Chapter -tv

'fHE ECX?NOMICS AND POL1TICS OF

COf1·~0piTY t£GOTIATIONS

165 Olapte~- IV

THS ECOl'!OMICS AND POLITICS OF C0~11'-10DlTY NSGOTXATtgNS

Having clarifiea the principal objectiws of ccnt­

eq»>rm:y commodity agr:eements against the backgreuntl of a

histor:ical ~eview of eommoaity contcol schemes. before

tumtng to their legal and institutional framework. it 1s

necessary to briefly examine the major: econamic ana poll·

tical factor:s Which £nwaigh tbe negotiations of commodity

ag~emente. such an axamlnation will. firstly. help one

unaerstanci why. While the Integratecl Commodity Pl'Ogramme

envisaged commodity agreements in all the eighteen contno­

ditlea. it today appea~:s to be a distant goal. In other

words. Why as the Programme of Action en the Establish­

ment of a New Intematlonal Ec:oncrnlo O~B hacJ reoQirlended.

commodity agreements a~ not balng expedltlouely fo~u­

lated. saconSly, lt wlll place ln per:spectlve the legal

ana institutional &amewor:k which earmOdlty a~eements

establish, conceptually speaking. canmcxJlty agreanents

insUtutionalise. within a foanal legal franework. a

cQ'ltinuoue system of negotiations which begins with the

p&"Oposal to have a camncdlty agreement. Thl~ly. since

the aee3of success or £allure o£ an agreenent an often

sown in the negotiations. lt ie usefUl to be acquainted

with the pr:oblems whiCh aJ:e confronted with ln the nego­

tiations. Lastly. an analysla o£ the political economy

of conrncXIlty negotiations is extrenely relevant frcm the

166

poin~ of view of intema~lonal accountabllit:y. I£ ln~r­

notional Instxumente of the char:aetel' of ~e P~ogr:amme

of A~ion on the establishment of a New Intemational

Econanlc Or:dar ana the atar:tel' of Beonanf.c Rlgbta ana

Dut)ies of states are to have any meaningful impact 16 is

necessary that there ls a process of evaluation to wblch

sta~s are held accountable. :tf ttle concemetl states are

not aBhedng to the spirit of the pr:ovtsi<ms contained lf!

these documents then the !ntemattonal legal I)XOOess

should be brought to bear upon them.

Gi'V9tl these concems the first part of the pl'esent

chaptel' portrays the econcmles of cQtlmoo~ty nauottations,

while the second pal't indicates the Smpor:tent political

factoxs dlidl play a I'Ole in these negOtiations. The last

section briefly posits the r:ole of 1ntet:national law in

bxinglng about greater: accommcdation in conmodity nego­

tletlons.

I. THE ECX>NOMICS OF CQilMODlTY NEGOTIM'IONS

ccmmodlty a~ementa are ~cee51ngly difficult to

negotiate as they se• to h~lse t:he diveme lntereste

of numerous pr:oduc~s and consumers. These c:!1ffere1nq

lntereata give rise to not only conflict: bet:ween producers

anti consumers but between producers as well. The final

agreement usually cepl'esents a compxcmise based upcn a

167

miftimum c:ommonallt:y of ln~~esee of the pan:ictpating

states. Of· en, therefore, the agreement possesses c:on­

genitel ciefecta which cende&- the agl"eement ineffective,

or inhibit ite operation, in the face of hostile market

fol'cea. For 11'lstance, at the lnslstenee o£ developed

countd.es, in particular the unltea states, exclusive

Ee11ance bas been placed ln raeent ccmnodity ag!:eemmte

en buffec stocks. a significant ~eascn for the!&- failure

in the camnotllty c:isls Which afflictea ccmnod lty ma~rketa

between 1980-92. The lengthy ana arducus negotiat.lona

Whlcb precGile the establishment of an ICA can, t2ler:efore,

be traced to the necessity of establtohing an e£fact1w

agreement, which, at the same ~ime, tett~s into acc01nt

tbe divergent Sntexests of the paRiclpatlng states.

Rangamjan has usefUlly sunrned up the fact« s whldl

deteDnine ccmmol!ity negotiations. They ar:e formulated

in the form of questions, as fo110ft:J a

1. QVVall atjt.iyde Gf A pad;lt;!pat{nq et;ay :

(l) Is it a developed or a developing country ?

(11) What Ss 1te attitude to cQutuodl~y agreeme~s in 0

gen~al and to tbe reaou~ce transfeJ: obj~ive ln

paJ:tlcul ar: ?

(ill) ~s the count~ an expor:ter or an Smpor~ ?

2. §tate og tba Macke~=

(iv) tfllat is the level of prlees - high or low ?

(v) Which '1ay are pr:ices expactea to move in the

neac future 1

168

(vi) What a~e the total stocks of the commodity ?

Am they adequate, overhanging or insufficient ?

(vii) Is there a prospect of a ibwntum in procllction

due to natuxal calami tl es or production eye lea ?

(viii) Is there a llkeldhooS of political tu~oll in a

major pmcluclng or consuming cu:ea 1

U.x) Is the mar'ke~ threatened by synthetics or subs­

titutes ?

3. A eount;n•a sj,tuatlon in cgspagt of tbe commoaltc'Li

(x) ~3hat is the degree of dependence on exports or

imports ?

bel) Wha~ is the econanlc lnteftat in the commodity ?

(x11) If an importer, cloea it pr~ect bane .produc~lon ?

(xlll) If an exporter, how large ? Is it an establ1Dba!

ox new exporter: ?

(xlv) What is the level of stocks 1n Ole country in

xelation to 1 ts bolctlng power ?

(xv) t-Jhat axe tbe xelative str:engtbs of different

danestlc pressure grcups - p~&leera, proceaaors,

importexe, consumers ?

(xvl) What 1& t:he 4egree of conbcdl over: productlon ana

marketS.n g ?

(xvli) Who are its political allies ? A4v.aad.es ?

168

4. tn fup;t!qnlng agmementa t

(xvlil) What importance do mporters attach to the

agreanent ?

(xix) Who ia most llkaly to b•eak away ?

bod Who is most likely to follCM sui tl;

Bach state ar:rives at ita negotiating position taking a

holistic view of these facta:s. It then seeks to coordi­

nate its position with a1mlllar:ly situated states. For

instance, if it is an exporte~, it will tr:y ana assume

a common po.;itlon tdth oth~r: exporter states. 'lbis ls

no easy task and ln fact a major: obstacle to cQlclucU.ng

new ICAs. As the UNC'l'AD VI policy paper m 'CommoeU.t:1es•

notes, "in many of tbe Sn4lv16ual canmodlty negotiations,

the developlftg countries bave not always succee4ec1 ln

evolving ancl presentjng CQmnOft proposals for: 1ntemat4ona1

action, end this has contttlbu~ea to delays and 1neffect­

iveness".2

Having acr:ive& at a ccnsenaus on ~he major: elements

of the pl'Oposed conmcc!l ty agreement tbe g&'Olp of exporter:

states pco~cls to negotla~ with the importer countries,

which will have in the mean•hlle undergone the same

process of err:lvlng at a ccmmcn negotiating pOsition.

1. L.N. Rangarajan, C,mo4,1ty Confltet (CJ:ocm Helm, London, 1918} i PP• 70..1.

2. TD/273, Pebr:uaJ:y 1983, CqnmodU:y Issues - UNCTAD Polley Paper for UNCTAD VI, P• 19.

170

The negotiations bett.Jeen the acportel's and the !n\')ol'ters

eventually culminate in an ag~eement. However, the entire

process is extremely complex, and as stated at the outset,

macked by expol'te~-!mpotter md intra-aMpocter c~fllcts.

The chief factors Which give d.se to these cQlflicta may

therefore be cU.scu99ed unc!er the tbllowing tMo heac!a a

(1) EMpOrt.er-impoRel' COlfl.lcts, md (2) Intra~po:tar

conflk:ts.

