International Commodity Agreements

International Commodity Agreements in the International Legal Encyclopedia

The International Commodity Agreements, or Commodity Agreements, are expressions referring to a… (Read more)

International commodity agreements in Global Commerce Policy

In this regard, international commodity agreements is: ICAs. These are intergovernmental agreements intended to improve the functioning of global commodity markets by balancing the interests of producers and consumers. They are of two types: (a) administrative agreements aimed at promoting transparency in production and market conditions through, for example, statistical work, and (b) economic agreements which seek to influence directly the market price of the commodity concerned. The agreement establishing the Common Fund for Commodities, negotiated under UNCTAD auspices, which aims at the conclusion of economic agreements, sets out four elements it deems necessary for an ICA: (a) agreements and arrangements must be concluded between governments, (b) agreements should promote international cooperation in that commodity, (c) producers and consumers must be included and (d) the agreement should cover the bulk of world trade in the commodity concerned. Most ICAs are negotiated for periods normally ranging from three to six years, when their operations are reviewed. Some, like the International Bauxite Agreement and OPEC, are made up of producers only. The entries on trade policy are here. ICAs with economic provisions typically contain obligations aimed at stabilizing prices, financing a buffer stock, disposal of non- commercial stockpiles, commitments to improve market access and to promote consumption. Some agreements also seek to encourage further processing in producing countries, and they contain provisions for the exchange of information on production, trade and consumption. Most also include consultation and dispute settlement provisions. The 1954 sugar and tin agreements carried a “fair labour standards” clause which stipulated that labour engaged in the production of the relevant commodity should receive fair remuneration, adequate social security protection and other satisfactory employment conditions. By and large such clauses soon fell out of use, with the exception of the International Natural Rubber Agreement which has now lapsed. The 2001 International Coffee Agreement contains a clause promoting improvement of standards of living for populations engaged in the coffee sector. The entries on trade policy are here. At the same time, members agreed that they would not use this provision for protectionist purposes. Buffer stock arrangements are triggered if the commodity price moves outside the defined price band. Finding the right price band is tricky. The entries on trade policy are here. If the floor price is too high, it will promote increased production which may depress the market price and force the buffer stock to buy. The entries on trade policy are here. A critical element in ensuring that floor prices perform their proper function is the need for all major producers to be members of the agreement. This has sometimes been difficult to achieve. Since the demise of the International Tin Agreement in 1985, buffer stocks have fallen out of fashion. Most ICAs are administered by a body established for the purpose. Members are divided into producers and consumers, with the two categories having an equal number of total votes. Producer countries often also import the same commodity, and consumer countries also export. The definition of producer and consumer therefore can hinge on whether a country is a net exporter or importer. Voting is usually based on the share of international trade a member has in that commodity. The entries on trade policy are here. ICAs commonly operate quite autonomously, but their negotiation or renegotiation often takes place under UNCTAD auspices which, upon its establishment in 1964, acquired responsibility for commodity matters within the United Nations system. Two agreements have, however, been negotiated in the GATT, and they were part of the WTO plurilateral agreements until the end of 1997. The two are the International Dairy Agreement and the International Bovine Meat Agreement. Both were ostensibly aimed at expanding, liberalizing and stabilizing trade in the commodities under their purview. See also commodity policy, Integrated Programme for Commodities and international commodity bodies.[1]