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Commodity Trade - Essay Example

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Name Institution Instructor Course Date Commodity trade Introduction (objectives of international commodity trade organizations) International commodity agreements cartels became common in early 1930s immediately after the great economic depression. International commodity trade organizations are state agreements to have a special class of trade and promote international cooperation in a commodity of interest…
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Commodity Trade Essay
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Download file to see previous pages The agreement aims at covering the bulk of the world trade in the commodity concerned and seeks to ensure corporative nature of the association. The associations also aim at safeguarding through participation, the interest of the producers and the consumers and insert provision that cater for all other entities (21). Any organization aims at implementing its provisions by carrying out specific functions that establish and strengthen their international accord. Challenges faced by the organizations International commodity agreements have been difficult to run and administer due to the current global economic crisis. There has been difficulties in the arranging and administering agreements partly due to technological problems surrounding the production and trading of products(27). The organizations have been facing the problem of conflicting interest between the importers and exporters where the importers want low quality products but of high prices. On the non-competitive imports, the importers require commodities of low prices and their respective quantity determined by demand. The international distribution of products is directly affected by government policy and the manner of trade restrictions within national bounds. Commodities transferred from the rich to the poor countries have an impact of accelerated economic impact. Large capitals are required to fulfill growth targets for the organizations and their payments are from the exchange earnings (29). For commodities that are largely produced in poor countries but consumed at the rich countries the agreement price set might be above the market levels or inelastic. These incidences give the market organizations to make negotiations with the producers who end up incurring losses or failing to strike a deal (31). The international trade organization having been facing another major challenge in the price stabilization, meant to implement support purchases. Theoretically, prices are set by the long term interlink of the supply and demand to bring the equilibrium price and commodity. However, stabilization effect is not achieved in buffer stocks without heavy financial commitment (37). Failure to obey these, upward price fluctuations or heavy accumulation of inventories and burdensome will ultimately result. Currently (in order to reduce the risk of market volatile global markets) the international commodity trades are giving loans to the less developed countries. These loans are available to countries that have an annual shortage in annual shortage in the foreign exchange earnings due to commodity price declines. These loans are for compensatory effect to these countries (41). The compensatory financial scheme is operated strictly as a program to offset short-term market instability and global volatility. The recipient countries are to repay within five years. In order to curb the risk of volatility in the global market the terms of finances should be liberalized and the repayment made contingent upon recovery of the exports of a certain country (43). This makes the loan doable in all season unlike now where it can be taken only if the trading prices are high enough. ICC INCOTERMS Inco terms are international rules that are accepted rules accepted by governments, legal authorities, as well as practitioners ...Download file to see next pagesRead More
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