Supra-National Compensation Schemes for Temporary Export Losses: A Critique

One important theme of discussions of international economic policy over the last fifty years has been the problem of the volatility of world prices of primary products. As Hans Singer has reminded us recently, Keynes in 1942 went so far as to describe this problem as ‘one of the greatest evils in international trade’ (Singer, 1996, p. 1). Much debate and a number of practical policy experiments have flowed from Keynes’s perception. One popular policy approach to countering volatility was the devising of international commodity agreements (ICAs) aimed at keeping the prices of commodities within a pre-agreed range. This approach reached its zenith with the agreement at UNCTAD IV in Nairobi in 1976 on an Integrated Programme on Commodities. The IPC is now generally regarded as a failure, and the debate that continues is about why it failed. Some identify the unwillingness of the developed countries to fund the IPC Common Fund adequately as the main cause. Others attribute this failure to the fatal ambiguity of the stabilization objectives of the ICAs themselves, along with underlying conflicts of interests between producers, and between producers and consumers, which quickly reasserted themselves.