'lbe confllc between exporte~s ana importers is

central to Ute fallum of conmodity negotiations because

sane of their interests, partiaulad.y jn ~e short-zun,

a1:e mutually contca41c=ry. 'lbe issues of potential

ccnflict &nt:F alia, ace (1) the 14eologice1 attitudes, (2)

price trends in conwuoalty maRet~u (3) the initial pr:!ce

range, (4) the ac1juatrnent of tbe pl'ice ranf)e, and (5) the

financSng of the buffer: stock mechanism. The differences

relating to the Choice of mechanlsn to be used to stabilise

prices bas been 4illcussec1 at length in the ~evious chapter.

1. Role o£ l:Bgolosg

tc!eOlogical attitudes ~e of considerable impor­

tance in a.q mudl as they detemine the first res\')Onse to

the problem and the broa:l contouca of policy preeorip~lone

within wbich the CQDncdity problan S.s approached. Feu:

171 .

instance, the fact that: many of the developed ccuntJ:ies.

in partteular: the united t1tates, aubaet:lbe to an idaology

of fJ:ee matket manifests itself in a negative attitud~

tO\farcle cemmtdlty agceements wl\t.dt a~ conceived as

instruments of ma~ket. cont~:ol. 3 ftee-market ideology

with its acJve~e Snrplications foe CQ'l'lmodt ty agceements

appears in a moce concent~:ated fo1m ln count.:les tJhlch

happen to be J:Uled by consawatlve govemments. Cemttac­

lng tbe attitude towards commotU.~ ~eementa under the

C~t: end the Reagan a&nlnlstrations# Gordon-Aahwm:tb

well Ulueuates this point t

the more generally s~patheUc a~1b1cle of the Ca~ec Administra­tion towal!da lntematicnal ccmmo­dity ~t:eenents lea to us paRl­cf.patlOn in the 1911 sugar Agl'eement. With the eac:esslcn of the Reagan Administration, S.n cQltcaiJt. and its canmltment to the vict.ues of • f.ree m~ket forces • • us support for inter­national ccrrmodf.ty ag~:eements weakened cona1der.ably •••• 4

3. Por the impact of ideology on us Ccrrm0d1ty pol ley. aee generally. J. Robert Vastine J't •• •unltecl states tntematlonal Commoalty Polley". ~ agd ~ali~ in l'Qtemational~ualnfts. Vol. 9. o.a, ·

1977 • P• 401. ACC:o~a g o vastitte the United states was eonml ttea to the ibrutamental p~lnelple tha~ .. the oper:atlon of fcee ena felt: m~k~s is

4.

t:be mo~t efficient way to increase p~otluction, Smpmve efftclency, and stimulate growth. Attempts, ebould be maae to SmJ>~ove Ule efficiency of inter:­nat.lonal mutcet.s, not fUrther inrpalr thef.~: opera­tion by adcUng new ~:eat~aints or ccmtrole. elthel:' govemmantal or: pr:tvate... P• 4?4. Also see pp. 409 and 436.

172

'l'ha ideological attitude also limits the apec1£ic

policy options Wbid\ M'e pJ:escnibed to attack tbe pJ:oblem

of, say, p~lce stabilisation. The developed count~:les,

fo~ lnatance, ue hostile to the expo.:t quota med\antsm,

for it is said t, ttmlsaUocate" wo.:ld resources. 5 That

is the ~eaaon ~Y the Cute~: at!minlatJ:ation, while shCM­

iftg a great flaxlbillty to tCAs (gi~ Ber:g:~ten eti a16),

contlllued to be hostile to any pxoposal relating to pl'o­

ctuctlon El4d/OI' eXpOrt cont~:ols on the g.:ouna that these

impede the operation of ma.:ket foa::es, c.:eate market

inefficlenclee and eventually lead ~ the mieallocaticn

of J:esauuoea. SuCh an attitude ~endel's 1~ difficult for:

the developing ccuntries to incoJ:pOJ:ate into canmodity

agr:eemen t9 tha export-quota mechanism even as a suppor­

tive neasur:e.

s. The unttea states consideb •buffm: stocks to be p~eferable to export conuols because they wor:lc within tbe maxket mecbanianu. Vastine, n. 3, P• 451.

6. Bergsten hatl pleadec! for: the •ctealr:abllley of an lnternat.lonal l'athel' than a puJ:ely national appJ:oadhu an4 noted that the.:e tes "a flr:rn basis for: a wide l'ange of corrrnodlty agreements uhlcb wculd p1'omote the ec:onClniC secu1'lty end welfal'e of both 1:he p1'o4uclng and consuming count1'1es •••• " c. FJ:e4 Bergsten, To a NEM t. atlcn

s 1972-1974 Lexington Books, PP• 408 ana 409.

173

The Intemational Cocoa Agreemed:s of 1975 ana

1980 ar:e casas in point. The United :;tates pa~:ticlpated

actively in negotiating the 1975 Cocoa Agreement but

refusecS to sign the Agreement on the ~ouna that "the

new agreements's price defense provisions are too rigid

and that it contains ~oo few pcotect1ons for consuming

nations". 7 'l'he state Depar:tmen t officials believed that

"the agreement 1a too dependent on tba quota system,

using the buffer stock in an ancS.lliary role ~ J:lgitlly

absorb quota cuts". 8 '1'ha us pr:opoaal wan tea the buff~ stock madlan!sm alone perfoDnS.ng the role of prlee

defence, and clespit:e the fact that the c:tevalop1ng coun­

tcies went a long way in meeting the cr:S.tictem by ralylnQ

less on export quotas, the uniteti f1tates cefuse6 to elgn

the Agreement. Ancl subsequEfttl•,, under: pcessur:e fl:om 1t,

the 1980 Agreement J:elies elmost exclusively on the

buffer stock mechanism, with the result that it was

helpless in the recent cammo4lty cr:lsS.s. 9 Simllia~ly, ln the XNRA. cn the tnsS.stence of the uns. tea states and

other: countnas, sole r:e1iance is placed upon an lnter­

nat1Cbal stock in stabilising prices •10 And ~he develop-

7. Thanes c. Papson. "The Int&matlonal Cocoa Agree­ment• Law md.YfYl!f{ An Ingma~ionol. Bllft!nMe• Vol. 9, No. 2 1977 , ~· 554.

a. 9.

10.

174

ing countriE~s, tn t:be faea of obdurate ideological lobby.

ing, ~e thus faced with the choice of etthel! no agceement

o~ an agreement t4hich ls defecti w at its inception.

The role of ideology is man! fested in c:QII'nOdity

negotl&tlons in anoth~ respect sa well,' that is, through

defining a~itudes twards vano~ tnteJ:nt*itmal econQtd.c

institutions anct their fUnctions. An instance is· the

refUsal of tbe developed countries to actively psraue

several necessarily 1ntegrate4 measures w!thtn ~ frame­

work of commcdity conferences. Por exaq,le, While in all

%CAs there are cer:tatn obligat:ions atatec! \ii th respect

to improving maJ:ket access, they ue usually etat:eneri: s

of intent because the devalopetl coun=ies insist that

concu:ete steps be negot1ate4 under the appropriate multi­

lateral trade negotiations system of tbe GATT. 1D other

words, the ideological hostility of the tnc!ustr:lalissd

t.zor:14 towaJ:ds tntematicnal institutional processes in

whidt the aaveloping countries can play a slgnt£icant role

often intehenes ana obst~cts the devising of more

effective eomnodit.y agreeman~.

Where alte~aUve 1n$t1tut1one like the GATT are

either: no~ relevant or: do not exist the attEmpt is some­

htN to stop Ute m~~r in issue fcom being tllscusaed !n

the ecrnmcXI1ty conference. Take the case of nego~lattcns

on phosphate. It is well known that transport costs

175

a~e a significant facto¥ in tha detaanination of pd.ce

ana the~eby tbe expon eamings of developing countries.

