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A study of international commodity agreements Roberts, Thomas Jones

Abstract

The following study of international commodity agreements, begins with a review of the inherent market and productive characteristics of primary commodities and particularly food staples. Inelasticity of their demand and supply, coupled with the dynamic effects of technological advance, business cycles and wars, lead to two principal difficulties, which are excessive instability of prices and a tendency towards the development and persistence of surplus productive capacity. These conditions cause much hardship amongst the primary producers concerned who are generally unable to help themselves, and call upon their governments for support. Such support is readily forthcoming in those primary producing countries which are particularly dependent upon an export trade in a few staple commodities. In the light of these difficulties the probable objectives of international commodity agreements is also briefly discussed. A detailed case study of certain commodities with which international agreements have been concerned, then follows. The market characteristics, special difficulties, the history of past agreements, and an evaluation of their effects, is made for rubber, coffee, tea, wheat and sugar. In concluding, beef, tin and other international regulatory agreements are mentioned. The opinions of various international bodies are then studied to indicate the direction of current thinking and the possible form of such regulatory agreements in the future. The viewpoints of various critics are also discussed in order to indicate the complexity of the issues involved and the divergencies of opinion which characterise this problem. A detailed review is made of proposals for buffer stock schemes since the idea has only lately received attention and seems to be the only feasible approach to the problem of price instability. In conclusion, it is pointed out, that real problems exist amongst certain primary producing industries, and that international commodity agreements could make some contribution to their solution. The chief weaknesses of past agreements have lain in their price raising objectives and use of export quotas. Individual commodity agreements on a short run basis, together with permanent buffer stock schemes are advocated as a desirable supplement to future anti-cyclical policies. The short run role of commodity agreements is emphasized because of the dangers of export quotas. Buffer stocks are advocated because the problem of price instability is a constantly recurring one. Strict adherence to the provisions of the ITO charter for such agreements will largely obviate the recurrence of their past mistakes. These conclusions are not final in that many problems such as the effective elimination of excess capacity yet remain to be solved. Moreover, it is pointed out that the ultimate control of the business cycle, and industrialization of certain primary producing nations would largely eliminate the problems besetting producers which have given rise to the need for International Commodity Agreements. Because of the institutional nature of this problem little attempt has been made at a statistical analysis of international trade problems. The methodology has been based on a theoretical analysis of underlying problems, followed by a pragmatical approach to previous agreements and an investigation of the writings of the many authorities who have studied the subject.

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