International Commodity Agreements: Policies and Problems

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Beginning in the 1920's, there was a wave of interest and activity directed toward the redress of a problem in international commodity trade. At that time, it was viewed as stemming primarily from the instability of demand for primary products by the more highly industrialized nations of the world. It was asserted that this instability of demand resulted in wide fluctuations in both the production and prices of these products. This was held to be highly detrimental to those countries, often underdeveloped, whose economies were dependent upon one or two such commodities.' The attempted solution to this problem frequently took the form of an international commodity agreement (ICA) to control the price and quantities produced and sold.2 Recently additional emphasis has been put on another aspect of the problem the alleged worsening terms of trade for primary commodity producers in a period when demand and prices have been relatively stable.3 Much of this new emphasis is related to the effect of the terms of trade on economic development, a matter of great concern to the United Nations Conference on Trade and Development (Unctad I), first held in Geneva in 1964. The members of that conference in number if not in influence were greatly in favor of extending commodity agreements as means of advancing the welfare of the developing countries.4 Unctad I was far more concerned about price levels than price stability. Nor was that conference an isolated example of the U.N.'s enthusiasm for extending international commodity agreements.