Why an OPEC-style commodity cartel never came to pass
Medford, Mass. — Sometimes there is news in no news. In the late 1970s, after the success of the OPEC cartel in boosting oil prices, there was much talk about the danger of commodity producers forming new cartels to raise prices. This, it was feared, would push inflation even higher.
It didn't happen.
There has not even been a rush of new international commodity agreements to stabilize prices. And a treaty to establish a Common Fund to help finance stocks of commodities for price-stabilization purposes has not been ratified by enough nations to come into force.
Gamani Corea, secretary-general of the United Nations Conference on Trade and Development (UNCTAD), during a recent lecture at the Fletcher School of Diplomacy, Tufts University, spoke of his ''disappointment'' at the failure of numerous negotiations to produce more commodity agreements and his ''impatience'' with the nonratification of the Common Fund.
So far some 70 nations, including 14 industrial nations, have ratified the Common Fund agreement, which was concluded in 1980. It needs ratification by 90 countries which would provide about two-thirds (or $313 million) of the ''subscribed capital'' of the fund to come into force.
That means for the treaty to be implemented, it will likely need ratification by the United States, which has signed it, or both the signature and ratification of the Soviet Union and East bloc.
Sri Lanka's Corea hopes for such a ''break-through.'' But State Department officials in Washington are more dubious. The US, noted one official, will not consider ratification until some existing commodity agreement organizations indicate their desire to actually make use of the Common Fund's more that $400 million. Before the administration asks Congress for the $74 million, it wants to see some movement in financing commodity stabilization stockpiles. So far no agreements have been made.
Mr. Corea describes this as a ''chicken and egg situation.'' He had hoped the existence of the fund would be the egg, encouraging the successful negotiation of further commodity agreements. The US wants the chickens - the commodity agreements - first.
But there has also been a change in the environment for commodity agreements, noted Mr. Corea. In the late 1970s, world recession reduced the demand and price for commodities produced by third-world nations. OPEC's economic power has been greatly trimmed. The bargaining power of developing countries has been weakened - or at least seen as weak.
''The whole North-South dialogue is in some sort of impasse, and progress is very difficult in every field,'' said the UNCTAD chief.
He added: ''The developed countries were preoccupied with inflation. They were less inclined to devote energy to stabilizing commodity prices. Indeed, commodity agreements were seen not as helping but as a danger.''
Conservative governments, such as the US, feared that commodity agreements might be used to hike prices.
Commodity agreements, said a State Department official, have problems. If price ranges for a commodity are set too high, this might encourage the development and use of substitutes for the product - sucrose for sugar, for example. If prices are held down too far, it may discourage needed investment in new production.
The consumer countries, said Mr. Corea, come to commodity agreements as ''agnostics'' - not convinced that such price-stabilizing agreements are imperative, bothered by their interference in free markets.
Even some developing countries, he admitted, are suspicious about international solutions. They may be as concerned with volume - thus production and employment levels - of their commodity sales as with price.
Only five price-stabilizing commodity agreements have been negotiated: cocoa, tin, rubber, sugar, and coffee. The US is a member of the last three.
The Soviet bloc has not signed the Common Fund agreement. It says price fluctuation is a weakness of capitalist economies and not the responsibility of communist nations. But Corea still has hopes they will sign, and that this might encourage the US to ratify the agreement.
Mr. Corea maintains that the impasse in North-South issues will not continue indefinitely. In the meantime, he said, the rich nations are becoming more dependent in their trade relations on the poor countries and beginning to see that they cannot have healthy economies while the economies of developing countries are languishing.