c l i n e i n t h e c o t t o n t e x t i l e i n d u s t r y as t h e c o s t o f r a y o n a n d n y l o n f i b r e s comes c l o s e r i n t o l i n e w i t h t h a t o f n a t u r a l c o l t o n . C o m p e t i t i o n f o r t h e n a t u r a l p r o d u c t s w i l l i n f u t u r e , t e n d t o r e s t o n a p r i c e b a s i s r a t h e r t h a n on a n y i n h e r e n t , u n i q u e q u a l i t i e s . The p o s s i b i l i t i e s o f expanded c o n s u m p t i o n o f c e r t a i n f o o d s t a p l e s f o r l i v e s t o c k f e e d a n d , t o a l e s s e r e x t e n t , i n d u s t r i a l m a n u f a c t u r e , a l s o o n l y becomes f e a s i b l e when p r i c e l e v e l s a r e k e p t l o w . The r e c o r d o f r e g u l a t i o n i n t h e r u b b e r , t e a a n d c o f f e e i n d u s t -r i e s shows how h i g h p r i c e l e v e l s have t e n d e d t o be f o s t e r e d b y t h e c a r e f u l r e g u l a t i o n o f q u o t a s , and how t h e p r o b l e m o f s u r p l u s c a p a c i t y , i n s t e a d o f b e i n g r e m e d i e d t h r o u g h i n t e r n a t i o n a l a g r e e m e n t , has t e n d e d t o be a g g r a v a t e d . - 175 -S h o u l d I C A ' s be condemned i n t h e l i g h t o f t h e s e g o a l s , i n r e a l i z a t i o n o f t h e i r i n h e r e n t p r i c e r a i s i n g o b j e c t i v e s and a l m o s t i n v a r i a b l e u t i l i z a t i o n o f e x p o r t q u o t a s ? F rom t h e e v i d e n c e , i t seems t h a t I C A ' s c a n be c o m p a t i b l e w i t h o u r economic o b j e c t i v e s , " p r o v i d e d c e r t a i n s p e c i f i c p r o v i s i o n s a r e made, and t h e i n h e r e n t weaknes s o f r e g u l a t i o n i s k e p t i n m i n d . ' . E x p o r t q u o t a s c a n be a c c e p t a b l e as t r a n s i t o r y a i d e s as l o n g as t h e y a r e v i e w e d s t r i c t l y as s h o r t r u n e x p e d i e n t s t o f a c i l i t a t e n e c e s s a r y p r o d u c t i o n a d j u s t m e n t s . I f p o s i t i v e p r o v i s i o n s a r e made t o f a v o u r t h e more e f f i c i e n t p r o d u c e r s a n d t o e l i m i n a t e e x c e s s c a p a c i t y , e x p o r t q u o t a s w o u l d be l e s s l i k e l y t o p e r s i s t , a n d c a n b e s e e n i n a u s e f u l r o l e as a means o f m i t i g a t i n g t h e h a r s h e f f e c t s o f t o o r a p i d m a r k e t a d j u s t m e n t s . ( v ) P r o v i s i o n s o f t h e I n t e r n a t i o n a l Trade C h a r t e r . The n e x t q u e s t i o n i s w h e t h e r t h e c r i t e r i a f o r commodi ty c o n t r o l s .1 l a i d down i n t h e I TO • C h a r t e r , a r e a d e q u a t e guide 's f o r t h e f u t u r e f o r m -a t i o n o f i n t e r n a t i o n a l a g r e e m e n t s . These ITO p r o v i s i o n s may b e e x a m i n e d u n d e r t h r e e h e a d i n g s : ( l ) R u l e s g o v e r n i n g t h e p r o c e d u r e l e a d i n g up t o t h e c r e a t i o n o f I C A ' s ; (2) R u l e s g o v e r n i n g t h e i r o p e r a t i o n , once s u c h a g r e e m e n t s a r e e s t a b l i s h e d ; and (3) m i s c e l l a n e o u s o t h e r p r o v i s i o n s . These-Rule s - g o v e r n i n g t h e p r o c e d u r e l e a d i n g up t o t h e c r e a t i o n o f i n t e r n a t i o n a l a g r e e m e n t s a r e a l l d e s i r a b l e , i n t h a t ample p r o v i s i o n may b e made f o r a t h o r o u g h p r e l i m i n a r y e x a m i n a t i o n o f t h e c o m m o d i t y , i n w h i c h a l l t h e government s c o n c e r n e d may p a r t i c i p a t e . The e x a c t c o n d i t i o n s u n d e r w h i c h a : c o n t r o l a g r e e m e n t m i g h t be i n s t i t u t e d seem c l e a r a n d r e a s o n a b l e p r o v i d e d t h a t government s a r e n e i t h e r p r e m a t u r e i n c o n s i d e r i n g a " b u r d e n s o m e " 1 See A p p e n d i x A - p r o v i s i o n s o f t h e ITO C h a r t e r r e l a t i n g t o I n t e r n a t i o n a l . Commodity C o n t r o l A g r e e m e n t s . . 176 -" s u r p l u s " t o e x i s t o r t o o t a r d y i n r e c o g n i z i n g " w i d e s p r e a d d i s t r e s s t o s m a l l p r o d u c e r s . " The c o n d i t i o n o f w i d e s p r e a d unemployment w i t h i n a n y p a r t i c u l a r i n d u s t r y , a s d e f i n e d i n t h e s e p r e l i m i n a r y p r o v i s i o n s , s h o u l d a l s o be u n r e l a t e d t o g e n e r a l b u s i n e s s c o n d i t i o n s , a s I C A ' s w o u l d o t h e r -2 w i s e t e n d t o become u n i v e r s a l and i n e v i t a b l e i n t i m e s o f d e p r e s s i o n . The p r o v i s i o n t h a t a n y agreement must i n c l u d e some c o n c r e t e p l a n t o s o l v e t h e p r o b l e m , i s a l s o a v e r y r e a l i s t i c o n e . H o w e v e r , i t s h o u l d be r e c o g n i z e d t h a t s u c h p r o b l e m s o f t e n have t h e i r r o o t s s u n k deep i n t h e p a s t ( W o r l d War 1 a n d t h e d e p r e s s i o n o f t h e 1 9 3 0 ' s ) and t h a t i t w o u l d be u n w i s e t o e x p e c t them t o be s o l v e d a l w a y s w i t h i n t h e f i v e y e a r s p a n w i t h i n w h i c h i t i s recommended t h a t s u c h agreement s s h o u l d s t a y . The p r o v i s i o n t h a t t h e p r o g r a m o f a d j u s t m e n t s h o u l d be b e l i e v e d a d e q u a t e " t o e n s u r e s u b s t a n t i a l p r o g r e s s t o w a r d s o l u t i o n o f t h e p r o b l e m w i t h i n t h e t i m e l i m i t s o f t h e a g r e e -m e n t " m u s t , t h e r e f o r e , be s u b j e c t t o l i b e r a l i n t e r p r e t a t i o n . I n v i e w o f e a r l i e r e x p e r i e n c e s i n t h e w o r l d ' s wheat t r a d e , i t i s u n f o r t u n a t e t h a t t h e s e ITO p r o v i s i o n s do n o t s t a t e more e x p l i c i t l y t h a t no n a t i o n s h o u l d be e n c o u r -aged t o e x p e c t t h a t , b y t h e use o f u n i l a t e r a l p o l i c i e s ( s u c h as e x p o r t s u b -s i d i e s ) a s a s o r t o f c l u b , t h a t o t h e r n a t i o n s may be c o m p e l l e d t o j o i n w i t h i t i n s u c h I C A ' s . The r u l e s g o v e r n i n g t h e o p e r a t i o n o f s u c h a g r e m e n t s i n c l u d e p r o v i s i o n f o r t h e a c c e s s i o n o f new s i g n a t o r y government s a n d a d e q u a t e consumer r e p r e s e n t a t i o n . These a r e g o o d , t h o u g h e x p e r i e n c e i n t h e p a s t l e a d s us t o d o u b t t h e e f f i c a c y o f t h e l a t t e r . O b v i o u s l y , i n many i n s t a n c e s , consumer c o u n t r i e s w i l l be i n a w e a k e r b a r g a i n i n g p o s i t i o n b e c a u s e t h e y do n o t p o s s e s s c o s t and p r o d u c t i o n d a t a . Governments o f l a r g e l y c o n s u m i n g n a t i o n s s u c h as B r i t a i n . a n d H o l l a n d have i n t h e p a s t shown a 2l A good d i s c u s s i o n o f t h i s p o i n t i s g i v e n b y H A L E Y , B e r n a r d F . , - "The R e l a t i o n B e t w e e n C a r t e l P o l i c y a n d Commodity A g r e e m e n t P o l i c y " , . A m e r i c a n E c o n o m i c R e v i e w , V o l , X X X V I , May 1 9 4 6 , N o . 