Yet the United <;tates stated in the P~epar:atoey t-!eetlnq

~hat the question of ma¥1na freight shOUld be dialeussec!

in the UNCTAD Ccmmittee on Shipp1ng.t1

In effect. f.deology is usea by tile developed

countries aa a clefence against an unpalatable agreement.

'lberefore. it aomes as no real surprise that the tbetorlc

is oveECcme when elthe~ a cOJntey has a substantial eco­

nClnic statce 1n the commOdity or lt needs to meet ce~taln

political imperatives. While tbe pol! tical factors am

41scussed shortly. en example of the fcmner is the

part:icipaUcn o£ the Unltea states in the wheat agree­

menb1 1 .. C!Jhe uns. tea States has n«* only been a loyal

member of tbe %1\tematlutal Wheat Agreanc:nts but an

active promo~. but only because lt is the most impor­

tant exporte~ of tbat cQnmodS. tyt' •12

The conflicts between exporters ana importers is

to a gr~at extent detend.ne4 by the l)riCe tre~td ln commo-

11.

12.

Kablr-ur-Rahnan Khan. abe ~ orallfisat!m RC 1Dt4mationa1 Cqmno41t.y 1'fiM!iienta MaR!nua Nijhoff Publlshem. 11\e Hague. 1982). P• 330.

Rangarajan, n. 1. P• 2S8.

17 0,

Clity markets. Wbeceas a boCl't'l bas always danpenec! the

incentive of the expOJ:ting countw:ies to establish XCAs,

s 4ownwai.'Cl trend in prices eouplSl tdtb maJ!kP.t c:oncU.­

ticne of ovew:supply bas usually seen the pcotiucec ccun­

t.ries taka initiatlva ~o contr:act commocilty agr:eanents.

In the latter situation, it is the impoRers ~.Jhic:h lack

enthusiasn for regulaticn, as they can benefit from the

lCM prices prevailing in the ma~tket. 1'il other weeds,

both for exporters and 1mporte~~:s, short-teem advantaqes

often tend to take priority over long-te~:m objectives.

'l'ha impact of price trends can cleacly be seen,

for instmce, Sn the pet:iocl of the Ko~an war boom, 13

as well as in the first fifteen years af~ the tvar,

t4hm agreements could be established only in wheat, tin

and sugu, because, emong other things, t2\e price ettua­

tiQ\ wes favourable to the expo !:tare in world ccmmoai ty

13. n'l'he lnter-d\mertcan Coffee Agreement was liqul• dated in 1948 and negotiations were not reri~tl fox six years, i.e. until after the bOom hac! abaqa. The fiQJt post-war UN ccnference en Sugar was only held Sn 19S3. A proof of tle reluctance of expor~rs to aeley concluding an agreemen1: until tbe boom was about to spend it­self was the failuce of the 1950 UN Tin O:>nfa~en­ce. The negotiators at this Ccnfexence agr:eed en the mechanisms of conuol including the creaticn of a buffer stock an4 the role of Ute buffer stock manager:. The Conference was unable to ceacb full agreenmt p~Uy because of the attitude of the United ~t.es and partly because of expor:teJ:s • besi~tions. By 1953, when the Xntemational 'l'in study Gr:out;) met again, the bOCln uas over: and the Fiwat Tin Agreement became possible". Ran<]ar:ajan, n. 1, P• 210.

177

mar:kets.14 Similar: has been the situation after the

UNCTAD IV (1976) till the beginning of the ~cent c~lsis

1n commodity markets a

••• the market prices of the majority of prlmar:y commodlt1ea increased substantially, as did tbe foreign exchange eamings of developing countries from their comn~ocUty exports. l'ft addition, foreign exchange flows into several l~ge c:anmodity-f!XI)Oxting ccuntr:les rose clur:tng this periccl aa a reaul t of the fast growth of expo=s of manufacturers mu)/or petroleum, and of heavy borrowing fran lntema­tional capt tal manets. These favcu l'able c!levelopments r:eclucetl the foreign exchange ccnetratnt en danestic aavelopment in these cCllntr:las, Whlcb did not cequlre ~ give high pr:lority to the regulation of commodity maJ:kets or to refo1!mlng the stmctul'e of 1nt~ational commodity tr:e5e.15

I:,...'

r OJr:rentl y the exporters have c:bangecl tbei r stance and .... the neecJ for international temecJial action bas ass~ec!

blgb priority. But tbe consumers, in l)8r:t1cular t:he

4ev:?lopt!8 countries, aee in the crisis tbe proepects of

not only reducing inflaticnary trentla within their

econanies, but a way cut of tba r:ecess1G'l. 16 ~; ....;

14. Ejt:cnf .46/141, cmodity Trade (UN, N • Y •, 1965) • Vol. It%. P• 90.

15. T0/273. n. 2, pp. 19-9.

v ,. ''

16. See generally, Prabhat Pablaik, .. On Econard.c Crista of wo~1a capt ta11sm", Social sctgg~t~t:, Vol. 10. No. s (1992), p. 19. On ths iinpact o t:ha crisis Q'l fo~tnation of ICAs the Mining Joumal com-rented

cantd ••••••• /-

17b

3. Price ~anqe

'rha most cl\lcial question to be aaaxeesecl 1n CQnmo­

dit.y negotiations is tle speci fie pt:ice at and uO\mB

whieb stabiUty should be sought. Htsto~tcally, acctvtng

at tbe approp~tate price Rnga to be defent!ed by stabt-

11sat1Cil action bas been among the chief stumb111tg bloclce

in the way of setting up ccntnodity agreements, in a

situation of owr supply, tbe exporters will seek a flool'

p~1ae Which will cove~ thei~ ccats as well aa ncmnal pro­

fit margins. While tm importers will ~aist, if 1n such

situations tn tbe past, pctces bad been lot.JG~ t2lan tbe

floor p~:tc::e now deman6ea.17 Whe~:e the seeta~lan in~resta of the importe~:s as well as exporters ao not ovenJbelm

their sense of tnte~nattonal meponslbility a compromise

generally emerges. Ultimately. tt is the realism on the

p~ of consume~s which helps na~ow dawn tha dlffecenees

between the two aides. In other woras. moEe often thEn

not ~e price objective is "es~ent.S.ally a polttlc:al

ccmprcmtse between opposing pastttons" •19 However, the

compromlse 1s not easy to achieve in practS.Ce.

cent •••

17.

16.

in DeCember: 1982 that .. the rec:esslon has hlncle~ed the clevelopnent of new conanodlty pacts ••• comnon tuna... bas been put back ••• " Vol. 299, No. 7689.

TD/9/C.-1/2'4a §elec.;ted 1asues An. ~!J: neqo~latiqn o£ Int;e;nat&cnal. Oomrnoaip Agr:emme ~n Esonqnig !galyatv -A siij!Y'~ Atfjea Matzele; N.Y., 1992 , P• 6.

Ibici.

179

SQnatimes, howeve~, a heavy price may be pal4 to

arrive at en agreed price range - the compxom1se solu­

tion could mean unr:eallstlc p~ice objective. The Inter­

national cocoa Ag~ent, 1972, ts most often cited to

illustrate this point. After yeal's of negotiations, the

ag~:eemant was concluded in 1972 ancl provisionally b¥ought

into force in October: 1973. The price range \tlhidl was

adopted (23-32 us cents per lb) was completely unrealietio

for in 1973 tne ooaoa prices ave~ged 51 cents pe~ lb.

rising to 71 cents per lb in 1974 and falling to '56.5

cent per lb in 1975. ag The same year-1975, therefore,

saw the negotiation of a new agreement. Therefore, the

mat~ is o£ not only finding a solution satisfactory

to both expo~ers ana importers but also to adopt a

prloe range Whieh is realistic.

. . ' . )

The pz:ovisions regarding the adjustment of the

price range also prove extremely difficult to neqotiate

and oparate# given the conf 11c~1ng interests of the

producer and oonaumea: ccuntd.ea. The negotiations which

19. Ibid., p. s, see aleo Tetteh A. Koft~ "The Inter­national cocoa Ag~eements•, Jguf.·al of worlt) ~Jade Law, Vol. 11, No. 1 (1977~ P• 37t Jock A. Finlayson and Mark w. Zach~, ••The Politics of Intematlonal COmnodtty Regulations the negoti&­ticn and o~ration o£ th~ International eoooa Agreements • Thl~:d world ouarter:ly, Vol. S,No. 2 (1983), P• 397 ff.

