What Are Some Examples Of International Commodity Agreements

The USTR cites U.S. participation in two trade agreements on raw materials: the International Tropical Woods Agreement and the International Coffee Agreement (ICA). These two agreements form intergovernmental organizations with boards of directors. Commodity agreements are agreements between producer and consumer countries to stabilize markets and increase average prices. Such agreements are common in many markets, including the coffee, tea and sugar markets. The commodity market is particularly vulnerable to sudden changes in supply conditions, known as supply shocks. Shocks such as bad weather, disease and natural disasters are largely unpredictable and cause high volatility in commodity markets. In comparison, the markets for finished products from these raw materials are much more stable. It has been argued that price stabilization, which is paid only for a portion of global export sales, tends on the whole to destabilize the price of the rest (Johnson 1950). However, the general reason for this theoretical position is not definitively proven. An important aspect is the inelasticity of demand in the stabilized part of the market relative to that of the destabilized sector. Thus, the assurance of an adequate supply of wheat from the United States and the United Kingdom has generally stabilized under successive international agreements or national control programs. Since the end of the Second World War, agreements have been successfully negotiated on wheat, sugar, tin, coffee and olive oil.

The 1949 and 1953 International Wheat Agreements (IWA) and the Post-War International Sugar Agreements (ISA) are prototypes of two forms of commodity agreements – the multilateral treaty and the variable export quota. Land prices and sugar caps have been set and, for the most part, imposed by the export regulations authorised by Member States; the sugar agreement also provided that stocks held by exporters were not higher or lower than the percentages indicated by export quotas. A very different instrumentality was used for wheat. Importers agreed to accept certain quantities when the price fell to the minimum level set in the agreement and exporters agreed to disclose certain quantities to Member States when the contract price was set. In terms of prices between the ground and the ceiling, the wheat agreement should be largely ineffective. The Tin Agreement (ITA) gradually set higher price thresholds for which a buffer storage agency (a) could purchase, (b) buy, c) could not buy or sell without special authorization, d) sold and (e) was required to sell. The agreement also provided for the introduction of export controls after the accumulation of the cushion exceeded the specified amounts. The main sanction of the coffee agreement, negotiated in 1962 at a long conference, was the certificate of origin to be required of importing countries in order to limit their recipe to exporters who choose to “do it alone”. (2) Reasonably stable market share. Since export quotas generally distribute markets in proportion to national shares over a given reference period, difficulties arise when there are sudden or longer-term changes in the shares held by different producing countries. The gradual ouster of U.S. raw cotton by exports from other countries, reinforced by the development of synthetic fibres, prevented the negotiation of an international cotton agreement in the post-war period and the increase in the volume of exports from African countries seriously complicated the negotiations of the 1962 International Coffee Agreement.