2 p p . 7 2 3 - 7 2 5 . 3 . I b i d . , page 7 2 2 . - 177 -c o n s t a n t t e n d e n c y t o e x e r t t h e i r i n f l u e n c e i n f a v o u r o f t h e i r c o l o n i a l , p r o d u c e r s , d e s p i t e t h e i n t e r e s t s o f t h e m a j o r i t y . M i s c e l l a n e o u s p r o v i s i o n s w h i c h a r e h i g h l y d e s i r a b l e , i n c l u d e p r o v i s i o n f o r a d e q u a t e p u b l i c i t y , r e n e w a l o f a g r e e m e n t s a f t e r f i v e y e a r s a n d c o m p u l s o r y r e v i e w a f t e r e v e r y t h r e e y e a r s o f o p e r a t i o n . I t m i g h t be s u g g e s t e d t h a t t h e s e p r o v i s i o n s ' i n t h e a g g r e g a t e w i l l make t h e f o r m a t i o n o f I C A ' s a l m o s t i m p o s s i b l e . H o w e v e r , o m i s s i o n o f a n y one does n o t seem r a t i o n a l , a n d i f a new t i n a g r e e m e n t i s s o o n f o r m e d t h e r e w i l l b e e v i d e n c e t h a t t h e c o n d i t i o n s a r e n o t i n s u p e r a b l e . The ITO p r o v i s i o n s make no r e f e r e n c e t o t h e p r o b l e m o f p r i c e i n s t a b i l i t y o r a n y b u f f e r s t o c k p r o p o s a l . H o w e v e r , i t i s f e l t t h a t i n t e r -n a t i o n a l ag reement s c o u l d be d r a w n up w h i c h w o u l d s u c c e s s f u l l y a c h i e v e t h e ends o f p r i c e s t a b i l i z a t i o n , ( v i ) S u g g e s t e d F o r m o f I n t e r n a t i o n a l R e g u l a t i o n i n t h e F u t u r e . ' •We h a v e s e e n t h a t i n h e r e n t p r o b l e m s i n t h e p r o d u c t i o n o f c e r t a i n p r i m a r y c o m m o d i t i e s , b e s i d e s c a u s i n g d i s t r e s s t o p r o d u c e r s , p r e v e n t s t h e r a p i d a t t a i n m e n t o f t h e g o a l s o f i n c r e a s e d r e a l i n c o m e s and e x p a n d e d c o n s u m p t i o n , A s u r v e y o f e x p e r i e n c e w i t h p a s t ag reement s i n d i c a t e s t h a t t h e y h a v e l a r g e l y f a i l e d t o overcome t h e b a s i c d i f f i c u l t i e s o f a d j u s t i n g p r o d u c t i v e c a p a c i t y t o demand and. m i t i g a t i n g t h e h a r s h n e s s o f p r i c e f l u c t u a t i o n s . T h e i r h i g h p r i c e o b j e c t i v e s h a v e t e n d e d t o s h e l t e r t h e f o r m e r , a n d t h e u s e o f q u o t a s has t e n d e d t o m a i n t a i n t h e s t a t u s quo i m t h e i n d u s t r y as w e l l a s p r o m o t i n g p r i c e i n s t a b i l i t y where t h e q u o t a s h a v e b e e n t o o r a p i d . S h o r t t e r m commodity' c o n t r o l a g r e e m e n t s w i t h permanent b u f f e r s s t o c k s c h e m e s , c a n , h o w e v e r , be a d v o c a t e d as b e i n g w h o l l y c o n s i s t e n t w i t h o u r e c o n o m i c g o a l s , a n d as a supplement- t o o t h e r d e s i r a b l e economic p o l i c i e s , p a r t i c u l a r l y o f a n a n t i - c y c l i c a l n a t u r e . I t i s f e l t t h a t c o m p l i a n c e w i t h - 178 -the provisions of the ITO Charter will be sufficient to prevent ICA's from fostering sectional interests, tending to persist in the absence of any real need, and constricting trade when the ultimate objective is to expand trade. Emphasis on the short run nature of each regulatory agreement will prevent quotas from being used as a weapon to preserve output capacity or maintain price levels. Provisions must be made,-within the terms of any agreement, for gradual elimination of excess capacity and for the promotion of low cost efficient producers. It is not possible in this study to suggest in detail the ideal form for such individual commodity agreements. It is obvious that the problem of eliminating redundant capacity is likely to raise many polit-ical difficulties and that the creation of undue hardship, amongst the producers concerned, will be a constant brake to the adoption of very positive measures. The conflict between mational sovereignty and international collaboration must also be recognized as a very real barrier to the complete success of future ICA's. Such is beyond the field of economics and can presumably only be gradually resolved with the accumulation of experience in international collaboration and the knowledge of past failures. Purely selfish nationalistic -interests appear, rather, to be a manifestation of the present day universal feeling of insecurity. Fear of war will always be a barrier to the expansion of international comity. • Emphasis on the short-run operation of ICA's is, moreover, not meant to imply a failure to recognize the persistent tendency of such agreements in the past, to remain in operation for. prolonged periods. It is hoped that the provisions of the ITO Charter, i f rigidly observed, will be sufficient to ensure that such agreements will not in - 179 -future persist in defiance of the general interest. (vli) Permanent Buffer Stock Schemes. In order to realize the goals of expanding human consumption and optimum resource allocation, the aim of ICA's should be to keep prices low. Prices'should also be sufficiently flexible so as not to force the entire burden of a depression on to other sections of the economy. This last consideration of price flexibility brings us to an exaniination of the way in which Individual buffer stock schemes could support and complement the operation of such regulatory agreements. The only expedient that -may accomplish some measure of price stability and ; yet satisfy the needs for economic change, seems to be a buffer stock arrangement. The proposal outlined by W. Riefler seems the most appro-priate for such a scheme. Such a plan could limit price fluctuations within a certain range by drawing supplies from the market- when falling prices reach the minimum of a pre-determined range (say 15 per cent below a pivotal index), and releasing supplies to the market when rising prices approach the maximum of that range (say 15 per cent above the index). It could be/financed by contributions from member nations and would be directly responsible for holding storage reserves. The successful operation of a buffer stock scheme would., how-ever, depend on certain favourable environmental conditions. The follow-ing necessary conditions to successful operation are based in part on the 4 recommendations of K. E. Knorr in his study of rubber regulation. 