The Trilateral Commission (© 1976)
Carl E. Beigie, Wolfgang Hager and Sueo Sekiguchi
ISBN: 0-930503-53-8
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Summary of Report
I. Introduction
II. A Definition of "Commodities"
III. Basic Causes of Commodity Market Disruptions
A. Resource Exhaustion
B. Cyclical or Temporary Phenomena
C. Contrived Shortages
D. Structural Problems
IV. Alternative Policy Approaches and Consequences
V. Recommendations: Towards a New Balance of Responsibilities
A. General Principles
B. Information Collection and Research
C. Commodity Price Stabilization
D. Trade Reform
E. Investment Matters
F. Development Assistance
Text of Summary of Report
The principal commodities issues of recent years have raised fundamental challenges to the international economic and political system. A failure to respond to these issues constructively would result in adverse consequences for all nations, whether commodity importers or exporters, whether industrialized or non-industrialized. There is a basic mutuality of interests regarding commodity issues. Recognition of this mutuality of interests should lead to changed perceptions as individual countries seek to accommodate national objectives within an increasingly integrated world economy and a natural environment that is creating more demanding challenges and constraints.
This report puts forward a broad range of recommendations to deal with a variety of causes of commodity market disruptions and to fashion a new accommodation between commodity producers and consumers. These recommendations, in their general thrust if not their specific features, constitute a package in the sense that each has an important role in contributing to an international environment in which all nations regard a liberal, multilateral trading system to be in their best long-term interests.
Resource exhaustion is often seen as a major potential source of commodity market disruption. Rapid increases in population and economic growth have placed increasing strains on the world's resource endowment. There has been inadequate recognition in recent years of the world's ability to overcome these strains through the application of technical skills, financial resources, and incentives to avoid waste. Still, the costs of supplying basic commodity needs may be rising, and perceptions that resource exhaustion problems exist are important in the determination of national resource policies. A primary recommendation of this report is that an information and research center be created at the international level to provide independent expert assessments of current and potential commodity market problems.
The most pressing needs for policy action, however, lie in the related areas of instability, in commodity prices, contrived shortages, and structural problems. If disruptions in world commodity markets arising from these problems are to be overcome, a new bargain must be struck between commodity importers and exporters. The elements of this bargain must reflect commodity-importing nations' interests in access to supplies and a predictable environment for investments to expand supplies, and it must also reflect commodity-exporting nations' interests in access to markets and stability in export earnings.
The elements of such a bargain are contained in the recommendations offered in this report. The following recommendations respond in particular to the interests of commodity exporters:
* There should be a meaningful commitment to seek workable methods for stabilizing commodity markets (which, it is argued, would bring significant benefits for commodity-importing nations as well).
* There should be a reduction in trade barriers that limit opportunities for processing of primary products prior to export.
* Assistance should be given for nations with resource development potential to become more involved in the ownership and management of resource projects.
The following recommendations respond in particular to the interests of commodity importers:
* Commodity agreements should include the creation of buffer stocks to be used to stabilize supplies to markets.
* Export controls should be brought under international rules.
* Contrived market disruptions should be subject to international sanction.
* Resource firms should know the terms and conditions for investment in host countries that will be adhered to by both sides over time.
For stabilizing export earnings, this report supports compensatory financing arrangements in preference to schemes such as direct indexation, which are based on doubtful logic. It strongly recommends that commodities be approached on a case-by-case basis in order to allow the maximum flexibility in achieving international policy objectives.
The basic challenges for Trilateral countries are to bring nonindustrialized
commodity exporters more fully into the world economic system and to demonstrate
a greater awareness of the importance of collective responsibilities in
making that system work, especially on the part of those Trilateral nations
that are commodity exporters. A failure to meet these challenges would create
grave consequences for the economic prosperity and political stability of
all nations.
Rapporteurs
(titles at time of publication)
Carl E. Beigie, Executive Director, C.D. Howe Research Institute,
Montreal.
Wolfgang Hager, Senior Fellow, Research Institute of the German Society
for Foreign Policy, Bonn.
Sueo Sekiguchi, Senior Staff Economist, Japan Economic Research Center,
Tokyo.
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