180

led to the inclusion of the price revision pmvislone in

the ItlRa illustrate tM conflicting interests. 20 The

pr:o&lce~:s wem 1n favour of q~anting greater ci1seret1on

~o tha tnt:ematicnal Natural Rubber o~gantsat:ion (JNRO)

in revising the ceference price, since they felt. that it

ahculCl be c:onstan~ly under review. seeoncUy, it was

felt that • zule-oriented mechanism would not be able to

~ke into account cGr~plex factora affecting the price of

natural ~rubber such as the coat of prolbctia\ ana tha

prlt:e of aynthet.1c rubbezo. 21 The initial pr:opossl

submitted by the Asscclatt.on of Natural Rubber ProtJuclng

countries (ANRPC) contained a provision which pent! tte4

review of prUes at: any time ana revls len when the coua­

cll cleemea it appropriate. 22 The consumer nations. were,

howeve~, not in agr~nt with the ANRPC proposal.

They were concernEd that. the buffer stock assets woula bG

expende4 by attempts to defena a prlce that was outside

~e long-teJ:m natur:al ~bbar price trmu! OJ: that lt would

unduly manipulate the mlUlcet. 23 'lbe c:onawner vie~

20. 21.

22.

23.

For a 4lscuaslcn see O'Grdy, n. 10, PP• G22-4. TD/9/!PC/RUBBER/St Report o£ the lnte•govemmental Task Foree on Rubber en its ftrst ~alon, october 10.20, 1977, P• 11.

TD/RUBBSR/PG/L.1, Draft Intemational Natural Rubber: Agreement (1978).

'l'D/RUBBBR/2 o Repo~t. of the Preparatory Gr:oup for the uns.tea Nations Confecence on Nat.u ral Rubber 1978, P• S.

181

finally p~evailed ana the agreement lncorpo~atecJ an outo­

matlc reference price •evle1on provision, ~antinq a

diec~etlon to the tNRO only tthen extraordinary market

conditions p¥eva11.24 Jndlcatlve p~loe r~slon• were

restctotea by the following a:equirementac the revision are

to be based upon market trenCls antS/or net changes tn the

buffer stock125 and the revialona can only be made by a

special council vote. 5\u:thermore, the opportunities

24. The ttefeJ:ence price under: the INRA S.s to be l'eviewed by the council every 18 months after the entry into fo~e of the acp:eemant. The cir:cums­tancea under Whidl the p rlce revlei en cou14 take plaee were c3eflnell in dateil. Jlbr instance, article 32 (1) lays CleM\ the following rules a

(a) tf the average of the daily market ln41cator prices over the d1x month period prior to a nvtew is at the upper lntet:vention price, at the lowex intervention price or bo~een these two prices, no rev1e1on of reference price shall take place,

(b) If the averaqe of! the daily market indicator prices over the six-month pericCl pr:ior to a r:eviet11 ls below the lower: inte.:vention price, ~e ~:efer­ence price shall be autanatically revise&! down­wuds by S pelr cent of its level at the time o£ the review, unlees the Council;~ by special vote, decides en a different percentage a:!justment dawn­warda of the refeJ:enee price1

(c) If the average of the dally mar.ket inCUcatoz: prices over Ule six-month period pJ:iOJ: to a review 1s above the upper intervention price, the re£er:e­nce price ehall be autCl'aatically revised upwards by s per CE!ftt of its level at the time of the review, unless the council, by special vote,· decides on a cS1fferent pereentage adjustment upwards of the refe~ence pr:lce.

25. Acoording to e~icle 32 (6) "The COut¥:il shaU en­sure that any revision of 1ndlcat1ve priees is c:onsi­stant with evolving market tr:enc!s and c:ont11 tions•.

182

fol" l"evialon al"e extremely llm1 tea. :tn 1981 wttm tho

p~c!uc:ers sought a total cevlew of tt\e QJ:ice utnde

and the mlsing of the lowel' lntei'Vfmticn prlca to teo-200 per kilo the ccuncil notea that "legal constraints

in the Agreement• ifthibitecl such Changes. 26

s. Dnanc:mo b\lffex stos;tsa

Proctucer-conaumeJr cSlfferences occui" inevitably

on the question and o~ent of financing the buffer stocks.

It ls a twisn that if a buffor stock is to operate

efl!ectively 1n the ma~et. e pl'a-conat ticn is that it be

provi4atl with aBequate cesoul'ces. 27 Xn t:ha psst. finence

hae been the majol' hw:4le in the establishment of buffer

stock type of c:orrmodity agNementae •a luge paR of the

reason fOr the f allure of past efforts to establish stocks

undel' tbe aeqie of ccmmodity agreements was the 41 ffl­

culty of overcoming the very vital. eantrsl and crucial

factol" of the financing of these camnotll ty st:ocSks. n 29

%n fact until tbe proposals fOl' an Intagl'ated P~granrne

26. O'Grady. n. 10. PP• 632-3.

27. What resources will be a4equate in e.chlevSng tbe price etab111,aticn objective wfll hinge on the tdelth of the pt:ice l'ange to be 4efent1ecl antl the amp11 tude of the pnce fluctuation wblcb would occur in the absence of ma~ket intel'Ventlon, for any given anplltucle of price fluctuation. the \:44el' the price range to be defent1e4. the smaller will be the stock that the stoctc agency td.U require. TD/B/C.l/224. n. 17. P• 10.

as. see statement of the UNC'l'AD Secteet~-G~ TD/B/%PC/CF/4t Report of t:he Pirst Prepar:at:OJ:y

c:orata ••••• /-

1~3

fo~ Cclmnoditles the principle o£ a comnan sharing of

etoc:.1cs waa n= a unl~sally acceptable ate. In cecent

yeus, hcwewr, Ute p~indple of joint cesponslb11lty in

financing stoclce has been accepted tn some commoat. ty

agcaementa like the lNRA and the XTA. Yet the financing

o£ stocks is still an area of conftict. It ls tn this

context U\at the eatmton FUnd for Oommodl ties acquires

special algnificance. On caning into operation, it will

assure advance access to £1nance on ativantsgaous teJ:ms

an6 tbls facilitate tbe negotiaticn of cc:mnodlty agree­

ments.29

CGnmodlty negotiations often faU because of ccat­

flict amongst expoRet:s themselves, ana not due to the

classic expcu:ter-1mpcmter calflict. The !ntra-expoxte~

ccnflic:t has its genesis eith~ in quantity or price

objectives, with eaeh exporter state attempting to

maximise ita galn !n the short-run. A CQDJ)romlss la

usually dlffjcult to evolve, given tbe unique situation

of eadl expocter state, anc1 unwillingness of eadh c:ouatEy

to sacrifice acme of its lntet:eets.

cont ••• t.lleeting ofcc the Negotiations of a canmon ~c! (29 November - 4 necenber 1976), Annex l.pp. 2-3. see also Nonh-§C!Utba A PJoqz:p• for Su!;!!~! (Pan Books, London, 1980) , p. 149.

29. For a discussion of the carmen 1\md for Canmoc11-t1es see Olapte r X.

164

1. QUanti tx son£11cta

For exporter countries, qUantity objectives .. have

an in4apendent valld~ty of tlelr awn basec! Ql current

exportable suq,lus, future producticn plans ana the pre­

servation of market shares•. 30 The quantity objectives

are, mcn:eover, integr:ate4 in the domestic ec:onolf¥ compe­

lling the exporting Ol)vemments to take into account a

C:Qnplex miX of social ana political factors like farmer• s

lncane, the ability to dive~slfy, tbe threat to t2le

stablll ty of tbe incumbent regime, etc. 31 The cr:1 tical

4epenttenee of a large number of countries on the expcn:t

eaminqs from one or bfo prima~ canmodi ties is a signi­

ficant factor in shaping this objeatlw.

