International Commodity Agreement

INTERNATIONAL COMMODITY AGREEMENTS
Commodities are primary goods used as inputs in manufacturing processes and traded in
world markets. It can be agricultural produce like coffee, cotton, jute and olive etc. commodity
agreements today cover products such as copper, bauxite, petroleum etc. These commodities are
also called soft commodities. Commodities like tin zinc, copper and oil that are extracted from
the land. This latter category is known as hard commodities. Resources are unevenly
distributed worldwide. No country in the world is self-sufficient. This but some resulted in
mobilisation of resources across the world to fulfil their needs and wants. Countries produce
crops as per their natural geographic region. Those countries endowed with factors of production
sincerely produce those commodities to ensure smooth flow of production to the market to avoid
price fluctuation. But over demand for such commodities may fluctuate price. Therefore, both
the importing as well as exporting countries should understand the market mechanism to
avoid sharp increase or decrease in commodity prices. Thus, the need for international
commodity trade agreements and organizations aroused to ensure smooth working of such
agreements among member countries that gave price stability.
With the very reason that the commodity markets are highly unpredictable and volatile due
to sudden fluctuations in demand and supply conditions, International commodity
agreements are signed between the governments of both producing and consuming nations
to stabilise trade, supplies and price of a commodity to benefit the participating countries.
They are essentially multilateral instrumentalities of government control that support the
international price of individual primary commodities and aim to regulate the terms of
international trade in a specified commodity. This agreement usually involves a consensus on
quantities traded, prices, and stock management. Thus, Commodity agreements are
international treaties concluded between producer and consumer countries aiming at the
stabilization of international commodity markets.
International commodity agreement attempts to stabilize the prices of some internationally
traded COMMODITIES such as cocoa, tin, sugar, wheat etc. with the objective of stabilizing
foreign exchange earnings with the view of such arrangements impose restrictions on the free
movement of commodities in international trade. However, such agreements also increase
cooperation between producer and consumer countries. International commodity agreements
aim to control supplies and prices. The ultimate purpose of a commodity agreement is to secure
adequate foreign exchange earnings for developing, primary-producing countries.
Commodity agreements are designed to alleviate the problems of annual price instability,
seasonal marketing difficulties, and pronounced price trends.
Following are the major commodity agreements:
1. INTERNATIONAL NATURAL RUBBER AGREEMENT

The International Rubber Regulation Agreement was a 1934 accord between the United
Kingdom, India, the Netherlands, France and Thailand that formed a cartel of major rubber
producing nations to restrict global rubber production and maintain a stable, high price for
natural rubber. In 1979 a new agreement was formed on International Natural Rubber
Agreement. The first International natural rubber agreement (INRA) came into force in October
1980 provisionally and fully in 1982. It was established to stabilise the price of natural rubber in
international market. It has been only the new international commodity agreement containing a
price stabilising mechanism to be negotiated under UNCTAD's integrated program for
commodities. The 1st INRA was finally expired on 22nd October 1987. The second agreement
entered into force in 1989 and expired in 1994. There are two categories of membership namely
exporting countries and importing countries.
After the crash of stock market in 1929 and the hit of great depression, the demand for
rubber plunged down. It was in this context that the International Rubber Regulation
Agreement was implemented. The Agreement was enacted in accordance with the decline of
rubber prices to maintain rubber prices and profitability of rubber producing firms. The
main objective of INRA is to achieve a balanced growth between the supply of and demand
for natural rubber, thereby helping to alleviate difficulties arising from surpluses or
shortages; achieve stable conditions in natural rubber trade through avoiding excessive
price fluctuations, and stabilize these prices without distorting long-term market trends, in
the interests of producers and consumers.
2. International sugar agreement
The international sugar agreement is the unique intergovernmental body devoted in improving
conditions on the world's sugar market through Debate, Analysis, Special Studies, Transparent
Statistics, Seminars, Conferences and Workshops. This multilateral commodity agreement came
into force in the year 1996. The objective of the Agreement is to ensure enhanced international
cooperation in connection with world sugar matter, so as to improve the world sugar
economy, facilitate trade by collecting and providing information on the world sugar
market and to encourage increased demand for sugar. The International Sugar Organisation
has the role of promoting the sugar industry, particularly in the developing countries, and
improving the transparency of the market by publishing statistics on sugar production and
trade and world market analyses.
The agreement signed in 1992 is the successor of international sugar agreement 1987 has the
following objectives
Following are the objectives of international sugar agreement:
• To ensure enhanced international cooperation in connection with world sugar issues
• To provide a forum for intergovernmental consultations on sugar and to discuss ways to
improve the world sugar economy
• To facilitate trade by collecting and providing information on the world sugar market
• To encourage increased demand for sugar.
3. INTERNATIONAL TIN AGREEMENT

The international tin agreement was signed in 1954 to prevent excessive fluctuations in the
price of tin and to achieve a reasonable degree of stability of price on a basis which will
secure long-term equilibrium between supply and demand. The International Tin Council
(ITC), established in 1956 is an organisation established on behalf of major tin producers and
consumers to control international tin market. After the 1954 agreement, 5 more agreements
were signed every five years, in 1960, 1965, 1970, 1975, and 1980. The Sixth International Tin
Agreement at Geneva 1981, is a multilateral agreement to prevent excessive fluctuations in the
price of tin and to make arrangements which will help to increase the export earnings from
tin.
4. INTERNATIONAL COCOA AGREEMENT
The International Cocoa Organization (ICCO) is organization, composed of both cocoa
producing and cocoa consuming countries. Located in London, ICCO was established in 1973 to
put a global into effect the first International Cocoa Agreement which was negotiated in Geneva
at a United Nations International Cocoa Conference. There have since been seven Agreements.
The Seventh International Cocoa Agreement was negotiated in Geneva in 2010 and came into
force provisionally on 1 October 2012. With a view to strengthening the global cocoa sector,
supporting its sustainable development and increasing the benefits to all stakeholders, the
objectives of the Seventh International Cocoa Agreement are:
• To promote international cooperation in the world cocoa economy.
• To provide an appropriate framework for discussion on all cocoa matters.
• To contribute to the strengthening of the national cocoa economies of Member
countries
• To promote transparency in the world cocoa economy
• To promote and to encourage consumption of chocolate and cocoa-based products
in order to increase demand for cocoa
• To encourage Members to promote cocoa quality and to develop appropriate food
safety procedures in the cocoa sector

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INTERNATIONAL COMMODITY AGREEMENTS

1. INTERNATIONAL NATURAL RUBBER AGREEMENT

3. INTERNATIONAL TIN AGREEMENT

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