SOVIET PARTICIPATION IN INTERNATIONAL COMMODITY PRICE STABILIZATION AGREEMENTS

Created: 4/1/1964

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Economic Intelligence Report

SOVIET PARTICIPATION IN INTERNATIONAL COMMODITY PRICE STABILIZATION AGREEMENTS

CENTRAL INTELLIGENCE AGENCY Office of Research and Reports

Economic Intelligence Report

SOVIET PARTICIPATION IN INTERNATIONAL COMMODITY PRICE STABILIZATION AGREEMENTS

VAKNI

at<formation bO jtlng Uie Nationalhe Unite? riUtes wUblr. Uie meaning oi the esptonug* laws, TIU> !fl,, ibaori of which In jn/ maimer tr aa unautjforlwU prohijlwd by Jaw.

CENTRAL INTELLIGENCE AGENCY Office of Research and Reports

Summary and

I. Soviet Participation ln International CommodityBefore World War

II. Postwar Soviet Participation in International Commodity

Agreements and Study Groups

as an

Wheat

Sugar

3- Tin

h. International Lead and Zinc Study

United Rations Ad Hoc Meeting on Tungsten

World Chromitc

European Forestry

as an

International Cotton Advisory Committee

Coffee

Appendix A. lhe International Sugar Agreement Concluded in

London3 (Selected Articles)

Appendix B. Declaration of the USSR cn Signing theCoffee Agreement,2 .

Appendix C Articlef the International Coffee

Agreement,

Appendix D. Statistical Tables

Appendix E. Source

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SOVIET PARTICIPATION IM INTERNATIONAL COMHODITr PRICE STABILIZATIOW AGREEMENTS"

Summary and Conclusions

The USSR has participatedumber of international commodity agreements and other international arrangements that have attempted, with only limited success, to assist countries exporting primary products in stabilizing and even increasing their earnings from commodity exports. Soviet participation has been carefully delimited and, like that of other participating countries, has been guided essentially by national considerations.

International commodity agreements exist for tin, wheat, sugar, olive oil, and coffee. Stabilization methods include production and export controls, buffer stock arrangements, and the establishment of maximum and minimum price levels. The USSRigner (with major reservations) of the wheat, sugar, and coffee agreements and maintains membership in several international commodity study groups sponsored by the UH. Primary products composed roughly one-half of total exports of tlie USSR Of the commodities under UN-sponsored agreements or study groups, the USSR exports to the Free World chromite; lead; zinc; lumber; sugar; and,heat.

The USSR as an exporter has never accepted production controls and is unlikely to do so in the future. Production controls imposedommodity agreement would be considered by the USSR as aninfringement on its national sovereignty and as incompatible with the desired rapid growth of production embodied in its economic plans. Even when the USSR accepts the obligation of export controls under on agreement, it has insisted on quotas well above current or anticipated export levels in order to preserve as much freedom as possible in export policies. The Soviet system of economic planning with its inherent short-run inflexibility has not proved to be any guarantee against the occurrence of unplanned commodity shortages or even "surpluses" (above-plan supplies from production andn the former case, export controls are irrelevant. In the latter, exports in excess of plan are expedient in order to earn foreign exchange. As an exporting memberommodity agreement with quota provisions, the USSR could find its exports restricted in such In addition, the USSR has generally limited its participation in commodity agreements by excluding from consideration its trade with other Communist countries. Thus the scope of the internationalagreements to which the USSRignatory is essentially only the trade flowing within the Free World and between the USSR and the tree World.

* The estimates and conclusions in this report represent the best judgment of this Office asU.

The USSHong record ao an exporter to various countries of the Free World of such products as lumber, sugar, and wheat. Themotivations of the USSBraditional exporter of such products to well-cutablished world markets are siailar to those of otherworld exporting countries. In order tolmuB long-run foreign exchange earnings, most of these countries. Including the USSR, realize that they must cooperate either through Informalor through participation ln International conmodity agreements. Continued Soviet association with International cooaodity organizations that are concerned with these traditional Soviet exports may thus be anticipated.

