International Commodity Agreements

MAC/WFY

Page-66

0230_553559_11_cha07

194570. Early Attempts: FAO's Pioneering Work

Objective of commodity agreements

International commodity agreements were seen to have one of five objectives, or
a combination of them, that could, inter alia, contribute directly or indirectly to
food security:

· They could attempt to raise, or uphold, export earnings by means of arrange-

ments among producers restricting production or exports or both.

· They could attempt to promote economic stability, both in producing and

consuming countries, by preventing undue fluctuations of prices and quantities
traded but without interfering with long-term trends.

· They could endeavour to mitigate the problems and hardships of such

long-term adjustments as may be required in cases of persistent disequilib-
rium between production and consumption, particularly under conditions of
inelastic supply and demand.

· They could try to counteract the shrinkage of markets to primary producers

which resulted from protectionist measures or preferential arrangements in
importing countries.

· And they could be used as instruments for intergovernmental commodity

programming on more comprehensive lines, taking into account trade on both
commercial and concessional terms, national policies relating to production,
prices, and stocks, and the close links between problems of commodity trade,
aid and development programmes.

One of the chief difficulties in the actual negotiation of international commodity

agreements was that participating governments were not always fully conscious
of which of these five objectives they were mainly aiming at, and the extent to
which any one of these objectives, or combination of them, could be success-
fully attained by one or the other of the standard type of agreement techniques
(Blau, 1963). The primary exporting countries were interested not just in price
stability but in securing reasonable returns in terms of the manufactured goods
that they bought. In 1950, work at the United Nations in New York by Hans
Singer and then by Raul Prebisch at the UN Economic Commission for Latin
America in Santiago, Chile, had shown that the net barter terms of trade between
primary products and manufactures were subject to a long-run downward trend,
which implied that without changes in the structure of the world economy, the
gains from trade would continue to be distributed unequally and unfavourably
between those nations exporting primary products (the developing countries)
and those exporting manufactures (the developed countries).

The importing

countries, on the other hand, were mainly interested in securing more stable
conditions of trade and were prepared to consider any measure influencing the
levels of exporters' returns only insofar as such measures formed part of a process
or orderly adjustment of production to the changing conditions of the world
markets.

The draft Havana Charter agreed at the UN conference in Havana, Cuba in

1948, when the International Trade Organization was successfully negotiated, but

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Useful links	International Commodity Agreements MAC/WFY Page-66 0230_553559_11_cha07 66 194570. Early Attempts: FAO's Pioneering Work Objective of commodity agreements International commodity agreements were seen to have one of five objectives, or a combination of them, that could, inter alia, contribute directly or indirectly to food security: · They could attempt to raise, or uphold, export earnings by means of arrange- ments among producers restricting production or exports or both. · They could attempt to promote economic stability, both in producing and consuming countries, by preventing undue fluctuations of prices and quantities traded but without interfering with long-term trends. · They could endeavour to mitigate the problems and hardships of such long-term adjustments as may be required in cases of persistent disequilib- rium between production and consumption, particularly under conditions of inelastic supply and demand. · They could try to counteract the shrinkage of markets to primary producers which resulted from protectionist measures or preferential arrangements in importing countries. · And they could be used as instruments for intergovernmental commodity programming on more comprehensive lines, taking into account trade on both commercial and concessional terms, national policies relating to production, prices, and stocks, and the close links between problems of commodity trade, aid and development programmes. One of the chief difficulties in the actual negotiation of international commodity agreements was that participating governments were not always fully conscious of which of these five objectives they were mainly aiming at, and the extent to which any one of these objectives, or combination of them, could be success- fully attained by one or the other of the standard type of agreement techniques (Blau, 1963). The primary exporting countries were interested not just in price stability but in securing reasonable returns in terms of the manufactured goods that they bought. In 1950, work at the United Nations in New York by Hans Singer and then by Raul Prebisch at the UN Economic Commission for Latin America in Santiago, Chile, had shown that the net barter terms of trade between primary products and manufactures were subject to a long-run downward trend, which implied that without changes in the structure of the world economy, the gains from trade would continue to be distributed unequally and unfavourably between those nations exporting primary products (the developing countries) and those exporting manufactures (the developed countries). 30 The importing countries, on the other hand, were mainly interested in securing more stable conditions of trade and were prepared to consider any measure influencing the levels of exporters' returns only insofar as such measures formed part of a process or orderly adjustment of production to the changing conditions of the world markets. The draft Havana Charter agreed at the UN conference in Havana, Cuba in 1948, when the International Trade Organization was successfully negotiated, but back to top Next page
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