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International commodity control : retrospect and prospect

Listed author(s):
  • Gilbert, Christopher L.
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    International commodity agreements (ICAs) fit uneasily in a world in which markets are becoming globalized and increasingly competitive. Development policy - both as preached by international agencies and as practiced by typically democratically elected and nonsocialist governments in the major producing countries - emphasizes productive efficiency, product quality, and effective marketing. This is a long way from the ideology that gave central place to supply restrictions operating through central marketing boards and quota allocations. In today's less centralized, more competitive world, the winners and losers from commodity stabilization are more evenly distributed across producing and consuming countries. Commodity policy is no longer a matter of redistribution from consumers to producers. This institutional change has been reinforced by the widespread belief - evidenced, for example, by the collapse of the international tin and coffee agreements - that commodity market stabilization through international agreements cannot succeed. In earlier decades, the belief that stabilization could and would improve the position of commodity producers provided the impetus for resolving some of the problems that intervention threw up. Since the collapse of the tin market in 1985, the belief that commodity market stabilization cannot work has undermined producers'willingness to try to resolve difficulties within existing ICAs and has reinforced the suspicion of consumer governments that these agreements were in no one's interests. In the current climate, encouraging competitive markets, state interventions are seen as requiring clear justification in terms of market failure. The existence of active futures markets in all of the industries that have commodity agreements makes justification along these lines problematic. But the"commodity problem"has not disappeared, and producers may look for other mechanisms to raise prices from often very low levels in industries experiencing excess capacity. Developed country governments may be forced to decide whether they prefer to see markets controlled by producer cartels (where they will lack representation) or under the auspices of international commodity agreements.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1545.

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    Date of creation: 30 Nov 1995
    Handle: RePEc:wbk:wbrwps:1545
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    1. Williams,Jeffrey C. & Wright,Brian D., 2005. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521023399, December.
    2. Anderson, Ronald W & Gilbert, Christopher L, 1988. "Commodity Agreements and Commodity Markets: Lessons from Tin," Economic Journal, Royal Economic Society, vol. 98(389), pages 1-15, March.
    3. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 1-23.
    4. Margaret E. Slade, 1991. "Market Structure, Marketing Method, and Price Instability," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1309-1340.
    5. Haskel, Jonathan, 1995. "Cartels, Contracts and Centralization: The Transition to Futures Trading for Primary Commodities," CEPR Discussion Papers 1193, C.E.P.R. Discussion Papers.
    6. Miranda, Mario J & Helmberger, Peter G, 1988. "The Effects of Commodity Price Stabilization Programs," American Economic Review, American Economic Association, vol. 78(1), pages 46-58, March.
    7. Townsend, Robert M., 1977. "The eventual failure of price fixing schemes," Journal of Economic Theory, Elsevier, vol. 14(1), pages 190-199, February.
    8. Bohman, Mary & Jarvis, Lovell, 1990. "The International Coffee Agreement: Economics of the Nonmember Market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(1), pages 99-118.
    9. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-378, June.
    10. Danthine, Jean-Pierre, 1978. "Information, futures prices, and stabilizing speculation," Journal of Economic Theory, Elsevier, vol. 17(1), pages 79-98, February.
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