What Does International Commodity Agreements Mean

Alternatives. Various efforts have been made to invent mechanisms other than international commodity agreements to transfer purchasing power to less developed countries whose incomes were either cyclical or chronically low. Some of these alternatives, such as the proposals for a commodity reserve currency (United Nations 1964a), would serve the purposes of foreign aid and international monetary “reform” at the expense of undermining the role of the price system as the main instrument of economic governance in (relatively) free entrepreneurial societies. Other transactions through regular financial transfers (United Nations 1964b; Swerling 1964), have the great advantage that the price system as an allocator of economic resources remains largely intact. Finally, the International Monetary Fund has acted – although with great reluctance and after some delay (Fleming & Lovasy, 1960) – to issue an additional tranche (i.e. a quarter of the country`s IMF quota) to compensate for the export earning deficits of less developed countries when these deficits occur for reasons beyond the country`s control, which is in difficulty with its balance of payments (International Monetary Fund, 1963). Such an approach has the important advantage of taking into account fluctuations in export volumes instead of reacting exclusively to fluctuations in commodity prices. An international commodity agreement is the obligation of a group of countries to stabilize the trade, supply and prices of a commodity for the benefit of participating countries. An agreement usually includes a consensus on the quantities traded, prices and inventory management. A number of international commodity agreements serve exclusively as forums for information exchange, analysis and policy discussion. Economic impact. International commodity agreements suffer from the various restrictions that characterize all efforts to artificially support the market position of individual raw materials.

In particular, price targets tend to be set too high, long-term elasticities of supply and demand tend to be underestimated, and cost structures tend to be constructed in such a way that any beneficial effect on producers` incomes is at best temporary. The longevity of the agreements is therefore not necessarily an advantage and, in the case of sugar, it has only been achieved by repealing the main provisions on export quotas at times (in particular high prices) when an agreement on market shares has proved impossible. International Commodity Agreements (ICAs) are essentially multilateral instruments of state control that support the international price of different primary raw materials, particularly through agreements such as export quotas or secure market access. Therefore, international commodity agreements must be distinguished from commodity task forces that are totally lacking in operational responsibility; international agreements of a non-governmental nature; and the Combined Food Board (1942-1945) or the International Materials Conference (1951-1953), which used international allocative machines for a significant number of primary raw materials in times of wartime shortages. .