OUBilti tati ve conflicts ue of two types • eon £11~

between large and small exporters and conflict between

eetabl1shet1 ad emerging export.e¥s. 32 In the fk st ty-pe

of conflict, the large expor~ saeks to maintain the

share lt has been exporting previously, while the small

exporter seek a to ensure that: it is easily able to Mepose

of lts own exportable surplus. In the secon4 ease,' the

emerging exporteJ:, f.n particular the low cost producer,

seeks to expand 1~ market shale a~ the expense of art

30. Rangarajan, n. 1, p.112.'

31. Ibid.

32. Ibia.

185

estabU .. shecJ pl'Qlueer. 'lbese groups not only bave diff­

erent intere$ts at stake but they also possess different

buga1nlng powers. The bigger producers ~e at S'l

advantage in view of their dcminant position in the tnda.

The 41larrna of the small count~:les ia E!}tplained thus by

Gwyera •for larga procluc1ng cCIUfttJ:las, the choice !a

bebleen en agreement and no agreement since thai: exclu•

slcxa fi'Om the agl'eement woulc1 matce it incp•ab1e. Pol'

small countries, tha choieo is membership in the aglree­

ment or nonmanbership, sinee Uleiw: merrQ)ershlp may not ba

essential for the eontinuatlcn of the ar,Jr:eanant. Thus,

large proauclng c:ountd.ss can foa:e an agreement upon

small countries, whicb, if they batl the eholca, t-Jould

prefer no a~eenent but ue pmsentea with a membersb1p•

non-membership altematlve. In pJ:actlee, there may be

no altexnative to mamber:shlp, since if all the consuming

countries ue party to tbe agreement there are no al tee­

native maJ:kets•. 33 11\e emaU pw:ot\tcer countries Are often

the emerging axpozters, who would not want to have any

constraints 1n thels' ~owth by an ag¥eenent Which alloca­

tes quotes an the basis of past export pe~onnanee#

1()6

rather than eu~cent expos:table surplus. 34

It ls the 41ant!tstive conflict Vhidl has obs­

tl'Uctea for years the establishment of an intemattonal

tea agreement. The Afsrtc:an tea producing countries like

Kenya, Wbidl have a l0t1er cost of pr:oducUon, have ~el

aaeld.ng to augment their cole at the expense of tncJia end

sci Lanka a

34.

35.

As a r:esul t. of letaewr pr:ocllction eoats. r:ising celattve pc!ces and l~er fiscal Smp~te. profits (both pee-tax 8ft6 post­tax) are substantially higher in Eaet African tea estates thcn in Asia. And the disparities in p~fltabi11ty have jeopaldlse4 tbe prospects of a S'Ppply management schema 4esp1 t<a euatainati oftocts, apred wee the last tt.;enty ..... yeaca or ao. to stan the escular: dec- f"· r~ ljne in the ceal pr:lc:es of tea •••• Moreover:, as the ln6lviduel Afcican ccuntr:ias bava only a minor: sham of the total world mal'ket for tea (al-though collectively they have a shace large enough to thwart an export quota sd'leme). the pd.ce-Glasticity of demand confr:ont.ing the inliividual supplying ccuntJ:ies is typlcalli ve~ high. Thecefore, they finc1 the r aava-nt.age lies in uncestricte6 expansion of tile volume of exports (antl hence ~heir: market ehar:es) at p¥evalllng prices catbec U\an 1n j otnf.ng a quota pact.35

%n cecent times. it will be seen, in order to minimise this conflict leqal mechanlsns have bam iutrocbcecS to aarsguar:d to some degree the intec­ost of the small and emerging producars. see Chapter VI under the GUb-heading "Principle of Equitable Treatment ana Export Entitlemert o".

Gautam K. Ssrkar. cqnmoc!l,tlea and tbm 'l'htrst Woru (Oxfo~ unive~si ty Press. calcutta, 1983 , PP• 89-90.

167

The UNCTAO V% policy pape~ en •ccmnoc11ttes• correctly.

therefore.' lists the problem o£ quantitative c:onfllet as

an tmport:ant factor for tbe lack of success in negotiat­

ing new XCAsa "where the principle of ecpolt regulation

has been accepted, c!1£flcult1es have arisen 1n agreeing on

the allocatiQl of global quotas amcmg tbe various protllc:­

ing cououles" • 36

2. Pr;iee ccnflietg

The classic illustratlcn of pric:a conflicts bet­

weeD Emporter states is of course presented by the dls­

a~y of the organisation of Petroleum Bxportlno countries

OPBC) ove~ the prlee question. And not too long eQO the

OPEC was ~ blaze the trail for producer cart:els in o~er

ecmnodities. 'lbe lesson clearly is t'ha~ countries whtdh

do not think that the pr:lce objectives suit their

interests would noDnally refUse to join ccntrol schemes.

A relevant illustration of this is the l'efusal of Ivory

coast to join the tCCA and the refusal of Bolivia to

join the ITA; the Ivory Coast did not join the I~A.

because it ccnsldered the pr:lce range incorpor:atea in the

agreement \-las too low. Slmtliar:ly, Bolivia felt that the

price range 1ncorpor:at:e4 ln the I'l'A was likely to cause

"irrepa~able damage to the ext~active tin industry~.37

36. TD/273. n. 2. P• 19.

37. see Gordon-Ashwortb, n. 4, PP• 22g and 126.

1t)8

II • THB POLITICS OF CO~J)I'.l'Y NEGOI'IA'l'IOMS

The politics of intematlonel ccmnodlty negoUa­

tic:na provf.das interesting insights into the worla of

lnter:national diplanacy. It underlines the political

inteceste which c:ut across simple eeoncxnlc calculations,

signifies the impoltanc:e of bis~cn:ical (colonial) ana streteglc-potfl!J: links; inclicates the strength of regional

links, ana, in general, reveals the inexulcable linkages

between political sntl economic interests. FUrther mol\!,

lt exposea tba lnflua1ce ana role of domestic pollttce

tn tha framing of foreign policy. More speeiflcally, it

enables an understanding Of the pollt:teal exdu.mges

between govemments ana their cons1:ituent interests viz.,

1n the case of a consumer country they ue tbe processors,

brokez:s ara4 the final c:onaumez:s. FS.naUy it emphasises

the slgnffteanc:e of an intematlonal policy perspective

cond6c1vo to 1ntemationa1 economic cooperation. Some

of these aspects may be examt.neel further.

A. ~storleal Links

In a recent article en the politics of lntemational

canmoaity regula~lcm wi tb re£enmc:e to cocoa agreemere s,

Finlayson and Zacher: make tbe following obsecvatlon in

examlnin g the process of negotiating tbe 19'72 cocoa

Agr:eement •

t:he £ac~ tbat African countries are the maj~ coeoa m:po~s, whereas Latin Amet: ieans an more promS.nmt in thea c:of!Ge m~ket, meant that b~ac!er foreign policy cons1Clerattcns played a mud\ smaller role in us thinking in the case of cocoa, ana tlma wol1ced against us mt1f1eaUcm of tho agreement.

168

For the t-Ies~ ti:Umpeans "the situ at.lon was just: the

reverse(•. ACcording to Short o

It la probable ••• that British ana Eur:opean ties with Afdc~ oc~lnstlng in the colonial period, have foateced greate• s,..mpatbles for an Agreement: to regulate tbe tr:acte of a pr:oc!uct lSCGcaly pcocllca4 on that c:ontl­nen~, much as us-Latin American tlea certainly helped to foster the COffee Agr:eement.39

These obsarvat.lone unc!erllne the sign1£tcance of bisto~:l­

c:al lintcs bcrt:ween ecpor~rs ana 1ml'C)rt.ere of a spaclflc

ccmnoalty in the successful conclusion of commodity

egnemants. Undoubtedly the conttnusnce of these llnka,

~Scb ~e usually between the fo~mu metropolitaa CCllntry

and tts Em-eolonial countries, are dictated by ~e c:ontl­

nuatlen of the economic imperative wbldl bas goveme4

38. Finlayson and Zad\ez-, n. 19, P• 401.

3g. Cited by Plnlayson and Zacbel', lb14.