4. KNORR, K. E. , World Rubber and its Regulation,(Stanford University Press), Stanford, California, pp. 241-246. - 180 -1. • There, c a n b e no e x t e n s i v e e x c e s s c a p a c i t y i n t h e i n d u s t r y c o n c e r n e d . The b u f f e r s t o c k a g e n c y w o u l d o t h e r w i s e a c c u m u l a t e s t o c k s i n d e f -i n i t e l y o r w o u l d be f o r c e d t o l o w e r t h e b a s i c p r i c e d r a s t i c a l l y . 2. A b u f f e r s t o c k may be u s e d t o , c u s h i o n t h e e f f e c t s o f s e c u l a r t r e n d s , b u t i t s h o u l d n e v e r t r y t o a r r e s t t h e m , as t h i s w o u l d be i n c o m p a t i b l e w i t h economic p r o g r e s s . I n e f f e c t , t h e n , p r o v i s i o n must be made f o r t h e j u d i c i o u s a d j u s t m e n t o f t h e b a s i c p r i c e when n e e d e d . 3 . The manner i n w h i c h t h e a c t u a l p h y s i c a l commodi ty h e l d i n s u c h b u f f e r s t o c k s , w o u l d u l t i m a t e l y b e d i s p o s e d , must be d e t e r m i n e d a n d made known i n a d v a n c e . A l s o , t h e r e must b e i n t e r - n a t i o n a l ag reement p r o v i d i n g a g a i n s t sudden a n d d i s r u p t i n g s t o c k r e l e a s e s f r o m r e s e r v e o r war d e f e n s e s t o c k -p i l e s . 4 . The p i v o t a l p r i c e above a n d b e l o w w h i c h t h e o p e r a t i n g a g e n c y b o u g h t a n d s o l d , s h o u l d be s u b j e c t t o r e v i e w and c o n s t a n t c h a n g e . I t s h o u l d n o t be d e t e r m i n e d b y any s u c h m e c h a n i c a l d e v i c e as a h i s t o r i c a l s l i d i n g p r i c e i n d e x o r a v e r a g e . The p r i c e r a n g e a t w h i c h t h e a g e n c y s h o u l d s t a r t o p e r a t i n g i n t h e m a r k e t s h o u l d be a t l e a s t f i f t e e n p e r c e n t above a n d b e l o w t h e p i v o t a l p r i c e . I t i s a l s o u n s a f e t o s p e c u l a t e as t o w h e t h e r s u c h a scheme c o u l d s u r v i v e i n t h e f a c e o f v i o l e n t and p r o l d n g e d d e p r e s s i o n s o r booms. I n t h e f o r m e r c a se t h e r e w o u l d b e a r e a l d a n g e r o f t h e a g e n c y a c c u m u l a t i n g s u c h e x c e s s -i v e s t o c k s as t o e x c e e d i t s f i n a n c i a l r e s o u r c e s . S i m i l a r l y i n t i m e s o f i n f l a t i o n , i t i s p o s s i b l e t h a t t h e a g e n c y w o u l d u l t i m a t e l y r e l e a s e i t s e n t i r e s t o c k s a n d so be u n a b l e t o p r e v e n t a n y f u r t h e r p r i c e r i s e . The p l a n i s , h o w e v e r , e s s e n t i a l l y d e v i s e d t o c o u n t e r a c t s h o r t - r u n p r i c e f l u c t u a t i o n s , and t h e s u p p o r t o f o t h e r c o u n t e r - c y c l i c a l measures t o l i m i t m a j o r s w i n g s i n t h e b u s i n e s s c y c l e , i s i m p l i e d . The above s u g g e s t i o n s f o r i n d i v i d u a l b u f f e r s t o c k p l a n s a n d s h o r t t e r m commodi ty ag reement s c a r r y no i m p l i c a t i o n o f f i n a l i t y , n o r a r e t h e y r e g a r d e d as b e i n g c o m p l e t e s o l u t i o n s . - 131 -( v i i i ) S i g n i f i c a n c e o f t h e B u s i n e s s C y c l e . A n o v e r a l l s u r v e y o f t h e g e n e r a l p r o b l e m s f a c i n g p r i m a r y p r o d u c e r s m i g h t r e v e a l t h a t t h e p r i n c i p a l d i f f i c u l t i e s e x p e r i e n c e d i n t h e s e i n d u s t r i e s c a n be r e l a t e d t o t h e i n c i d e n c e o f t h e b u s i n e s s c y c l e , a n d t h e w i d e d i s p a r i t y i n economic d e v e l o p m e n t b e t w e e n t h e g r e a t c o n s u m -i n g n a t i o n s and t h e m a j o r i t y o f p r i m a r y p r o d u c i n g n a t i o n s . U n d o u b t e d l y a n y a n t i - c y c l i c a l p o l i c i e s w h i c h c o u l d be e f f e c t i v e i n r e g u l a t i n g t h e b u s i n e s s c y c l e w o u l d e l i m i n a t e i n l a r g e measure t h e p r o b l e m s w h i c h t e n d t o become p a r t i c u l a r l y a c u t e amongst p r i m a r y p r o d u c e r s . There i s e v e r y reason- t o hope t h a t o u t o f c u r r e n t r e s e a r c h i n t o t h e n a t u r e a n d c a u s e s o f t h e b u s i n e s s c y c l e e f f e c t i v e n a t i o n a l a n d i n t e r -n a t i o n a l p o l i c i e s may u l t i m a t e l y be d e v i s e d w h i c h c a n c o n t r o l and r e g u l -a t e i t s i n c i d e n c e . S i m i l a r l y t h e r e a r e s i g n s t h a t t h e i n d u s t r i a l d e v e l o p m e n t o f b a c k w a r d n a t i o n s may make r a p i d s t r i d e s i n t h e f u t u r e . P r e s i d e n t T r u m a n ' s 5 6 " P o i n t F o u r " programme, t o g e t h e r w i t h t h e Commonwealth Colombo P l a n f o r c a p i t a l a n d t e c h n i c a l a i d t o t h e s e u n d e v e l o p e d c o u n t r i e s , g i v e e v i d e n c e o f t h e W e s t e r n N a t i o n s ' g r o w i n g s e n s e o f r e s p o n s i b i l i t y . S i m i l a r l y , t h e p o l i t i c a l e m a n c i p a t i o n a n d n a t i o n a l m e t a m o r p h o s i s o f many o f t h e s e p r i m a r y p r o d u c i n g n a t i o n s w h i c h has r e c e n t l y a n d i s now s t i l l t a k i n g p l a c e , r e p r e s e n t s t h e b e g i n n i n g o f a new e p o c h o f e c o n o m i c d e v e l o p m e n t i n t h e s e a r e a s w h i c h has d e r i v e d i m p e t u s o u t o f r e v o l u t i o n . I t i s p o s s i b l e , t h e r e f o r e , t h a t w i t h r e l a t i v e l y s u s t a i n e d i n d u s t r i a l a c t i v i t y and t h e m a i n t e n a n c e o f h i g h l e v e l s o f employment 5*. S e e , f o r e x a m p l e , t h e a c c o u n t "by HUTCHESON, H a r o l d H . , " G o v e r n m e n t a n d C a p i t a l i n P o i n t F o u r " f . F o r e i g n P o l i c y R e p o r t s . V o l . X X V , N o . 6, M i d s t o n H o u s e , New Y o r k . 