In international arrangements for several metals, such ao zinc, lead, ond tin, the USSR has been less cooperative than when traditional Soviet exports were involved. For example, the recent Soviet conmit-ments to cooperate with the International Tin Council and theLead and Zinc Study Group regarding sales of these commodities came only after Soviet supplies available for export had been reduced. Fear of actions that might restrict Soviet sales in the US andapparently prompted the Soviet statements that the USSR would limit its exports of chroaltc. These me tale are relatively minor foreign exchange earners, and, except for chromite, their export to the Free Wsrld ls made possible by Importation from other Communist countries. In the case of chromite the USSR hopes to continue toilu share of the Free World market.

As an Importing nation the USSR probably will be prompted by international political pressures to participate more actively than ln the post in negotiations for establishing new commodity agreements, particularly those designed to assist producers of tropical products. The USSR, as well as tbe industrial West, ls being challengedto Institute cooperative trade assistance programs onbases. Indications of Soviet awareness of these demands of the less developed countries are furnished by the participation of the USSR as sn observer ln the ill-fated negotiations$ocoa agreement and its ratification of the Coffee Agreement effective The USSR has insisted in the coffee agreement,that the Soviet state must control the volume of imports and thus implicitly the domestic price of coffee, which in fact means that the USSR undertakes no obligation to the agreement whatever.

I- Soviet Participation in InternaUonal Commodity Agreements Before World War II

Until the end of World War II, international commodity problems seldom were considered by multinational The few agreements then existing frequently were rendered ineffective by the nonparticipation of major exporting countries. Participation by importing countries was particularly limited because the point of these efforts was to reduce the bargaining position of the importer.

The USSR acceded to two international commodity agreements duringsn agreement for wheat3 and one for sugar/ The Wheat Agreement, envisioning export quotas and acreage reductions, became inoperative soon after its signing The USSR refused to accept production controls, asserting that itseconomic plan called for expansion, not reduction, of wheat acreage. The USSR contended also that its export quota. Calculated on the basis of past exports, was too low and too rigidly fixed.

Obstructionism by the USSR was not, however, the prime cause for failure of the Wheat Agreement. It was not at all certain whether other participants could or would institute production controls. All members had attempted to obtain the largest possible export quotas, and several (especially Argentina) were not able to come to terms on this major point. Cooperation among the entire membership was never adequate to insure success of the agreement-

During the sugar negotiations7 the USSR assumed an attitude similar to the one that it had taker, in the previous wheat conferences. Although supporting in principle every proposal for the increase of sugar prices, the USSR reiterated its disagreement with any form of production control- Nevertheless, an export quota was accepted, and duringears' existence of the agreement the USSR did notits quota. Excluded from the USSR's quotas were exports to the three neighboring areas of Mongolia, Sinfciang, and Tuva, which were virtually economic colonies of the USSR. Quota violations and other breaches of agreement terms were the rule rather than the exception for most of the signatories because the enforcement machinery was too weak to compel compliance. Soviet adherence to quota provisions during the agreement period probably was the reeult of physicalin exportable surpluses rather than the sole intent to adhere to the agreement provisions.

The Sugar Agreement, whose continued membership included the USSR, was renewed in World War II disrupted sugar trade to such an extent thathe agreement had become inoperative, hut the Sugar Council continued to existeries of protocols- ew agreement was negotiated after the war.

For serially numbered source references, see Appendix E.

Other Soviet ventures into commodity agreements? toward participationetroleum syndicate with representatives of US, British, and Dutch oil interests. Soviet refusal to accept the terms for price and export restrictionsconcerted action with the syndicate. In an attempt toits* economic interests as an exporter to Western European lumber markets, the USSRhort-lived accord with eight other countries at the European Timber Exporters Convention. The USSR was spurred primarily by its alarm over Nazi Germany's success in gaining control of the timber industries in strategic parts of Europe, therebyarge part of the Soviet export market.