'11 ('\ 0 ..&..v

their relatlatsblp in tba past. 40 Yet it cannot be

denied that the factor Of htatorlcal aesociattcn induces . affimattve motlCil of the fo~tner metmpolltan counta:y

towards a more sympathetic eonsldaratlon of commodity

agreements whose bEneficiaries will be countrJe s with

which it shares a long-standing telat.ia~ehip. This,

apart frcm bringing certain material benaflts to the

metropolitan counuy, strengthens mutual poli~S.cal

ties to its advantage.

'ftle fact of hS.stOJ:tcal assoctatton S.s often

coupled wttb what Rangarajen ter:ms as • strategic power

relattonmlp' wbidb la pethaps best axanpllfle4 in the

relat1Qashlp of the Unl ted states wl t.11 Latin Ametlca.

After the termination of the tnter-~Wedcan Coffee Agree­

ment 1n 1948, the unt~ states enunciated a "handq off•

policy tcwa~s an in~nattonal coffee agreenent. %ts

~esponse ~ the efforts to join a new agreement was

categorically negative. A ettange was, however, dtsc:emed

40. Rangarajan aptly obseJ:Vea that .. .Lilolonlallsm establtshed ecatomic lnteraependencles whlch have an 1mperatl ve Of thAS.r Otfll. Achievement of pol t­tl cal independence cClJld not change the ae over­ntg'h~. The e~stwhlle met&apolitan eountr!os etlll remain the maj o~ trading partne~s of the foaner colonies•, n. 1, p. 253.

1G1

in the a~itu4e of the Unitetl s~tes in 1959 when the

then see~eta~ of state, John Poste~ Dulles, stated

that

'lbe United s~tes Government ~ealizes the ootentlel conseq­uences of violent fluctuatioris in the pJ:ic:es of Latin Amed.ca• a exports and is tlaily aeaz:ch1ng fo~: ways and neans to contz:ibute tG~Jar4 a solution.... LThia polic:y np~entsJ a constde~­able emoun~ of new qcouna.41

This cbangtng attitude wqs accentu~ by the CUban cevo­

lutlon, and soen the Latin Amez:ican Task Fo~:ee set Ul' by

Pceslden t Kenna4y, conc:emea at the sp~:eacl of "CeatJ:olsn",

~:ecanmen~ct. as one Of the measuz:es,' that the Unitect

States coopexate in establimlng canmoaity a~:cangemm ta.

The process vas helpeB by the fact ~t even ••the larga

tl*blll'Cly held coJ:pOxatiOls, such as GeneJ:al Poo4s, were

a.waze of the consequertcea for us security lf tbe maJ:ket

should b"'ak and Latin P4oe~:ica went carcnunlst". 42 Xn

Maz:oh 1961, in his fanous Alliance foJ: Pl'ogJ:eas apeecb.

Pz:esttlent Kennedy obsez:vea that.

41.

42.

B~t s. PlsbeJ:, !'f:}tmat&?J§J. Coffn Aapement;t A sway in Co£fteNRlqnagy Pmege~: Publisbem, N.Y., 1972), P• 21.

Ibld., P• 22.

count~ governments in a earious case-by-case examlnatiat of the major c:ommodities anc! to lend its support to practical efforts to ncluc:e extreme prtae fluctua­tiona.43

1S2

Thus, in 1962 the first tntematia.al Q)ffee Agnement

was concluc!ed. tn other wOlds# otrateglc eompulslcna

made the united states to suppon the Agleement. The

United states, in the wo~ds of Krasner:, "was interestecl

1ft transfor.ming the dcmestic political, social, and eco­

ncm1c situation in the countd.ee to which it offered a1a. 'lbe Intemational Coffee Agreement was seen as a ctev1ee

which woultl, by stabilising coffee p~:1cea at mode~:ate

levela, contribute to 4Qnes1:ic tranquility ln proc!ucing

nattona" •44 It thereby hopec! to pnvent the ~reaa of

eomrrunism ana soviet influence in Latin America. 49

More recently, the political advantage of etren­

gthenSng ties ttitb the ASBAN counuUts was an important

facwr fc. the Uni~4 states joining the tNRA, four

member:e Of ASEAN i.e. 1n4onesia, Malaysia, Singapore m6

43.

4 ••

45.

Ibid., P• 28.

stephen Dav14 ~asner:, '1;d:!'=ttc1 if;fimm Cqmnod&tieaa A sty~ of 1 - 9 Unpub11ehe4 Ph.D. esls Sn Political Science submittecl to Hacvaxd Unive~:slty, p. 302.

-

Krasner: w~1tes that t:rtftte American govemment peECeive4 the Intemational coffee Ag~:eement as an economic 1nstmment "'ich would fuJ:ther its stra­tegic aims. 'lhese objectives were paRly dizectea at thwarting Soviet !nit1atlves in Latin Amenca•. ibid., P• 243.

Thailand ~resent ee pez: cent of the WOJ:ld's supply of

natu~al r:ubber. The unt.ted states ~id\ has a vital

1ntexest in the area aaw the INRA as an instll\lment fo~

achieving its auateg1o en"s. 46

so eignlfieant ls the strategic factor that

Krasner concluc!es that nCi/he act1Q1S of the United

states and other consuming nations do not appear to have

been fundamentally motS. vatec! by econcmlc objectives". 47

1ft his view, "Cfln the case of aoffee, and of othesr

primary commccJltf.es, central decision-makers in ln4ust­

r1al nations have offereCl econanic cCl'lcesalens to secure

political aima." 48

47. Krasner, n. 4,4, P• 302.

48. Ibid. That the political factor plawa an important r:~le is furth~ 111uat:eate4 by the actions of other inc!ustrlallsa! statas like, for intYtance, ftence. F~om UNCTAD I itself the ~ench Govemmen~ dis­played euppowt fro ccxmnctlit.y agreemenq. At UNd'AD III, Giscard D'Estatno (then Minlstezr of Ptnanee) even extended suppeR fozr the principle of co-~irumclng of buffer st.ccke. 'l'he French intere~t in taking this positive attitude was essentially poll~c:al ana lay in a continued ata­loque with t.he developing eountl'ies. William FoX, the formec Sec~etafy of the Inte~national Tin ccunc11, has observed in the context of the tin agreements that .. France, amongst the consuming ocuntz:1es, had per:bapa the clearest philosot;)hy Q'l

eontd •••••••• /-

1G4

While a~eeing with Kcaener ~hat the political

motive is often the ntOYing for:ce behind a developed con­

aumer countr:y j o1n1ng an agreement - as was the case

with the 1962 Coffee AgJ:eernent- it is difficult to

endorae his c:oncluslat that econcmic Objectives always

play a secondary ~le. There is little tloubt that the

ccnsumer naticns also atana to benefit substantially

fcan commodity a~eemen tet 1 t pcov14ee them assured

access to supplies at atable prlcee allowing than to

plan with certainty their own econcrny. so. more often

then not. eccncrnic considecations are as 1mpoctant as

political/stcateglc motives.

c. R!!Jlcgel Sol!4arl tv;

Among the factors which help tt\e concluelcn of

conmodlty agmements is the factor of ceglatal sols.ctad.ty

wbleh E!ftables tbe paRlcS.pants to expedl tiaualy formulate

an effective strategy. It ls well 'known that Ute initia­

tive taken by the Latin Amencm eount~:les has been

cont ••• camno41ty agreements and the clewloplag cauntcles ••• The government of Prance aim84 not cmly in thG Tin council at being an essential link bebzeen the industrialised and the developing countries. an essential link Which would bclng FJ:ance stat.us ancl pcestige ana might help 4evalop1ng countclcaa to act wl thin the 11m1 ts of economic ceason" • Willian Fax, m• Tb,e WQflSSna of a Cgnmocll1;" Au:r;ent (Min g Jouma Books LttJ •• London l974 • PP• 256-7.