6. The Colombo P l a n f o r G o - o p e r a t i v e E c o n o m i c D e v e l o p m e n t i n S o u t h a n d S o u t h - E a s t A s i a . R e p o r t b y the Commonwealth C o n s u l t a t i v e Commit tee ( L o n d o n , O c t o b e r , 1950.) - 182 -t h r o u g h o u t t h e w o r l d , t h a t f u t u r e p r i m a r y p r o d u c e r s w i l l n o t s u f f e r t h e d i f f i c u l t i e s w h i c h h a v e l e d government s t o t a k e s p e c i a l measures t o g i v e them s u p p o r t . A g a i n , t h e v e r t i c a l i n t e g r a t i o n o f t h e i n d u s t r i e s o f n a t i o n a l economies w i l l d i m i n i s h t h e e x t r e m e dependence o f many p r i m a r y p r o d u c i n g n a t i o n s on f o r e i g n e x c h a n g e , and e q u a l i s e t h e t e r m s o f t r a d e b e t w e e n e x p o r t i n g a n d i m p o r t i n g n a t i o n s . There i s no j u s t i f i c a t i o n f o r t h e f e a r t h a t i n d u s t r i a l i z a t i o n o f p r i m a r y p r o d u c i n g n a t i o n s w i l l d i m i n i s h t h e vo lume o f i n t e r n a t i o n a l t r a d e . E c o n o m i c i n t e r d e p e n d e n c e c a n be j u s t a s e x t e n s i v e b u t w i l l b e on a h e a l t h i e r b a s i s . S e v e r e r e g u l a t o r y commodi ty a g r e e m e n t s w i l l no l o n g e r be a d e s p e r a t e n e c e s s i t y f o r s u c h n a t i o n s when t h e i r economy i s no l o n g e r a l m o s t w h o l l y d e p e n d e n t on t h e p r o d u c t i o n o f one o r two s t a p l e c o m m o d i t i e s . I n c o n c l u s i o n , i t w o u l d n o t be t o o s t r o n g a s t a t e m e n t t o make t h a t t h e p r o b l e m o f e q u a l a c c e s s t o raw m a t e r i a l s s u p p l i e s ha s b e e n t h e 7 f u n d a m e n t a l a n c i l l a r y economic c a u s e o f r e c e n t w a r s . A n y c o n t r i b u t i o n t h a t I C A ' s o r o t h e r d e v i c e s f o r i n t e r n a t i o n a l c o - o p e r a t i o n c a n make, t h e r e f o r e , t o i m p r o v e r e s o u r c e a l l o c a t i o n a n d c o n s u m p t i o n l e v e l s , may be a c o n t r i b u t i o n t o w o r l d p e a c e a s w e l l a s p r o s p e r i t y * - . 7 . See f o r example F E I S , H e r b e r t , The S i n e w s o f Peace (Harper & B r o s . , New Y o r k and L o n d o n ) , p. 2 1 3 ; a l s o HOBSONS,- J. A . , , f I M P E R I A L I S M " , and FROKOPOVICZ, S . N . , E d i t o r . Q u a r t e r l y B u l l e t i n o f S o v i e t R u s s i a n  E c o n o m i c s ( G e n e v a , S w i t z e r l a n d ) , November , 1 9 4 1 , a s q u o t e d b y ( M a c M i l l a n C o . , New Y o r k , 1943), p . 2 6 7 . A P P E N D I X - I83 -APPENDIX A E x t r a c t s f r o m I n t e r n a t i o n a l C o n f e r e n c e s , d e t a i l i n g p r i n c i p l e s and p r o v i s i o n s r e l a t i n g t o I n t e r n a t i o n a l Commodity A g r e e m e n t s . I. 1933 W o r l d M o n e t a r y and E c o n o m i c C o n f e r e n c e . A t t h e i n s t a n c e o f S i r P h i l i p C u n l i f f e - L i s t e r i t was l a i d down t h a t p r o d u c e r ' s : ag reement s d e s i g n e d t o r a i s e t h e p r i c e o f commo-d i t i e s t o r e a s o n a b l e l e v e l s ; and t o o b t a i n e q u i l i b r i u m o f s u p p l y and demand s h o u l d c o n f o r m t o t h e f o l l o w i n g t e s t s : 1 . The commodi ty must be one o f w o r l d i m p o r t a n c e where a n e x c e s s o f s t o c k s ; o r p r o d u c t i v e c a p a c i t y c a l l s f o r s p e c i a l a c t i o n . 2 . The agreement s h o u l d be c o m p r e h e n s i v e as r e g a r d s t h e c o m m o d i t i e s r e g u l a t e d and s h o u l d even i n c l u d e r e l a t e d o r s u b s t i t u t e p r o d u c t s . 3. I t s h o u l d be c o m p r e h e n s i v e as; r e g a r d s p r o d u c e r s , command-i n g a g e n e r a l m e a s u r e o f a s s e n t among e x p o r t i n g c o u n t r i e s a n d p r o d u c e r s w i t h t h e m , and p r o v i d i n g f o r t h e c o - o p e r a t i o n o f n o n - e x p o r t i n g ; c o u n t r i e s w i t h a c o n s i d e r a b l e p r o d u c t i o n . 4*. I t s h o u l d be f a i r t o a l l p a r t i e s , p r o d u c e r s and c o n s u m e r s , and w o r k e d w i t h t h e c o - o p e r a t i o n o f t h e l a t t e r , who a r e e q u a l l y c o n c e r n -e d w i t h p r o d u c e r s i n t h e m a i n t e n a n c e o f r e g u l a r s u p p l i e s a t f a i r a n d s t a b l e p r i c e s . 5» I t s h o u l d be a d m i n i s t r a t i v e l y p r a c t i c a b l e as r e g a r d s m a c h i n e r y and t h e a b i l i t y o f g o v e r n m e n t s t o e n f o r c e i t s o p e r a t i o n . 6>. I t s h o u l d be o f s u f f i c i e n t d u r a t i o n , e v e n i f a m e r e l y t e m p o r a r y e x p e d i e n t , t o g i v e an a d e q u a t e a s s u r a n c e t o a l l c o n c e r n e d t h a t i t s o b j e c t c a n be a c h i e v e d . 7. Due; r e g a r d must be h a d t o t h e d e s i r a b i l i t y o f e n c o u r a g -i n g e f f i c i e n t p r o d u c t i o n . SOURCE: H o l l a n d , W . L . , e d i t o r o f Commodity C o n t r o l i n t h e P a c i f i c  A r e a ( S t a n f o r d U n i v e r s i t y P r e s s , C a l i f o r n i a ) * , q u o t e d f r o m p p . 423-424 I I . U n i t e d N a t i o n s C o n f e r e n c e on F o o d and A g r i c u l t u r e T e x t o f t h e f i n a l a c t , s e c t i o n X X V , I n t e r n a t i o n a l '• Commodity A r r a n g e m e n t s . WHEREAS: 1 . E x c e s s i v e s h o r t - t e r m movements i n t h e p r i c e s o f f o o d and a g r i c u l t u r a l c o m m o d i t i e s a r e an o b s t a c l e t o t h e o r d e r l y c o n d u c t o f t h e i r p r o d u c t i o n and d i s t r i b u t i o n . - 184 -2. E x t r e m e f l u c t u a t i o n s o f t h e p r i c e s o f f o o d and a g r i c u l -t u r a l p r o d u c t s a g g r a v a t e g e n e r a l d e f l a t i o n a r y and i n f l a t i o n a r y t e n d e n -c i e s , w h i c h a r e i n j u r i o u s t o p r o d u c e r s and consumers a l i k e ; 3 . The m i t i g a t i o n o f t h e s e i n f l u e n c e s w o u l d promote t h e o b j e c t i v e s o f an e x p a n s i o n i s t p o l i c y ; 4. Changes i n t h e s c a l e and c h a r a c t e r o f p r o d u c t i o n t o meet more e f f e c t i v e l y the, w o r l d ' s n e e d f o r f o o d and a g r i c u l t u r a l p r o d u c t s may i n c e r t a i n i n s t a n c e s r e q u i r e a p e r i o d o f t r a n s i t i o n a n d i n t e r n a t i o n c o - o p e r a t i o n , t o a i d p r o d u c e r s i n m a k i n g n e c e s s a r y a d j u s t -ments: i n t h e i r p r o d u c t i v e o r g a n i z a t i o n ; 5» I n t e r n a t i o n a l commodity a r r a n g e m e n t s may p l a y a u s e f u l p a r t i n t h e advancement o f t h e s e ends b u t f u r t h e r s t u d y i s n e c e s s a r y t o e s t a b l i s h t h e p r e c i s e fo rms w h i c h t h e s e a r r a n g e m e n t s s h o u l d t a k e and w h e t h e r and t o what e x t e n t r e g u l a t i o n o f p r o d u c t i o n may be n e e d e d ; REIXMEENDS: * 1. T h a t i n t e r n a t i o n a l commodi ty a r r a n g e m e n t s h o u l d be d e s i g n e d so as' t o promote t h e e x p a n s i o n o f an o r d e r l y w o r l d economy; 2. T h a t , t o t h i s e n d , a body o f b r o a d p r i n c i p l e s s h o u l d , t h r o u g h f u r t h e r i n t e r n a t i o n a l d i s c u s s i o n be a g r e e d upon r e g a r d i n g t h e f o r m u l a t i o n , t h e p r o v i s i o n s , and