II- Postwar Soviet Participation in International Commodity Agreements and Study Groups

A. USSR as an Exporter

Most major world producers and exporters of coffee, wheat, sugar, and tin participate in international agreements in order topecified share of world markets at stable prices. The USSR, as aexporter of sugar ond,f wheat, has been motivated by the same considerations as other exporting member countries. Partly to demonstrate an interest in international cooperation but mainly tomaximum long-term foreign exchange earnings from traditional exports to well-established world markets, the USSR acceded to membership in the Sugar and Wheat Agreements. In addition, the USSR participatesuch lesser degree in international arrangements for several othercommodities.*

1. Wheat Agreement

The International Wheat Agreement, which included the major wheat exporting and importing countries, was negotiatedear termultitude of conferences during andafter World War II.** Renewals with modifications occurred The agreement is unique among international commodity arrangements in that industrially developed notions arc among the largest exporters of this primary product.

* The USSR, like the US,ajor exporter of primary commodities. Petroleum and petroleum products, coal, ores and concentrates, metals, lumber, cotton, and grain accounted for almost one-half of the USSR's total exports? and for more than one-half of its exports to the Free World in that year.

** As shown in Tobleppendix D,elow, the USSR was aworld exporter of wheat Soviet wheat exports to the Free World2 amounted toillion. By comparison,2 total Australian wheat exports amounted to9 million, and US wheat exports amounted toillion. (Dollar values are given in current US dollars throughout thie report.)

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lhe stated objectives of the Wheat Agreement ore

to assure supplies of wheatImporting countries and markets forocountries at equitable and stable prices; to promote the expansion of the international, trade innd to secure the freest possible flow of this; tourdensomeand critical shortagesto encourageconsumption ofarticularly in developing

The USSR attendedegotiations but withdrew before the convening of the final conferencestatement that it regorded theillion bushelsillionranted as its share of guaranteed sales to be unacceptably small. 9 agreement, whose provisions varied somewhat from the present arrangement, called for specific quantities to be assigned to members to buy and sell whenand maximum price levels were reached- Trade between these price limits was free- As world prices were declining duringeriod, the USSR felt that unless it could successfullyuota large enough to satisfy its wheat export goals, the disadvantages would exceed the advantages of membership.

The USSR sent no delegates to the conferencesut Soviet representatives attended the conferences68 (for the first time conducted under direct UH supervision) as observers. At neither of the two conference scries did the USSR indicate that itto upgrade its membership status. Just before the conferenceowever, Soviet representatives called on the Executive Secretary of the Wheat Council and inquired about the requirements for full They showed particular interest in the responsibilities ofmembers toward supplying statistical information.

The USSR, represented by competentull member of the conference Theconducted themselves, for the most part, in aand indicoted that they would be satisfied with the newif alterations from the terms of9 agreement were keptminimum. There were occasions at the sessions when the Sovieteliminated their objections to several procedural mattersout the difficulties through informal consultations withduring recess

* Unless otherwise indicated, tonnages are given in metric tons throughout this report.

In signing2 Wheat Agreement the USSR made aconcerning member reporting obligations*:

Tbe Government of the Union of Soviet Socialist Republics will supply theprovided under this Agreement for compiling an annual survey of the world wheat market within the limits of thedata published in the country, and information on commercial and specialwith countries not participating ln the Agreement provided the respectiveagree thereto, kj

The USSR remains reluctant to provide statistical data if such data are not published within the country. This reservation,does not appear toignificant obstacle to tbe working of the agreement, because the review function of the Council does not affect performance under the agreement terms. In this function the Council studies the effects of internal policies on international wheat trade and then proceeds to advise the participants of those effects.

?. Sugar Agreement

The USSR signed the protocolso keep the Sugar Council alive but did not take part in its meetings again until3 negotiating Conference. The International Sugar Agreement, which came into being ink,7 and again9ermears.""