1S5

crucial to tba successfUl negotiat1Q'l of tbe coffee

agraanent. In the case of the INRA, all four of the main

members of the Assoc:latjon ot Natu~al Rubbe~ Pr:cxtuoing

count~ies (ANRPC) •re members of the AssociatlCh of

south East Asian Nations (ASSAtt) ana abuect a ecrnmcn

perspective anct goal. Howevel'. •CiJven where regional

co-operation is tenuaas. the fact that major: pl'ocile1ng

count~tes all belong to tha same region is helpful 1n

tackling cQllnodity p:r:oblems". 49 In thiS context, it ltJ

hopetl that the accelerated process of ngla'lal coopera.

t1Ql being td tnessea to4ay will gc. far to snoothen tba

cow:se of conmoaU~y negotla t.lcns.

For an ac!equate untlerstant!Sng of the polltica of

international comnodlty negoti&t1Chs, it ls extremely

important to lift the veil of state aove:r:ef.gnt:y and look

at the cJ1ve~:se interes·t groups which ~1st in both the

1mp~r cmd exporteJ: countries. Generally speaking.

at. least three interest. groups may be ldentt fle4 in tb.e

1mporter countm.esa aaneatic protlleera. pl'oc:essors and

me~Sllts. ana individual eonsumel's. WhPatas the prl•

nclpal interest g~oups in the E:'xpo~ter ccuntr:iea ar:e.

49. Rangarajan~ n. 1, P·• 260.

1S6

the Government, planta-ion ewers, small bo14ers, SftC1

processors ancJ meJ:&t\anto. 50 The lntra-tnt.ereste of the

groupe in both the i~ortlng and exporting countries al'e

often at va~lance. Por exaq>le, the mel'dlsnts ana pro.

cessors 1n the c:ons\lnlng countries often tend to support

conanocJlty agreements for the xeUOft that "they gain fmm

two scurcesa they faee a lower coat of informatlcn abcut

fUture supplies and thus lower l'lak of losses due to

inventory ehol'tac;es1 they oen use their establiahec1

channels of caae within the quota system to ensu~e that

new entrants and potential c:Qftpetltol's ue exclu4ed". 51

However, dcmestic p~:o4lcel'a may oppose an agmement S.f it

means foregoing to a certain extent ito own dQnsatic

muttet. The picture la fUd'lex canplicatea by the

existence of txan•attonal links sncng the pr04ucer.

collSUmal' and m•ketiftg tnaustl'les.

The l'Ole of 4omastlo I)Oli tics in the negOtiatlcn

of ccmno&Uty ag&-eements can pedlaps be best aeen at work

in tbe negotiation of lntematla'lal q ar agreements.

The sEc countries have never beett enthuaiaatlc to join a

so. This is a modifiecl venlon of Alan Rufus Walter' a list 1n bls "The Bconomlo Reason for International COmnedl ty Agreement s•, JSYkloa, Vol. 27 (1974), P• 784.

51. Ibid., P• 106.

197

eugcu: agreement as this woU14 ~ean dismantling Ute pro­

teeticat dtich 1s given to the fumers ""o represent a

st~cng lobby within acme of these coun td. es. The common

Agricultural Polley (CAP) of EBC Which regulates the

prot!ucticn, consumption anc1 trade of sugar in the entire

ec:mnunity has been examined elsewhere. 52 tt may suffi­

ce to note here that the Ccntnunity• a au(]ar policy is an

exaq,le of indefensible ecatomlcs, nee east. tatea by dome­

stic political ccmpuls1Qls. Puadoxlcally, it is this

indefensible eccncxnics "'ich has fome4 the EEC to

negotiate se~lously for: the nsw agceenent, the huge

subsidies to fumers toolc its toll en the EEC budget as

well as of the ocganlsattcn and maae 1 t tum to the next

be~ alternative of ccrrmo4lty agreement. 'Jhey aze(·of

course seetcing to rewrite 'the agreement in their:

favour:.s3

UX. INTERNATIONAL LAt'l AND COMMODITY NEGOTIATIONS

The reasons for: th., lack of a large numbe~ of cQnJI\Oo­

cSt. ty agreenents, both in the past ana in the present, can

52. see dtapter: :cc, also see generally, John H. Marsh ana Panela J. ~anney, Aqriglltum Jll4 t;ht ,su~ean CQM!Jnit" (George Allen and Unwin, Lcnacn, 1980 P• 57.

53. For a 41scussicn of tbe current negotiations see ten smith, "P~apecta for: a New Itltematicnal SUgar Acp:eement", Jcumal of Wm;lc! '!Xa@'!J.,aw, Vol. 17, No. 4 (1983), P• 309.

19b

be tcaced to the vast array of complex eccoanic anti

political factors Mllch axe involvecJ in the negotlat!ats,

eQne of which have been examined above. a.1h11e the reality

of conflicting in~eats between pro&Jcec atd consumer

aountd.es and between the pl'Oclleer ccunt rlee thernael vee

cannot be wlllhed away, greater willingness needs t.o be

shown by states ln arriving at comncxilty agreenente,

p~ticularly effective agreements. l'n this context,

iftternatlonal law can play a perauaalve role by anpha­

sialng those aspects of law ana eQ~i~ which dictate

g~:eater accQDodatlcn in tbe negotiationa.

It may be recall a1 tla the Progr8lilne of Action

en the establlabment of a New International Economic

Order ( .. ~ogranme of Acticn") statea 12\at all efforts

should be made tow,.as a

BJCpecSltlous fo~tnulation of carrnoaity agr:eements Where appl'Oprlate, in Ol'de&­to mgulate as necessuy d to etabilise the world markets for raw materials and pr:lmary conmodltiea.

Artlole 6 of tbe 0\aRer of Bconcmlc Rights ana Duties

of states ("atarter') goes further and states tbat.

It ls tt\e duty of States to contribute to tbe t!evelopment of international tratle of gOods, paRicularly by means of ucange­ments anc! by the concluslcn of long­tezm mul~llateral conmot!ity agcee­men te, Whece appropriate, atd taking into account the f.n~esta of pro&l­cecs end consumers.

199

This is not the occasion to review the legal basis

and effect of the £nstrumenta containing the Pcogxemme of

Action ancl the atactec. '1\'170 general observations ue

howevec in oxdec. ftrstly. even 1£ tbe cltet! l)rovislons

are cons14ere4 manf.featat1cns of aoft law they ua not

wl thout legal impact. 54 In th8 least, it 1s expecto4

that the states will tal<e the11' content s•lously ana

show tham Clue r:espect by abstaining fl:an conduct which

violates their: essence. Secondly, While the c!evelcpec!

c:ountr:tes may not be willing to un4ertake a legal duty

to ar:rive at commodity agreements they are not awrae

to negotiating then cn a case-by-case basis. Por

instance, in ita ataten.mt of reservations to t'he Pro­

gramme of Action the unite4 statea noted that, .. CiJur: akepticimn abcut CQ'IlrnOdlty agreements ia well known, but

we are pxe~mt! to cmslder them en a case-bv-c~e

basta• • 55 The Federal Republic of Gemany aleo ex~essecl its willingness to ccnalcter: commodS. ty agreements en a

case-by-case basis. 56 spealctng on behalf of the sse

54. For a tllacuss ion of the concept of soft law see 0\apter xx. Xt may, however; be mat!e cleac that 1n the perspectlw of tbls atu4y the Pr:o~amme of Actlcn and the Cbacte~ are not manifestations of soft: law.

ss. Although the P~ogrammct of Aetlon was adopted by consensus a numbe~ of oountciea 414 make s1:atement of cesenrations • .,R•sewattona Bnten4 by tbe Unlte4 states", !nts:mat.tonal Laqol J1ateriala. Vol. 13 (1914). P• 747.