t h e a d m i n i s t r a t i o n o f s u c h i n t e r -n a t i o n a l commodity a r r a n g e m e n t s a s may be deemed f e a s i b l e and d e s i r -a b l e a n d s h o u l d i n c l u d e a s s u r a n c e t h a t : ( a ) S u c h a r r a n g e m e n t s w i l l i n c l u d e e f f e c t i v e r e p r e s e n t -a t i o n o f consumers a s w e l l as' p r o d u c e r s : ; ( b ) I n c r e a s i n g o p p o r t u n i t i e s w i l l be a f f o r d e d f o r s u p p l y -i n g c o n s u m p t i o n needs f o r t h e mos t e f f i c i e n t s o u r c e s o f p r o d u c t i o n a t p r i c e s f a i r t o b o t h consumers and p r o d u c e r s and w i t h due r e g a r d t o s u c h t r a n s i t i o n a l a d j u s t m e n t s i n p r o d u c t i o n as may be r e q u i r e d t o p r e v e n t s e r i o u s economic and s o c i a l d i s l o c a t i o n s ; ( c ) A d e q u a t e r e s e r v e s w i l l be m a i n t a i n e d t o meet a l l c o n s u m p t i o n n e e d s ; ( d ) P r o v i s i o n w i l l be made, when a p p l i c a b l e , f o r t h e o r d e r l y d i s p o s a l o f s u r p l u s e s ; 3 . T h a t i n t e r n a t i o n a l o r g a n i z a t i o n s h o u l d be c r e a t e d a t an e a r l y d a t e t o s t u d y t h e f e a s i b i l i t y and d e s i r a b i l i t y o f s u c h a r r a n g e -m e n t s w i t h r e f e r e n c e t o i n d i v i d u a l c o m m o d i t i e s and i n a p p r o p r i a t e c a s e s , t o i n i t i a t e o r r e v i e w s u c h a r r a n g e m e n t s t o be e n t e r e d i n t o b e t w e e n g o v e r n m e n t s , and t o g u i d e and c o - o r d i n a t e t h e o p e r a t i o n s o f s u c h a r r a n g e m e n t s i n a c c o r d a n c e w i t h a g r e e d p r i n c i p l e s , m a i n t a i n i n g c l o s e - 185 -r e l a t i o n s w i t h s u c h programs as may he u n d e r t a k e n i n o t h e r f i e l d s o f i n t e r n a t i o n a l e conomic a c t i v i t y t o t h e end t h a t t h e o b j e c t i v e o f r a i s i n g c o n s u m p t i o n l e v e l s o f a l l p e o p l e s may be most e f f e c t i v e l y s e r v e d . SOURCE: I n t e r n a t i o n a l C o n c i l i a t i o n , September 1943 ( C a r n e g i e Endowment f o r I n t e r n a t i o n a l P e a c e , New Y o r k ) . I I I . The I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n T e x t o f t h e Havana C h a r t e r - C h a p t e r I V , I n t e r - . G o v e r n m e n t a l Commodity A g r e e m e n t s . The members; r e c o g n i z e t h a t t h e c o n d i t i o n s u n d e r w h i c h some p r i m a r y c o m m o d i t i e s ; a r e p r o d u c e d , e x c h a n g e d and consumed a r e s u c h t h a t i n t e r n a t i o n a l t r a d e i n t h e s e c o m m o d i t i e s may be a f f e c t e d by s p e c i a l d i f f i c u l t i e s s u c h as t h e t e n d e n c y t o w a r d s p e r s i s t e n t d i s e q u i l i b r i u m b e t w e e n p r o d u c t i o n a n d c o n s u m p t i o n , t h e a c c u m u l a t i o n o f burdensome s t o c k s and p r o n o u n c e d f l u c t u a t i o n s i n p r i c e s . These s p e c i a l d i f f i c u l t i e s may h a v e s e r i o u s a d v e r s e e f f e c t s on t h e i n t e r e s t o f p r o d u c e r s and c o n s u m e r s , as; w e l l a s w i d e s p r e a d r e -p e r c u s s i o n s j e o p a r d i s i n g t h e g e n e r a l p o l i c y o f economic e x p a n s i o n . The members r e c o g n i z e t h a t s u c h d i f f i c u l t i e s may, a t t i m e s , n e c e s s i -t a t e s p e c i a l t r e a t m e n t o f t h e i n t e r n a t i o n a l t r a d e i n s u c h c o m m o d i t i e s t h r o u g h i n t e r - g o v e r n m e n t a l a g r e e m e n t . O b j e c t i v e s ; o f I n t e r - G o v e r n m e n t a l Commodity A g r e e m e n t s Members; r e c o g n i z e t h a t i n t e r - g o v e r n m e n t a l commodi ty a g r e e -m e n t s a r e a p p r o p r i a t e f o r t h e a c h i e v e m e n t o f t h e f o l l o w i n g o b j e c t i v e s : ( a ) To p r e v e n t o r a l l e v i a t e t h e s e r i o u s economic d i f f i c u l t -i e s w h i c h may a r i s e when a d j u s t m e n t s be tween p r o d u c t i o n a n d c o n s u m p t i o n c a n n o t be e f f e c t e d by n o r m a l m a r k e t f o r c e s ; a l o n e as r a p i d l y as t h e c i r -cumstances- r e q u i r e . ( b ) To p r o v i d e , d u r i n g t h e p e r i o d w h i c h may be n e c e s s a r y , a f r a m e w o r k f o r t h e c o n s i d e r a t i o n and d e v e l o p m e n t o f m e a s u r e s w h i c h h a v e as t h e i r p u r p o s e e c o n o m i c a d j u s t m e n t s d e s i g n e d t o p romote t h e e x p a n s i o n o f c o n s u m p t i o n o r a s h i f t o f r e s o u r c e s a n d man-power o u t o f o v e r - e x p a n d e d i n d u s t r i e s ; i n t o new and p r o d u c t i v e o c c u p a t i o n s , , i n c l u d i n g as f a r a s p o s s i b l e i n a p p r o p r i a t e c a s e s t h e d e v e l o p m e n t o f s e c o n d a r y i n d u s t r i e s b a s e d u p o n d o m e s t i c p r o d u c t i o n o f p r i m a r y c o m m o d i t i e s . (.c:) To p r o v i d e f o r t h e e x p a n s i o n o f t h e p r o d u c t i o n o f a p r i m a r y commodity where t h i s c an be a c c o m p l i s h e d w i t h a d v a n t a g e t o c o n s u m e r s and p r o d u c e r s , i n c l u d i n g i n a p p r o p r i a t e cases ; t h e d i s t r i b u -t i o n o f b a s i c foods ; a t s p e c i a l r a t e s . \ - 186 -( d ) To m a i n t a i n a n d d e v e l o p t h e n a t u r a l , r e s o u r c e s o f t h e w o r l d and p r o t e c t them f r o m u n n e c e s s a r y e x h a u s t i o n . i .1 ( e ) To p r e v e n t o r m o d e r a t e t h e p r o n o u n c e d f l u c t u a t i o n s ; i n t h e p r i c e o f a p r i m a r y commodity w i t h a v i e w t o a c h i e v i n g a r e a s o n -a b l e d e g r e e o f s t a b i l i t y on t h e b a s i s , o f s u c h p r i c e s a s a r e f a i r t o consumers; and p r o v i d e a r e a s o n a b l e r e t u r n t o p r o d u c e r s , h a v i n g r e g a r d t o t h e d e s i r a b i l i t y o f s e c u r i n g l o n g - t e r m e q u i l i b r i u m be tween t h e f o r c e s o f s u p p l y a n d demand.. ( f ) To a s s u r e t h e e q u i t a b l e . d i s t r i b u t i o n o f a p r i m a r y commodi ty i n s h o r t s u p p l y . C i r c u m s t a n c e s . G o v e r n i n g t h e Use o f Commodity C o n t r o l A g r e e m e n t s S u c h agreement s may be e m p l o y e d when ( a ) A burdensome s u r p l u s o f a p r i m a r y commodity h a s d e v e l o p e d o r i s e x p e c t e d t o d e v e l o p , w h i c h , i n t h e ab sence o f s p e c i -f i c g o v e r n m e n t a l a c t i o n , w o u l d c a u s e s e r i o u s ' h a r d s h i p t o p