The stated objectives of the Sugar Agreement are

to assure supplies of sugar to importing countries and markets for sugar to ox-porting countries ut equitable and stable prices; to increase theof; und to maintain the

* It is not certain what effects the poor wheat harvest3 and the large imports of wheal. will have on the future of Soviet membership in the Wheat Agreement. Uic Wheat Council is empowered to suspend export commitments in cases of temporary hardships, and, the USSR would have no irraediatc reason to withdraw from membership. ** The USSRet importer of sugar in world trade (see Tableppendix D, p. 2k, below)et exporter of sugar in trade with the Free World (see Tableelow). The listing of countries of the Free World excludes Yugoslavia in all years and Cuba in

purchasing power in world markets of countries or areas whose economies are largely dependent upon the production or export of sugar by providing adequate returns to producers and making itto maintain fair standards of labour conditions and wages. %f

Signatory nations subscribed to quotas for each exporting nation on sugar going to the "free market" and to restrictions onfrom nonparticipating exporting countries.* Exporting nations also agreed to maintain stocks within minimumevels but were allowed some discretion on this point. The Council assignedquotas before each crop year on the basis of existing world market conditions and was empowered to adjust quotas during the year as these conditions changed.

The USSR signedgreement with the following reservations:

It is understood that in view of the social-economic structure of the USSR and their planned system of national economy, Articlesndoncerning restriction of production and stocks, as well asoncerningof the export of sugar, are not applicable to the*

Subsequently, at1 Conference held to revise price and quota provisions, tensions among the participants were aroused when Cuba demanded an extraordinarily large export quota. The Cuban delegate argued that the USSRew market and therefore should bc considered outside Cuba's previous export quota limitations. The US rejected this position, and,esult of the ensuing discord, the Conference vas recessed. Cuba's demands appeared initially tothe Soviet delegates but nevertheless drew their support. Yet, when it later became clear that the Conference was in danger of collapse the Soviet delegates tried to persuade the Cubans to modify their stand-

The Sugar Agreement is now maintained in name only because the current state of US-Cuban relations prevents formal negotiations of

* The "freehich accounts for about one-third of world sugar trade, does not include sugar trade under special regionalarrangements such as the Commonwealth Sugar Agreement* For Articlesndf the Sugar Agreement, see Appendix A.

a new agreement. The Sugar Council, seeting ingreed to an indefinite postponementegotiating conference. Through the signingrotocol in3 by the majority of the members,the USSR, the Council la to be preserved but quota and price regulation Is being held ln abeyance.

3- Tin Council

International agreements among nations to controland export of tin dateuccession of loosely knit marketing agreements was negotiated durings. Several drafts were prepared after World War II, but the first postwar International Tin Agreement did not come into force It was renegotiated0 and was ratifiedufficient number of signatories to take effect in

Price stabilization continues to be the Tin Council'sobjective, but the buffer stock at present is exhausted, with heavy demand pushing tin prices in3 to the celling price ofper longer metric ton) as set by the Agreement. The Council, however, has more frequently had to deal with recurrent and severe downward pressures on the price of tin because of market supplies well In excess of demand. The most recent of these periods of difficulty was in the late

Soviet sales of tin in markets of the Free World, which rose sharply0 tons8 cocpared with lessonedded to the distress of the already depressed market. JJ 'lhe Buffer Stock Manager finally oxhauuted his purchase funds in the autumn8 and was unable to continue the support of tin prices. Shortlyrecipitous fall8 per ton in the price of tinevel ofer ton took placeay's trading on the London Metal Exchange.

The Tin Council reacted by accusing the USSR of dumping and threatened to make full disclosure of the details to the producing countries.* At the same time, the British Board of Trade curtailed laports or Soviet tin. 8/ At the height of Its tin sales8 the USSR offered to Join the Tin Council as an associated member, but the Council replied that membership required the assumption of allincluding contributions to the buffer stock fund and adherence to internal consumption and production reporting procedures.

The USSR has never had formal affiliation with the Tin Council (not even observerut it did agree9 to cooperate with the Council by limiting tin sales to world markets0 tons each year9 Soviet tin sales to the Free

' Major tin-mining countries of the Free World are Malaysia, Bolivia, Indonesia, Thailand, Nigeria, and Republic of the Congo.