56. "Reser:vations Bnteced by the ft!deral RepublSc of Germany .. • ibid., P• 750.

200

tbe cepceaentatlve of Federal Republic of Germany furth•

stated that blf!ec steeles, within the fcemewol:k of commo­

dity agnerner&s, •ace in themselves favourable to all

cOUDtcles•. 57 Mo~r • alnc::e than the developed coun­

t~:les haw accepted the Integ~:atea Pro;~:amme for Cortno­

dttles in 1976, a major canponent of which ue eanmoatty

agnements. Plnally. they bave before and alnce parti­

cipated in comnocU.ty agreements std agreed on an Amteangnt

&agblkblpq ~hi cqop mma foe Q:mmocJitMI• 'lbe chief

pur:poso of the ecmmon FUnd will be to pcanote mon •4

effective commc5ity agreements.

In bdef, the Bevelopect countries ue willing to

negotiate new agr:eemente and r:eeoftegotlate those alreacJy

1n oper:aticn. In this respect, lt ia aubmltted, that the

Pr:ogr:arrne of Actlcn tmc! the atar:ter: place Clll states a

minimum obllgatlCJrl to negotia~ ln good faith. such a

duty to "bugaln in goocS faitb", aeco~Jng to Pranctc, ls

a •p~eemptive• no~nt o! intematlatal customary law. 59

The contoua of the obligation wem laid ctow by the

lfttem~1cna1 coutt of Justice ln the North sea Conti­

nental Qltlg case '-"are lt noted that

57. Ibld., P• 752. sa. Thcmas M. ftanck, "Minimum Stan&lt:ds of PUb11c

Policy and Or:der Applicable to Collective CQmno­atty NegoUat tcxur. R!9uell Deg couq, vol. n (1979), P• 428.

the parties are under an obliga­tion to enter into nec;otiations with a view to arriving at an ac;reemr.>nt, and not merely to go through a mrmal proce~s of nego­tiation ••• they are under an obligation so to conduct them­selves that the negotiations are meaningful, which will not be ~he case when either of them J.a:d.~ts upon its own position withoot contemplating any mcdi fi­cation of it ••• ,69

2 0 ~- .·

To put it differently, with reference to comnodity

agreements, the wty to negotl ate in good faith can ~

said to establish a eactum ne neaotiando be~.,een the

producer and the consumer countries. It implies a

"willingness for ttle purpose of negotiation to abandon

P.arlier positions and to m~t the othPr sd:l!e part

way" • 60

Such a perspective would, for instance, militate

against the positi01 of the develop~ importinq countri~s

that comnodity agreem~ts should not be promoted b~ause

they violate the i~eology of frc=te market. ~ot only i"\l

sudh a pnsit1on unnecessarily ri~td but it has also

little basis in reality. The perspective also Sndlc<'ltes

that states particlpatinq in cotm1odlty neqotiatione should

59, I,C.J. Reports (1969), P• 47.

6:), neclsial of the Arbitral Tribunal for the Agree­ment on German Extemal nebts, 26 January 1972, cited by Ignaz Seidl-l'Ohenvelden, "International Ecmanic Soft Law'', R~etl Des cou ra, Vol. n (1979), p. 195.

202

not. subVert it in cccte&- to seek shott-term gains• consumer:

c:ountcies seeking to take ailventage of falling prices

While producing countries wanting to cash tn on a boom.

A aecon4 implication of the p&-ovleione contalnea

in the fr:ograarne o£\Action and tla Cler:ter: is that tho

fcameworlc of negotlat.tcns must be in hazrnony td th the

content of a Nmo. 'lbat ls to say, eQ'rlnodlty agreements

shculcl n«* be vJewect as isola tea in strum eats of mul u­lateral aooper:attcn but as elements of the overall stca­

tegy of the in ternatlcnal CQmnUnlt.y t.o br:lng abcut a nc:?A

economic order. A £untlanenta1 pr:f.nclple of intematf.Olal

ec:oncmic celat.S.ons, the Gtl8Rewr notes, ls t21e pranotlcn

of !ntel'ftadonal aocjal juetlce. And the p-rincipal

legal tool t.uougb wbf.ch intem at.ional social justice can

be adhlevect can be aald to be the ps-lftciple of equity. 61

The Ifttematicnal COUR Of JUstice has Uftl!eretoo6 ~e

pr:indl ple tlus •

61.

62.

the te~ ·~stable pr:tftclple" cannot be Snteq,reted i.wt the abstcact, it ¥efer:s back t.o the pnnelplee ancl rules Which may be appcopr:late in orcter

6to2 aChieve an ~ltable r:esult..

see generally, s.G. Ramdlar:an, "Bquity end Justice 1n Jntecnatlonal Law-Ma'kln'lf, Inf1an 3oumel of nltematlcmal Law, Vol. 15 (1975 , p. 47.

cae;e concezntng tbe Ccllttnental Shelf (Tunisia/ Libyan AJ:ab Janabiclya), ~~~at:iggal b!cm~ taatg;laJ;a.. Vol. 21, No. 2 19a2. ~>• 6o.

2G3

til othe~ words, in c:omno41ty negoUationa, states shou14

seek to ensure that the final a~nement 1ncoq,O¥ates

measumo which p~omote the objectives of a new eccnanlc

o~djr. Ccncretely, thls would, fl~stly, mean tbat affe­

ctive price ~abillsatlQl machanisls an wr:itten into

the a~eementa the nee4 to aupptnt blffer stocks tMourJh

tbe use of export quo-s, the firm acceptance of the

p~Snciple of joint J:espcnslbiJJ.ty in financing tbe buffel'

stock etc. ~onclly, it would mean that the long-tear.

c:crmnoalty development objectives ~lob cocrrnoalty agree­

ments set tbemael ves ue backed up by awxopr!at.e, p~e­

clse and binding measu~:es. As shall be seen elsewhtUe

ccntemporacy agreanenta often 4o aot include effective

ways end m~ans to achieve theaa objec~vea. 63

A third lmpllcetlcn relates i:O Ute factor of tjme a

the P¥Ogramme of .Aetlcn requlcea ~e •elCPe4lt1ous bmula•

tiCD of conmodlty agreements". In ~hla light, states

should abjure ftom following obltructlcniet tactics in

the negotiations. It may be po1Dte4 out here that the

tnteg1"ate! PIOgrarmte hacl nqul~etlnegoUatlona fo• CO{fltiO­

dlty agreements ln the .,ectfieCl eighteen ecmmoc!ltl~a to

be ccmpleted by tile en&! of 1918. This bas not been tbe

case. %n view of the pmvlsions of the Pr:ogranme of Actlcn

ana the Olarter, the conce~n.ed atat;ea neea to ebow greater

l'Olltlcal will, ant! eppcoacb ihe negott.aticns ln a spirit

of comprQ'Dlse.

63. sea Ch~te~ VI.

204

Finally, besides the Programme of Action, the

Ch~ter ana a ho~t of other relevant intemattonal ins­

tRments conurocUty neqotiations, in this regard, thezeS.s

also the nea'l to taka cOC)nisance of evolving principles

and noans of a NIEO. As shall be seea, there has evolved

a legal principle of stabilisation of the export earnings

of devel()l)ing countr:tes. 64 If such a principle can be

said to have evol~ then it ~oaes certain obligations

on the international conmunitv of states. t,Jhile the

content of tbe principle will be examinE'd at the appro­

priate place, it may be noted for present that, 1n so

far: as commoatty negotiations are concer:nea, tbev only go

to reinforce the observations made ear:llPJ:.

Where the negotiations eulml.nate in an agreer."~mt

over: the major: issues it is emobdie4 in a formal tr:e~ty.

The treaty defines the basis of memberShip, indicates the

manner: in which it will ente~ into force as well as lte

duration. lt also establishes an international organi­

sation to administer: and enforce the agr:eemant. It ls

the institutional stz:uctul'e whid't commodity agreements

establish which is the conc~n of the next chapter.

***

64. see Chapter XI.