Chance for rubber pact<\/p>\n
Last Friday's agreement between producers and consumers to
\nextend the deadline for signing the 1995 global rubber pact to
\nthe end of July provides another chance for the pact to come into
\nforce. The International Natural Rubber Agreement (INRA) III,
\nwhich was agreed upon in February, 1995, to replace the 1987
\npact, could not be implemented from last January as scheduled
\nbecause the consumer members -- Japan and the European Union --
\nwhich have signed the new pact represent only 48 percent of the
\ndemand, less than the required minimum of 75 percent.<\/p>\n
The main stumbling block is the United States which accounts
\nfor 28.8 percent of the demand. The United States, due apparently
\nto the recent government shutdown and budget crisis, missed the
\nDec.28, 1995, deadline for signing. All the major producers --
\nIndonesia, Thailand, Malaysia and Sri Lanka -- which represent
\nalmost 95 percent of the world's output have signed. If the new
\ndeadline is met by the United States, INRA III will most likely
\ntake effect early next year.<\/p>\n
It would be a great loss both to consumers and producers if
\nINRA III, which was agreed after a series of negotiations under
\nthe United Nations Conference on Trade and Development since
\n1993, failed to come into force only because of the United
\nStates.<\/p>\n
INRA III is most outstanding because it is virtually the only
\ncommodity organization of both producers and consumers that
\nremains effective now. Similar commodity price-stabilization
\nschemes in sugar, coffee, tin and cacao have all failed.<\/p>\n
It would indeed be encouraging if the 16-year-old INRA could
\nsurvive at a time when almost all countries are in favor of the
\nopen market mechanism to form prices. The new agreement will last
\nfor four years with provisions for two one-year extensions.<\/p>\n
There are, we think, several factors which have contributed to
\nthe success of the INRA which is administered by the
\nInternational Natural Rubber Organization.<\/p>\n
First, the agreement groups producers which are responsible
\nfor 97 percent of the world's natural rubber output and consumers
\nwhich account for more than 72 percent of global imports of
\nnatural rubber. The high level of discipline of the three largest
\nsuppliers -- Thailand, Malaysia and Indonesia -- who together
\naccount for 90 percent of the global production has played an
\nespecially crucial role in making the pact effective.<\/p>\n
The second factor is the pragmatism and flexibility of the
\nreference price range set by both the producers and consumers as
\nthe guidelines for the buffer stock manager in undertaking market
\nintervention either by releasing stocks at a time when prices
\ntend to rise steeply or by buying new stocks in a depressed
\nmarket. The price range, which is reviewed every 12 months, is so
\npragmatic and flexible that it is highly responsive to market
\nforces.<\/p>\n
The third factor is that the final round of negotiations for
\nthe new agreement took place under strong market conditions with
\nnatural rubber prices on the upward trend and the buffer stocks
\nnearly depleted. Given the economic recovery in almost all major
\nindustrialized countries, the price rise may spiral way above the
\nprice range.<\/p>\n
Those factors have combined to further convince both the
\nproducers and consumers that INRA should be renewed to guarantee
\na steady supply of natural rubber and to curb wild price
\nfluctuations.<\/p>\n
It is obviously much better for the consumers to have a
\nguaranteed supply at relatively stable prices, rather than having
\nto face an unpredictable market condition with wild price
\ngyrations.<\/p>\n
Seen from the interests of the producers, relative price
\nstability is crucial for planning production and investments in
\nnew estates to guarantee a steady supply.<\/p>\n
The new agreement is obviously a boon to Indonesia, the second
\nlargest producer in the world after Thailand. Rubber plantations
\nare especially important in the country because more than 90
\npercent of the 3.3 million hectares of rubber trees are owned by
\nsmallholders. The commodity also is a major foreign exchange
\nearner, with annual exports of around 1.3 million tons worth $880
\nmillion.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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