World0ons9espectively. One sharp reduction in Soviet exports of tin0 suggests that the greater part of Soviet exports of tin has been of Chinese Communist origin. The small quantities of tin that the USSR now sells abroad are routed primarily to the European Satellites, hut Soviet internal needs continue to be strong and apparently are not net by domestic production and imports from Communist China, as evidenced by recent purchases by the USSR on the London Metal Exchange. The USSRons of tin from the UK between January and

1*. International Lead and Zinc Study Group

The International Lead ond Zinc Study Group is unique among UI(-sponsored study groups in that, aside from servingorum for discussion and exchange of market information, its members have at times informally agreed to limit their exports and imports. are hopefulormal International Agreement eventually will emerge.

The USSR, as the largest producer of zinc and lead in the Soviet Bloc, hasember of the Study Group* since its inception in London In spite of the evident Soviet reluctance to assume an active role, relations with the Study Group have been consistently cordiol. The USSR remains reluctant, however, to supply dato on internal production.

At the meeting in2 the Soviet delegates stated that the USSR would study methods of strengthening the zinc market but felt no further action was necessary at that time. umber of member countries suggested the reduction of lead and zinc output byercent, in order to balance supply and demand in markets of the Free World, the USSR agreed to sell no more lead and zinc to the Free World2 than lt sold Soviet exports of zinc to the Free World2 amounted0 compared0 tonsl. Soviet exports of lead to the Free World0 tons2 and0 tonsI.

It is probable that reductions in Soviel exports of lead and zinc2 resulted as muchecline in Soviet imports of these metals from other Communist countries and other factors as from the willingness of the USSR to cooperate with the members of the Lead and Zinc Study Group. raditional supplier of zinc to the USSR, reduced its exports lo that country fromons1tiO0 The USSR's imports of lead from Communistonsl to 'iOO tons Similarly, imports of lead from Korth Korea were reduced fromons10 tons Domestic consumption absorbs the major part of the USSR's production of both metals.

* Czechoslovakia and Poland also are members.

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5- United Nations Ad Hoc Meeting on Tungsten

The US, Communist China, North Korea, and the USSR produce more than two-thirds of total world supplies of tungsten. Communist China alone produces one-third of the world's total. Production of tungsten is important also to Bolivia and South Korea, amountingtoercentercent of their foreign exchange earnings, respectively.

Because of depressed prices in the world market for tungsten, exploratory conferences were held under UN auspices in January and They were attended byxporting and importing countries.the USSR. At the first meeting the participants realized that gross deficiencies in available statistical data on world production and consumption of tungsten would inhibit meaningful international action. Accordingly, the UN Secretariat was requested toact-finding study. ommittee of Government Experts was established ot the3 conference to continue this study preparatory to the3 meeting. 2/

At the3 Conference the UH Secretariat delivered its report entitled "Review of Long-Term Problems in the TungBten Market." The report stated, in part, that the reemergencc ofChinaajor tungsten exporter to the Free World contributed to the drop in theungsten price levels by more thanercent compared with the average for the. The report concluded that no prediction could be mude as to when the current price depression would end, because the tungsten sales policy of Communist China was unknown.* The US delegate also stated that the responsibility for the current problems in the tungsten market lay with Communist China.

The Soviet delegate failed to rise to the defense of the Chinese Communists. Without mentioning Communist China by name, he said only that it would be nearly impossible to formulate an agreement unless all major producing and consuming countries were represented. The USSR hasavorable attitude toward the formation of such unprobably because thereby it would enjoy the benefits of more stable world prices for the small quantity of tungsten that it exports to the Free World.**

* The report stated also that the cessation of demand forpurposes (such as stockpiling by national governments) was the second major contributing cause of the problem.

** Incomplete data in Tableppendix D,elow, show that the USSR exported at7 million of tungsten concentrates to the Free World The quantity exported to the Free World was otons1onss shown in Tableppendix D,elow. Estimated Soviet production of tungsten ore0 tonslespectively, as shown in Tableppendix D,elow.