r o d u c e r s among whom a r e s m a l l p r o d u c e r s who a c c o u n t f o r a s u b s t a n t i a l p o r t i o n o f t h e t o t a l o u t p u t , and t h a t t h e s e c o n d i t i o n s c o u l d n o t be c o r r e c t e d by n o r m a l m a r k e t f o r c e s i n t i m e t o p r e v e n t s u c h h a r d s h i p , b e c a u s e , c h a r a c t e r i s t i c a l l y i n t h e c a s e o f t h e p r i m a r y commodity c o n c e r n e d , a s u b s t a n t i a l r e d u c t i o n i n p r i c e does- n o t r e a d i l y l e a d t o a s i g n i f i -c a n t i n c r e a s e i n c o n s u m p t i o n o r t o a s i g n i f i c a n t d e c r e a s e i n p r o d u c t i o n ; o r ( b ) W i d e s p r e a d unemployment o r underemployment i n c o n n e c t i o n w i t h a p r i m a r y c o m m o d i t y , a r i s i n g out o f d i f f i c u l t i e s o f t h e k i n d r e f e r r e d t o i n ( t h e f i r s t ) a r t i c l e , h a s d e v e l o p e d o r i s e x p e c t -ed t o d e v e l o p , w h i c h , i n t h e ab sence o f s p e c i f i c g o v e r n m e n t a l a c t i o n w o u l d n o t be c o r r e c t e d b y n o r m a l m a r k e t f o r c e s i n t i m e t o p r e v e n t w i d e s p r e a d and undue h a r d s h i p t o w o r k e r s because c h a r a c t e r i s t i c a l l y i n t h e c a s e o f t h e i n d u s t r y c o n c e r n e d , a s u b s t a n t i a l r e d u c t i o n o f p r i c e does n o t r e a d i l y l e a d t o a s i g n i f i c a n t i n c r e a s e i n c o n s u m p t i o n b u t t o a r e d u c t i o n o f employment , and b e c a u s e a r e a s i n w h i c h t h e commodity i s p r o d u c e d i n s u b s t a n t i a l q u a n t i t y do n o t a f f o r d a l t e r n a -t i v e employment o p p o r t u n i t i e s f o r t h e w o r k e r s i n v o l v e d . SOURCE: The Havana C h a r t e r f o r a n I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n , U . S . Depar tment o f S t a t e , P u b l i c a t i o n 32-06. C o m m e r c i a l P o l i c y S e r i e s 114. P r o v i s i o n s f o r t h e O p e r a t i o n o f s u c h Agreements- - T a k e n f r o m t h e Geneva D r a f t C h a r t e r . The members s h a l l o b s e r v e t h e f o l l o w i n g p r i n c i p l e s g o v e r n i n g t h e c o n c l u s i o n and o p e r a t i o n o f a l l t y p e s o f i n t e r - g o v e r n m e n t a l commodity a g r e e m e n t s . ( a ) S u c h a g r e e m e n t s s h a l l be open t o p a r t i c i p a t i o n i n i t i a l l y by any member on t e r m s no l e s s f a v o u r a b l e t h a n t h o s e a c c o r d -ed t o any o t h e r c o u n t r y and t h e r e a f t e r i n a c c o r d a n c e w i t h s u c h p r o c e d u r e - 187 -and upon s u c h t e r m s as may be e s t a b l i s h e d i n t h e agreement s u b j e c t t o t h e a p p r o v a l by t h e O r g a n i z a t i o n . ( b ) Non-members; may be i n v i t e d by t h e O r g a n i z a t i o n t o p a r t i c i p a t e i n s u c h agreement s and t h e p r o v i s i o n s ; o f sub p a r a , -(a) a p p l y i n g t o members s h a l l a p p l y t o any non-member so i n v i t e d ; ( c ) U n d e r s u c h ag reement s t h e r e s h a l l be e q u i t a b l e t r e a t m e n t as; be tween p a r t i c i p a t i n g c o u n t r i e s ; and n o n - p a r t i c i p a t i n g members , and t h e t r e a t m e n t a c c o r d e d by p a r t i c i p a t i n g c o u n t r i e s t o n o n -p a r t i c i p a t i n g members s h a l l be no l e s s f a v o u r a b l e t h a n t h a t a c c o r d e d t any n o n - p a r t i c i p a t i n g non-member, due c o n s i d e r a t i o n b e i n g g i v e n i n each c a s e t o p o l i c i e s a d o p t e d by n o n - p a r t i c i p a n t s i n r e l a t i o n t o o b l i g a t i o n s assumed and a d v a n t a g e s c o n f e r r e d u n d e r t h e a g r e e m e n t : ( d ) S u c h agreement s s h a l l i n c l u d e t h e p r o v i s i o n f o r adequa te p a r t i c i p a t i o n o f c o u n t r i e s s u b s t a n t i a l l y i n t e r e s t e d i n p r o d u c t i o n o r c o n s u m p t i o n o f t h e c o m m o d i t y . ( e ) F u l l p u b l i c i t y s h a l l be g i v e n t o any i n t e r - g o v e r n -m e n t a l , commodity agreement p r o p o s e d o r c o n c l u d e d , t o t h e . s t a t e m e n t s o f c o n s i d e r a t i o n s ' and o b j e c t i v e s ^ a d v a n c e d by t h e p r o p o s i n g members , t o t h e n a t u r e and d e v e l o p m e n t ' o f m e a s u r e s a d o p t e d t o c o r r e c t t h e u n d e r l y i n g s i t u a t i o n w h i c h gave r i s e t o t h e agreement a n d , p e r i o d -i c a l l y , t o t h e o p e r a t i o n o f t h e a g r e e m e n t . SOURCE: T e s t o f t h e Geneva D r a f t o f a C h a r t e r f o r a n - I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n o f t h e U n i t e d N a t i o n s , I n t e r n a t i o n a l - C o n - c i l i a t i o n . O c t o b e r , 1947f N o . 434» ( C a r n e g i e Endowment f o r I n t e r n a t i o n a l P e a c e . ) B I B L I 0 g R A P H Y - 188 -BIBLIOGRAPHY The f o l l o w i n g b i b l i o g r a p h y c i t e s o n l y t h o s e s o u r c e s u s e d i n t h i s s t u d y . B o o k s A s h l e y , S i r W i l l i a m , T h e B r e a d o f Our F o r e f a t h e r s . A n I n q u i r y i n E c o n o m i c H i s t o r y . ( C l a r e n d o n P r e s s . O x f o r d , 1939) B e n n e t t , M.K. and. A s s o c i a t e s , I n t e r n a t i o n a l Commodity S t o c k P i l i n g  a s an Economic S t a b i l i z e r . ( F o o d R e s e a r c h I n s t i t u t e . S t a n f o r d U n i v e r s i t y , C a l i f o r n i a , 1941). B l a c k , J o h n D. and K i e f e r , M a x i n e E . F u t u r e F o o d and A g r i c u l t u r a l  P o l i c y ( M c G r a w - H i l l Book C o . , 1948) B o u l d i n g , K e n n e t h E . Economic A n a l y s i s . ( H a r p e r & B r o t h e r s , New Y o r k , 1948). B r o w n , W i l l i a m A . The U n i t e d S t a t e s and t h e R e s t o r a t i o n o f W o r l d T r a d e ( B r o o k i n g s I n s t i t u t e . ) C h a m b e r l a i n , E d w a r d . The T h e o r y o f M o n o p o l i s t i c C o m p e t i t i o n ( H a r v a r d U n i t e r s i t y P r e s s , 1935) C l a r k , C o l i n . The C o n d i t i o n s o f E c o n o m i c P r o g r e s s . ( M a c M i l l a n C o . , L o n d o n , I940.) C r o o k e s , S i r W i l l i a m . The Wheat P r o b l e m . (Longman ' s G r e e n & C o . 1917) D a v i s , J o s e p h S . Wheat and t h e A . A . . A . ( W a s h i n g t o n , D . C . 1935.) D u t c h , O s w a l d E d i t o r , E c o n o m i c P e a c e A i m s . ( E d w a r d A r n o l d & C o . , L o n d o n ) F e i s , H e r b e r t . The S i n e w s o f P e a c e * ( H a r p e r B r o s . , New Y o r k & L o n d o n , I944.) F o o d R e s e a r c h I n s t i t u t e . ( I S O ) Wheat S t u d i e s V o l . I - X X . , I924-I944. ( S t a n f o r d U n i v e r s i t y , C a l i f o r n i a ) Graham, B e n j a m i n , S t o r a g e and S t a b i l i t y . 