Fair trade in tropical crops is possible; international commodity agreements revisited

Abstract

In spite of the growing rhetoric on international trade liberalisation that we hear today, developed countries continue to support their agriculture using methods that are harmful to farmers in developing countries. In WTO discussions, `non-trade distortionary` payments are used as a pretext for continuing to displace imports and for exporting products below their own cost of production. Meanwhile, world markets for tropical crops that were actually liberalised have seen a deeper and more protracted price fall than in the 1930s. This has led to poverty and land degradation, and is the major cause of the debt crisis that has many developing countries in a stranglehold. Voices are now being raised calling for new arrangements aimed at improving the prices of tropical export crops. Kenya, Tanzania, and Uganda have placed the issue on the WTO agenda (WTO/CTD 2003). However, many western economists and policy-makers resist such new interventions, claiming that it will reduce welfare and encourage rent seeking. Moreover, in their view, the collapse of international commodity agreements in the 1980s proved that price-raising controls are doomed to failure. In this paper, we address three questions: - Are supportive arrangements for tropical export crops desirable? - Why did international commodity agreements collapse? - Are sustainable arrangements possible? We find that some system of managed trade is needed. We argue that the failure of past agreements were the result of political rather than economic causes. Moreover, we believe that regulations can be made self-financing and resistant to free rider problems, and we put forward a proposal to this effect. Finally, we also discuss how developing countries may overcome the resistance that is met from governments of developed countries.

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