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6. World Chrooltc Market

Increased Soviet chromite salesl to the major consuming countries of Western Europe have cut Into the traditional export markets of Turkey and Southern Rhodesia, the two other principal world exporters. I, Turkish chromltc sales, representing 3of that country's total exports,illion in foreign exchange. Chromiteercent of Southern Rhodesia's total exports in that year. With increasing competition from the USSR, there is concern in the West that segments of the chromite industry In Turkey nnd Southern Rhodesia may be forced to close, thereby increasing Weutcrn dependence on Soviet

Tbe USSR has been the world's largest producer of chromite Its exceptionally high-quality reserves are claimed to be the largest in the world. Soviet exports of metallurgical chrome ore to the Free World0 tons per year5hey climbed to an annual averageonsloviet sales to the Free World are expected to increase further3 Soviet exports to tbe US2 amounted0 tons.

The Turkish Government in tbe latter part2 made strong declarations to officials of the American Embassy and AID that Soviet chrooltc sales had reduced Turkish exports to Western marketsons1 Turkey openly accused the USSR of dumping and further stated that Soviet price cutting prevented Turkey from concluding any contracts with US business Tinns fordelivery Turkey traditionally has been the source of approximately one-fourth of US chromite Imports. Shipments from Southern Rhodesia and the Republic of South Afrlcu hove represented about one-half of US imports of chromltc.

Soviet price concessions2 have beennoticeable in the US, where high-grade metallurgical chromite from the USSR has been sold below the priceimilar grade from other sources. hipment or Soviet chromite unloaded at Kew Orleans2 solder Um, whereas delivery prices for Turkish ores of slightly inferior quality were quoteder ton. Lower Soviet prices also have been reported.

US officials have felt that ln some instances Turkish chromite was overpriced. Nevertheleii, they have tried to assist Turkey by offering proposals to KATO and the OECD for cooperative action In limiting imports of Soviet chromite. The US also has urged Turkey to negotiate an understanding with the USSR and Southern Rhodesia on price and market ehnrcr..

lhe USSR has implied that it would at least considerIn some kind of marketing agreement und has stated that voluntary

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restrictions of chromite shipments to Western Europe will be initiated. The USSR further stated that its chromite deliveries to the US will be spreadonger period of tine than previously planned. However the USSR, which undoubtedlyontinued expansion of its share of the Free World market, is not likely to accede to anythat would greatly restrict this growth. An effective long-term international agreement in chromite, however, also would require the accession of consuming countries, who at present show reluctance to participate because of prevailing adequate supplies and low price levels.

7- European Forestry Commission

Striking increases in Soviet production of wood-based sheet materials, such as paperboard and fiberboard, have been stimulated by domestic needs and by efforts to increase sales of wood products to export markets. The USSR has been successful in erpanding its sales of softwood lumber and pulpwood abroad while exports of other European countries have been declining. Total Soviet exports of softwood lumber2illion cubic meters. Soviet pulpwood exports were up nearlyercent1 toillion cubic 2 the USSR's gross sales of all types of wood and wood products to the markets of the Free World, including the UK, Japan, West Germany, France, and Italy, earned7 million inforeign exchange.

Manifestations of the desire of the USSR to increase its exports of lumber through international cooperation can be seen in its attitudeember of the UI) European Forestryranch of the UW Economic Commission for Europe working with the Food and Agriculture Organization. The work of the Commission is primurily devoted to fostering international cooperation in lumber production, pest control, reforestation, and mechanization, but the USSR has been pushing for an expansion in the scope of the Commission's activities. The USSR, for example, has attempted to persuade the Commission to promote the development of government-to-goveronent contracts covering sales Of forestry products.

B. USSR as an Importer

1. International Cotton Advisory Committee

The international cotton trade of the USSR is typified by imports of the medium and long staple varieties from several lesscountries and by exports of its own shorter staple cotton to Eastern and Western Europe." Sales of cotton by the USSR to the Free

* The USSRet world exporter of cotton butet importer from the Free World. Seendppendix D, pp.nd 2k, respectively, below.