1937. W o r l d Commodit ies- and W o r l d C u r r e n c y . (New Y o r k and L o n d o n , 1944.) Graham, S i r R o b e r t . E d i t o r I n t e r n a t i o n a l T e a C o m m i t t e e ' s R e v i e w  o f t h e T e a R e g u l a t i o n Scheme 1 9 3 3 - 1 9 4 4 . ( L o n d o n , 1944.) Guedes;, Jayme F e r n a n d e s , B r a z i l C o f f e e i n 1 9 4 1 . R e p o r t s u b m i t t e d , on A p r i l 30,1942 t o t h e A d v i s o r y C o u n c i l o f t h e N a t i o n a l C o f f e e D e p a r t -m e n t . ( R i o de J a n e i r o , 1942) H a l l , S i r D a n i e l , The P a c e o f Progress 1 . . The Rede L e c t u r e M a r c h 4 th , 1935. ( C a m b r i d g e U n i v e r s i t y P r e s s : . ) - 190 -H a r l e r , C . R . C u l t u r e & M a r k e t i n g o f T e a . ( L o n d o n , 1933). H a r r i s , Seymour E . P o s t w a r E c o n o m i c P r o b l e m s . ( M c G r a w - H i l l , 1943•) H e r e s y , E a r o n P a u l D e . W o r l d Wheat P l a n n i n g & E c o n o m i c P l a n n i n g i n  G e n e r a l . ( O x f o r d U n i v e r s i t y P r e s s , 1940)* H e x n e r , E r v i n e . I n t e r n a t i o n a l C a r t e l s . ( U n i v e r s i t y o f N o r t h C a r o l i n a P r e s s . ) Hobsons, , J o h n A t k i n s o n . I m p e r i a l i s m . (G. A l l e n & U n w i n L t d . , 193°*.) H o l l a n d , W . L . E d i t o r Commodity C o n t r o l i n t h e P a c i f i c A r e a . ( S t a n f o r d U n i v e r s i t y P r e s s . ) J a c o b , H . E . C o f f e e — The E p i c o f a C o m m o d i t y . ( New Y o r k , 1933.) J o h n s o n , D a v i d G a l e , F o r w a r d P r i c e s f o r A g r i c u l t u r e . ( U n i v e r s i t y o f C h i c a g o P r e s s , 1947.) 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I n t e r n a t i o n a l A g r e e m e n t s on C o n s e r v a t i o n o f M a r i n e  R e s o u r c e s . ( F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d U n i v e r s i t y , C a l i f o r -n i a , 1943*) U k e r s , . W . H . A l l About C o f f e e . . (2nd e d i t i o n , New Y o r k , 1935.) W a i t e , W a r r e n C . & C a s s a d y , R a l p h . The Consumer a n d t h e E c o n o m i c - O r d e r ( M c j & r a w - H i l l , 1939.) W a l l a c e & E d m i n s t e r . I n t e r n a t i o n a l C o n t r o l o f Raw M a t e r i a l s . (The B r o o k i n g s I n s t i t u t i o n , W a s h i n g t o n , 1930.) W i c k i z e r , V . D . The W o r l d C o f f e e Economy w i t h S p e c i a l . R e f e r e n c e t o  C o n t r o l Schemes . ( F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d ; C a l i f o r n i a . ) T e a Under 1 I n t e r n a t i o n a l R e g u l a t i o n . ( F o o d R e s e a r c h I n s t i t u t e , S t a n f o r d U n i v e r s i t y , C a l i f o r n i a . - 192 -PERIODICALS A m e r i c a n E c o n o m i c Review, C a l s o y a s , C D . "Commodity C u r r e n c y and Commodity S t o r a g e 0 V o l . . X X X V I I I , J u n e , 1948, N o . 3. Davis- , J o s e p h S . " I n t e r n a t i o n a l Commodity A g r e e m e n t s i n t h e P o s t w a r W o r l d " ' V o l . X X X I I , M a r c h , 1942, No; 1, P a r t 2. G o r d o n , M a r g a r e t S . " I n t e r n a t i o n a l A s p e c t s o f A m e r i c a n A g r i c u l t u r a l P o l i c y " V o l . X X X V I , S e p t e m b e r , 194&, N o . 4, P a r t 1. H a l e y , B e r n a r d F . "The R e l a t i o n be tween C a r t e l P o l i c y and Commodity Agreement P o l i c y " V o l . X X X V I , M a y , 1946', N o . 2 •' J o h n s o n , D . G a l e , "The N a t u r e o f t h e S u p p l y F u n c t i o n f o r A g r i c u l t u r a l P r o d u c t s , " V o l . X L , S e p t e m b e r , 1950, N o . 4. W a l l a c e , B e n j a m i n , B . R e v i e w o f t h e " H i s t o r y o f R u b b e r R e g u l a t i o n * and ' T e a U n d e r I n t e r n a t i o n a l C o n t r o l ' V o l . X X X V , M a r c h , 1945. A m e r i c a n F a r m E c o n o m i c A s s o c i a t i o n D a v i s , J o h n N . "The I n t e r n a t i o n a l F e d e r a t i o n o f A g r i c u l t u r a l P r o d u c e r s - " , a p a p e r p r e s e n t e d a t t h e a n n u a l •meet ing o f t h e A m e r i c a n F a r m E c o n o m i c A s s o -c i a t i o n , W i s c o n s i n , Sep tember 11th, 1947• A m e r i c a n P o l i t i c a l S c i e n c e R e v i e w W i l k , K u r t . "The I n t e r n a t i o n a l S u g a r R e g i m e " , October ,1939* E c o n o m i c s T y s z y n s k i * H . "Economic s ; o f t h e Wheat A g r e e m e n t " V o l . X V I , F e b . , 1949, N o . 6 l . " A N o t e on I n t e r n a t i o n a l Commodity A g r e e m e n t s " V o l . X V I I , November , 1950, N o . 68. E c o n o m i c J o u r n a l p u b l i s h e d by t h e J o u r n a l o f t h e R o y a l E c o n o m i c S o c i e t y K e y n e s , J . M . "The P o l i c y o f Government S t o r a g e o f F o o d S t u f f s and Raw M a t e r i a l s " V o l . X L V I I I , S e p t e m b e r , 1938. F a r m e r & S t o c k - B r e e d e r ( L o n d o n ) J u n e 7th and September 27th,1949-F o r e i g n A f f a i r s ( C o u n c i l on F o r e i g n R e l a t i o n s I n c . , New Y o r k . ) F e l s , H e r b e r t . "Raw M a t e r i a l s and F o r e i g n P o l i c y " V o l . l 6 , J u l y , I938, N o . 4. - 193 -^ F o r e i g n A f f a i r s ( C o n t ' d ) • Hansen , . A l v i n H . " W o r l d I n s t i t u t i o n s f o r S t a b i l i t y and. E x p a n s i o n " V o l . 22, J a n u a r y , 1944. N o . .2 I s t e l , A n d r § . " E q u a l A c c e s s t o Raw M a t e r i a l s " V o l . 20, A p r i l , 1942. N o . 3. ' V i n e r , J a c o b . " C o n f l i c t s o f P r i n c i p l e i n D r a f t i n g a (Erade C h a r t e r " V o l . 25, J u l y , 1947. N o . 4. W h e e l e r , L . A . " A g r i c u l t u r a l S u r p l u s e s i n t h e P o s t w a r W o r l d " V o l . 20, O c t o b e r , 1941, N o . 1 F o r e i g n P o l i c y R e p o r t s ( M i d s t o n H o u s e , New Y o r k . ) H u t c h e s o n , H a r o l d H . " C o v e r n m e l i t and C a p i t a l i n P o i n t F o u r " V o l . X X V , N o . 6. F o r e i g n T r a d e ( D o m i n i o n G o v e r n m e n t , O t t a w a . ) " I n t e r n a t i o n a l M a t e r i a l s C o n f e r e n c e Seeks S o l u t i o n t o W o r l d Commodity S h o r t a g e s " V o l . I X , J u n e 9, 1951, N o . 232 I n t e r n a t i o n a l C o n c i l i a t i o n ( C a r n e g i e Endowment f o r I n t e r n a t i o n a l P e a c e , New Y o r k . ) B i d w e l l , P e r c y W. & D i e b o l d , W i l l i a m "The U n i t e d S t a t e s a n d t h e I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n " M a r c h , 1949, Wo. 449. I n t e r n a t i o n a l J o u r n a l o f A g r a r i a n A f f a i r s " I n t e r n a t i o n a l Wheat A g r e e m e n t s " V o l . 