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International commodity trading and agreements for International Business Mcom sem 2 Delhi University

International commodity trading and agreements for International Business Mcom sem 2 Delhi University

International commodity trading and agreements for International Business Mcom sem 2 Delhi University:An international commodity agreement is an undertaking by a group of countries to stabilize trade, supplies, and prices of a commodity for the benefit of participating countries. An agreement usually involves a consensus on quantities traded, prices, and stock management. A number of international commodity agreements serve solely as forums for information exchange, analysis, and policy discussion.

International commodity trading and agreements for International Business MCOM sem 2 Delhi University

International commodity trading and agreements for International Business MCOM sem 2 Delhi University

USTR leads United States participation in two commodity trade agreements: the International Tropical Timber Agreement and the International Coffee Agreement (ICA). Both agreements establish intergovernmental organizations with governing councils .International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

International Coffee Agreement

The International Coffee Organization (ICO) is the main intergovernmental organization for coffee. ICO exporting members account for more than 97 percent of world coffee production, and its importing Members, are responsible for around 80 percent of world coffee consumption. The ICO makes a practical contribution to the world coffee economy and to the improvement of living standards in developing countries by facilitating intergovernmental consultation and coordination regarding coffee policies and priorities, by encouraging a sustainable world coffee economy, by initiating coffee development projects to add value and improve marketing, by increasing world coffee consumption through innovative market development activities, by promoting the improvement of coffee quality, by working closely with the global coffee industry through a 16-member Private Sector Consultative Board, and by ensuring transparency in the coffee market with objective and comprehensive information on the world coffee sector by means of statistics and market studies. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

The United States led recent efforts to renegotiate the ICA, and the text of the seventh International Coffee Agreement (ICA 2007) was adopted by the International Coffee Council on September 28, 2007. The new ICA is designed to enhance the ICO’s role as a forum for intergovernmental consultations, to increase its contributions to meaningful market information and market transparency, and to ensure that the organization plays a unique role in developing innovative and effective capacity building in the coffee sector. Among the features of the new agreement is a first-ever “Consultative Forum on Coffee Sector Finance” to promote the development and dissemination of innovations and best practices that can enable coffee producers to better manage financial aspects of the inherent volatility and risks associated with competitive and evolving markets. Other notable changes include expanding the organization’s work in providing relevant statistical and market information and strengthening efforts to develop, review and implement capacity building projects that are particularly important to small-scale farmers in key developing country trading partners. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

International Tropical Timber Agreement

The International Tropical Timber Agreement (ITTA) is often described as a “hybrid” agreement because it combines a traditional commodity trade agreement with objectives that include sustainable management of tropical forests. The ITTA established the International Tropical Timber Organization (ITTO), an intergovernmental organization with 59 members who collectively account for about 80 percent of the world’s tropical forests and 90 percent of the annual trade in tropical timber trade. The ITTO promotes market transparency by collecting, analyzing and disseminating data on the production and trade of tropical timber; assists in developing, funding and implementing projects and other activities to build capacity to sustainably manage and use tropical forests; and facilitates intergovernmental consultation and international co-operation on issues relating to the trade and utilization of tropical timber and the sustainable management of its resource base. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

Negotiations for a successor agreement to the ITTA 1994 were concluded in 2006, and the new agreement (ITTA 2006) is expected to further strengthen efforts to promote tropical timber trade in the context of sustainable management of tropical forests.

International commodity trading and agreements for International Business Mcom sem 2 Delhi University

International commodity agreement

an agreement that attempts to stabilize the prices of someinternationally traded COMMODITIES such as cocoa and tin, with the objective of stabilizing foreig exchange earnings andproducers’ incomes, primarily in the DEVELOPING COUNTRIES. Although international commodity agreements areestablished to further the interests of producing countries, they may also benefit consumers by removing the uncertaintiesand inconveniences associated with erratic price movements.

International commodity agreements vary in format, but one typical approach involves the establishment of an ‘official’ pricefor the commodity, agreed on by member countries, which is then maintained over a period of time by the use of a BUFFER STOCK mechanism: surplus output is bought in if market supply exceeds demand at the official price and sold off if demandexceeds market supply. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

International commodity agreements have been promoted by the UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT as a means of enhancing the economic interests of the developing countries (see NEW INTERNATIONAL ECONOMIC ORDER), but there are often serious difficulties encountered in ensuring their viability. For example,disagreements can occur between member countries on what particular official prices to set arising out of differences in thedegree of importance of the commodity to individual members’ economies; and often the temptation is to set prices abovemarket-determined rate, which places a financial strain on the buffer stock, which may then eventually run out of money. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

As a result of the growing foreign exchange and balance of payments problems of developing countries, theINTERNATIONAL MONETARY FUND has established a number of ‘special’ funding facilities for these countries. See alsoECONOMIC AID, INTERNATIONAL DEBT. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

International commodity agreement. An international commodity agreement is an undertaking by a group of countries to stabilize trade, supplies, and prices of acommodity for the benefit of participating countries. An agreement usually involves a consensus on quantities traded, prices, and stock management.

Empirically, if not in theory, the following would seem to be among the primary conditions to be met if an international commodity conference is to materialize into an agreement:

(1) Inelastic demand. Clearly, if close substitutes are available, supporting the market price of any individual commodity is certain to have immediately and sharply adverse effects. The existence of synthetic rubber explains the complete lack of any postwar agreement for the natural product; restrictive agreements for individual oilseeds are ruled out by the existence of a considerable list of alternative seeds, as well as by competition from butter; but sugar has lent itself to a continuous succession of agreements since 1937.

(2) Reasonably stable market shares. Since export quotas generally divide up markets proportionately to the national shares prevailing in some base period, difficulties arise whenever there are either abrupt or longer-term shifts in the proportions contributed by various producing countries. The progressive displacement of exports of raw cotton from the United States by those originating elsewhere, compounded by the development of synthetic fibers, precluded the successful negotiation of an international cotton agreement in the postwar period, and the rising volume of exports from African countries seriously complicated the negotiation of the International Coffee Agreement of 1962. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

(3) Distress price levels. As is best illustrated by the breakdown in negotiations for a revised sugar agreement in 1951 and for a cocoa agreement in 1963, exporting countries are not prepared to accept the necessary compromises unless prevailing prices are extremely low. International commodity trading and agreements for International Business MCOM sem 2 Delhi University.

(4) Mixed producer–consumer interest. The longest-lived agreements currently in effect involve commodities concerning which the major industrial countries have rather mixed motives. Thus the United Kingdom is interested, as an importing country, in relatively low prices for sugar; but as champion of the Commonwealth countries in the West Indies as well as Oceania, the United Kingdom does not wish world sugar prices to fall to disastrous levels. In pre-Castro days, the United States sought a higher price for Cuba’s sugar shipments to non-U.S. destinations than did even the Cubans, who were rather more impressed with the desirability of maintaining export volume. Even the new agreement for coffee reflects some mutuality of producer and consumer interest within the major importing countries: no domestic sources of supply exist, but the temperate zone industrial nations are broadly concerned for the well-being of less developed countries in tropical regions of Latin America and Africa, which supply most of the world’s coffee exports.

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