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*

World earnedillionnd imports from the Free World2 million. Its tvo major Western outlets are Canada and West Germany. Soviet imports of cotton come mainly from Egypt.

The International Cotton Advisory Committeehose activities are similar to other UN Study Groups, came into existence shortly after World War II. There have been attempts to create an international agreementuffer stock arrangement as the principal mechanism of control. However, divergent national cotton policies and conflicts of interest among members have impeded progress.

Delegates from the USSR attended the Committee sessionsumber of years as observers before acceding to full membership Their refusal to provide statistical information to thetheir frequent use of the meetings to disseminate propaganda, and their almost obstructionist demandshinese Communistwere constant sources of friction between the Soviet delegates and the ICAC in the early period of Soviet membership.

A recent marked change in the Soviet attitude toward the Committee is reflected in the increased quality and quantity ofdata presented by the USSR to the Committee. The ICAChas been permitted to make official visits to the USSB to collect data on cotton production and consumption. The USSR, moreover,its use of propaganda at the plenary meeting in the springlthough it again protested the exclusion of the Chinese Communists.rief polemical exchange the meeting followedusinesslike manner.

2. Coffee Agreement

2 International Coffee Agreement, negotiated under UN auspices, is the first long-term coffee agreement to include both exporting and importing countries. Sirr.ilar to other internationalagreements, its objectives arc

toeasonable balance in supply and demand with adequate supplies (to ochievej long-term equilibrium between productiono eliminate surpluses andpriceand] to promote employment and income in producing

The Agreement is scheduled to existarket7 anderies of limited short-term 'Ihe pact will attempt to regulate most of theillion annual

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coffee trade, including that of both South American and African producers. The Agreement entered into full force on3 on ratification by the US on that date.*

Disagreement, particularly between the Inter-African Coffee Organization and South American coffee producers over representation on the Executive Committee,avorable beginning. The Agreement may be impaired further by future .difficulties of hard bargaining over quotas. Recent increases in world coffee prices also have engendered opposition among several large coffee importing nations.

The USSR signed the Coffee Agreement in2eclaration that Article, which refers to the effects of national policies that mayreater or lesser extent hinder the increase in consumption ofould not be interpreted as applicable to the foreign trade monopoly of their country.** Because the USSR thusfrom consideration its control over the volume of imports of coffee and because the USSR is designated in the agreementnewnd therefore enjoys the status of an ex-quota country, it has in essence accepted no obligations under the Soviet ratification of the agreement is recorded as of

* Signatories specified that the Agreement would enter into full force when at leastxporting countries, having at leastercent of total world exportsnd at leastmporting countries, having at least GO percent of total world importsl, ratify the Agreement. The deadline for ratification was

** For Articlend the text of the Soviet declaration, seend C.

oviet imports of coffee from the Free World2 amountedillion.

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APPENDIX A

Tiffi IKTERHATIOHAL^

(Selected Articles)

l)

The Participating Governments recognise that subsidies on sugar may so operate as to impair the maintenance of equitable and stable prices in the free market and so endanger the proper functioning of this

g)

If any Participating Government grants or maintains any subsidy,any form of income or price support, which operates directly or indirectly to increase exports of sugar from, or to reduce imports of sugar into its territory, it shall during each quota year notify the Council in writing of the extent and nature of the subsidisation, of the estimated effect of the subsidisation on the quantity of sugar exported from or imported into its territory and of the circumstances making the subsidisation necessary.

In any case inarticipating Government considers that serious prejudice to its interests under this Agreement is caused or threatened by such subsidisation, the Participating Government granting the subsidy shall, upon request, discuss with the other Participating Government or Governments concerned, or with the Council, theof limiting the subsidisation. In any case in which the matter is brought before tho Council, the Council may examine the case with the Governments concerned und mske such recommendations as it deems uppropriate.