1, Sep tember , . 1943, N o . 3 . J o u r n a l o f A m e r i c a n S t a t i s t i c a l A s s o c i a t i o n K a p l a n , A . D . H . " E x p e n d i t u r e P a t t e r n s o f U r b a n ' F a m i l i e s " V o l . 33,. 1938. ^ J o u r n a l o f F a r m E c o n o m i c s A r n e r , G . B . L : R e v i e w o f ' T e a U n d e r I n t e r n a t i o n a l R e g u l a t i o n ' V o l . . X X V I , A u g u s t , 1944. E l l i o t , F . F . " R e d i r e c t i n g W o r l d A g r i c u l t u r a l P r o d u c t i o n and T r a d e T o w a r d B e t t e r N u t r i t i o n " V o l . X X V I , F e b . , I944, N o . 1 " A P r o p o s e d W o r l d T r a d e B o a r d f o r E x p a n d i n g I n t e r n a t i o n a l T r a d e " V o l . X X V I I , A u g u s t , 1945, N o . 3. - 194 -J o u r n a l o f F a r m E c o n o m i c s ( c o n t ' d ) S c h u l t z , T . W . " F o o d , A g r i c u l t u r e and T r a d e " V o l . X X I X , F e b . , 1947, N o . 1 S c h w e n g e r , R o b e r t B . " W o r l d A g r i c u l t u r a l P o l i c i e s and t h e E x p a n s i o n o f T r a d e " V o l . X X V I I , F e b r u a r y , 1945t N o . 1 W h i t e , Benne-t S . & D e n h a r d , D e i t h T - " C h r o n i c S u r p l u s e s o f A g r i c u l t u r a l C o m m o d i t i e s i n t h e P o s t -war P e r i o d " V o l . X X V , N o v e m b e r , 1943, N o « 4-Z a g l i t s , O s c a r , " I n t e r n a t i o n a l P r i c e C o n t r o l t h r o u g h B u f f e r S t o c k s " . V o l . X X V I I I , M a y , I946, N o . 2 . J o u r n a l o f P o l i t i c a l Economy D a v i s , J o s e p h S . " E x p e r i e n c e u n d e r I n t e r n a t i o n a l G o v e r n -m e n t a l Commodity A g r e e m e n t s , 1902-1945" V o l . L T V , J u n e I946, N o . 3 R i e f l e r , W.W. " A P r o p o s a l f o r an I n t e r n a t i o n a l B u f f e r S t o c k A g e n c y " ! V o l . L I V , December , I 9 4 6 . V i n e r , J a c o b " i n t e r n a t i o n a l F i n a n c e i n t h e P o s t w a r W o r l d " ' V o l . L V , A p r i l , 1947. Law a n d C o n t e m p o r a r y P r o b l e m s D a n i e l s , P . C . "The I n t e r - A m e r i c a n C o f f e e A g r e e m e n t " V o l . V I I I , Autumn, I.941. N a t u r e E d i t o r i a l , V o l . 148, November 8 , 1941, N o . 3758. P r o c e e d i n g s o f t h e Academy o f P o l i t i c a l S c i e n c e F e i s : , H e r b e r t "Raw M a t e r i a l s P r i c e s and C o n t r o l s " J a n u a r y , 1945 •. Q u a r t e r l y B u l l e t i n o f S o v i e t R u s s i a n E c o n o m i c s : ( G e n e v a . S w i t z e r l a n d ) P r o k o p o v i c s , S . N . "The E c o n o m i c Cause o f t h e R u s s i a n -German War" November , 1941» Q u a r t e r l y J o u r n a l o f E c o n o m i c s C a s s e l l s ' , J o h n M . " E x c e s s C a p a c i t y and M o n o p o l i s t i c C o m p e t i t i o n " V o l . L I , M a y , 1937. B l a c k , J o h n D. & T'sou, S t a n l e y " I n t e r n a t i o n a l Commodity A r r a n g e m e n t s " V o l . L V I I I , A u g u s t , I944 - 195 -Q u a r t e r l y J o u r n a l o f E c o n o m i c s ( c o n t ' d ) G o l a y , F r a n k H . "The I n t e r n a t i o n a l Wheat Agreement o f 1949" v o l . L x r v , 1950.. R e v i e w o f Economic S t u d i e s B r o s t e r , E . J . " E l a s t i c i t i e s o f Demand f o r T e a and P r i c e - F i x i n g P o l i c y " V o l . V I , J u n e , 19.39. R o y a l E c o n o m i c S o c i e t y - " S t u d i e s i n t h e A r t i f i c i a l C o n t r o l o f Raw M a t e r i a l S u p p l i e s " Howe, J . W . F . . Memorandum N o . 23, " S u g a r " , October ,I930 Memorandum N o . 29, " R u b b e r " , A p r i l , I 9 3 I . S c h w a r t z , G . L . K e y n e s , J . M . & Rowe, J . W . F . 1 Memorandum N o . 24, " S t o c k s o f S t a p l e C o m m o d i t i e s " O c t o b e r , 1930. R u b b e r News L e t t e r I936-I938. T e a and C o f f e e T r a d e J o u r n a l . B r o o k s , J a c k "Tea I n d u s t r y i n I m p r o v e d S t a t e a f t e r F i r s t R e g u l a t i o n P e r i o d " M a y , 1938. The E c o n o m i s t ( L o n d o n ) ' O c t o b e r 31st, I93I " R u b b e r and t h e I n v e s t o r " Sep tember 21st, 1940. The T i m e s ( L o n d o n ) F e b r u a r y 10th,I925. - 196 -O F F I C I A L DOCUMENTS I m p e r i a l Economic Commit tee ( L o n d o n ) E i g h t e e n t h R e p o r t - T e a (1931) I n t e r i m C o - o r d i n a t i n g Commit tee f o r I n t e r n a t i o n a l Commodity A r r a n g e -m e n t s ( U n i t e d N a t i o n s , New, Y o r k 1947 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s (I947 . I I . 9 ) 1948 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s ; (1948.11.0:.6) 1949 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s ( I950 . I I .D .2:) 1950 R e v i e w o f I n t e r n a t i o n a l Commodity P r o b l e m s (1951.11.D.1) I n t e r n a t i o n a l I n s t i t u t e o f A g r i c u l t u r e M o n t h l y C r o p R e p o r t and A g r i c u l t u r a l S t a t i s t i c s , November , '1.931« I n t e r n a t i o n a l L a b o u r O f f i c e I n t e r n a t i o n a l Commodity C o n t r o l Agreements ; ( M o n t r e a l ) , 1943* O f f i c i a l B u l l e t i n , J u n e 1st, 1944. I n t e r n a t i o n a l T e a Commit tee R e p o r t f o r 1937-38. League o f N a t i o n s M o n e t a r y and E c o n o m i c C o n f e r e n c e . D r a f t A n n o t a t e d A g e n d a ( G e n e v a , 1933) M o n e t a r y and E c o n o m i c C o n f e r e n c e . R e p o r t s a p p r o v e d by t h e c o n f e r e n c e on J u l y 27th, 1933, and R e s o l u -t i o n s a d o p t e d by t h e B u r e a u and t h e E x e c u -t i v e C o m m i t t e e , c . 435. M . 220, I I , C o n f . M . E . 22 (1) ( L o n d o n , J u l y 27th, 1933.) R e p o r t o f t h e C o m m i t t e e f o r t h e S t u d y o f t h e P r o b l e m o f Raw M a t e r i a l s ; A . 27, 1937, I i , B , ( G e n e v a , 1937.) R e v i e w o f W o r l d T r a d e , I.938 ( G e n e v a , 1939.) R e p o r t , " E c o n o m i c S t a b i l i t y i n t h e P o s t w a r W o r l d " (Geneva , , 1945.) P E P B r o a d s h e e t - P l a n n i n g N o . 174, "Commodity C o n t r o l Schemes" J u l y 29,1941. P r o c e e d i n g s o f t h e F o u r t h I n t e r n a t i o n a l C o n f e r e n c e o f A g r i c u l t u r a l E c o n o m i s t s , C a i r n s , Andrew " C o m m e r c i a l P o l i c y and t h e O u t l o o k f o r I n t e r -n a t i o n a l T r a d e i n A g r i c u l t u r a l P r o d u c t s " ' . 

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