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Two Types Of International Commodity Agreements

An international agreement on raw materials is a commitment by a group of countries to stabilize trade, supply and prices of a commodity in favour of participating countries. An agreement usually contains a consensus on traded volumes, prices and inventory management. A number of international agreements on raw materials serve exclusively as forums for information exchange, analysis and political debate. Created in 1960, the Organization of the Petroleum Exporting Countries (OPEC) is a special case. It violates, so far without appeal, the provisions of the Havana Charter that require consumer representation. It uses a process of collective bargaining, not with importing countries, but with producers and distributors of companies largely controlled by the citizens of advanced industrialized countries, in particular the United States, the United Kingdom, the Netherlands and France. 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. . . .