Commodity Agreements In International Business

Prerequisites for negotiation. Empirically, if not theoretically, the following conditions seem to be met if an international conference on raw materials is to reach an agreement: it has been argued that stabilizing the price paid for only part of world export sales tends to destabilize the price of the rest (Johnson 1950). However, the general arguments in favour of this theoretical position are not definitively proven. An important consideration is the inelasticity of demand in the stabilized part of the market compared to that of the unstabilized sector. Overall, the guarantee of an adequate supply of sugar to the United States and the United Kingdom of wheat has tended to stabilize under successive international agreements or national control programmes. Economic impact. International agreements on raw materials suffer from the various restrictions that characterize all efforts to artificially support the position of certain raw materials on the market. In particular, price targets tend to be too high, long-term elasticities in both demand and supply tend to be underestimated, and cost structures tend to be put in place in such a way that, at best, the beneficial effects on producers` incomes are temporary. The longevity of the agreements is therefore not necessarily an advantage and, in the case of sugar, it has only been achieved by the annulment of the main provisions on export quotas at a time (in particular high prices) when an agreement on market shares has proved impossible.

Historically, U.S. policy on international agreements on raw materials has been characterized by a certain degree of ambivalence. It avoids agreements on industrial raw materials subject to large fluctuations in demand and, until recently, it has only participated in agreements in which most of the United States has an interest for producers, in particular the International Wheat Agreement. Even in the case of sugar (of which the United States remains a net importer), it acted more as a producer than as a consumer; Too great a difference between domestic and foreign prices would embarrass the continuation of the national sugar control system. From time to time, the United States borrowed with the idea of a lead and zinc deal to end a system of unilaterally imposed import quotas, which caused great irritation in trade relations with Mexico, Peru, Australia and Canada. . . .