Article 10

The Government of each participating exporting country agrees to adjust the production of sugar in its country during the term of this Agreement and in so far as practicable in each quota year of such term (by regulation of the manufacture of sugar or, when this is not possible, by regulation of acreage or plantings) so that the production does not exceed such amount of sugar as may be needed to provide for domestic consumption, exports permitted under this Agreement, and maximum stocks specified in

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Article

The Governments ol' participating exporting countries undertake so to regulate production In their countries that the stocks In their respective countries shall not exceed for each countryixed date each year immediately preceding the start of the nev crop, such date to be agreed vith the Council, an amount equal toer cent, of Its annual production.

Article

The Government of each participating country listed in Article lh (l) agrees:

(l) that stocks equal to an amount of not less thaner cent, of its country's basic export tonnage shall be held ln its countryixed date each year immediately preceding tbe start of the nev crop, such data to be agreed with the Council, unless drought, flood or other adverse conditions prevent the holding of such stocks; and

hat such stocks shall be earmarked to fill increasedof the free market and used for no other purpose without the conoont of the Council, and shall be immediately available for export to that market when called for by the Council.

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APPENDIX B

DECLARATION OF THB USSR ON SIGNING THE IHTBRNATIONAL COFFErl AP.REEMEKT Pj?

The Government of the Union of Soviet Socialist Republics, desirous of promoting the expansion and strengthening of economic cooperation among countries on the basis of equality and mutual benefit, upholds international measures aimed at stabilizing the markets for raw materials and foodstuffs. olicy meets the interests of all countries, especially the economically underdeveloped countries, for the economy of the latter is dependentubstantial degree on conditions in the markets for raw materials and foodstuffs.

Whereas the International Coffee Agreement is the onlyinstrument aimed at stabilizing the coffee market and solving other coffee problems, the Government of the Union of Soviet Socialist Republics, desirous of facilitating the achievement of this aim, has signed the aforesaid agreement.

In view of the fact thatf the agreementeference to the effect that operations of government importand official purchasing agenciesreater or lesser extent hinder the increase in consumption of coffee, the Government of the Union of Soviet Socialist Republics believes it necessary to state that the above-mentioned reference cannot be interpreted as applicable to the foreign trade monopoly of the USSR.

Soviet foreign trade is conducted on the basis of state monopoly, which has been fixed in the Constitution of the USSR and which is an organic consequence and an integral part of the socio-economic system of the USSR.

The foreign trade monopoly is aimed at promoting the economicof the country. As the history of nearly forty-five years of Soviet foreign trade confirms, the USSR foreign trade monopoly ensures the comprehensive development of trade with all countries. Irrespective of their social systems and levels of development. it to say that the USSR is trading with more than eightyand the volume of Soviet foreign trade1 (in comparable prices) almost doubled as compared5 and exceeded8 level almost ten times. Tlie foreign trade monopoly, far fromactually promotes the development of foreign trade.

Distorting the nature of the Soviet foreign trade monopoly and its goals can lead nowhere and is an attempt to misinform the public and business circles with regard to the nature of the economic tics of the USSR.

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APPENDIX C

ARTICLEFTl'EKATJQ?fAL COFFEE AOREEKF.tti'

The members recognize that there are presently in effect measures which mayreater or lesser extent hinder the increase inof coffee, in particular:

import arrangements applicable to coffee, includingand other tariffs, quotas, operations of Government importand official purchasing agencies, and other administrative rules and commercial practices;

export arrangements as regards direct or indirect subsidies and other administrative rules and commercial practices; and

(c) internal trade conditions and domestic legal andprovisions which may affect consumption.

Table 1

Value of Trade withFree World la Selected Ccassodltieselected

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lat tum laaiaataa aa* nvorta;Miion art

Mai aalaa af UfWM or aorfM aaa raraa aa raptr'aa laaa Uarf Bnlat laaorta ft**la Mt eaat.ta. Parla.al aaa (awafry (Ciloaaia) la Intx muiiut

i*iar oali.

-

2

USSB: Voluce of Foreign Trade In SelectedSelected

J2S1

torn g/ fafforM ttW V

i aar.i -ta.jco t

or

niir Ja#u

ll. *

Com

n.i

OM

J.*Tj.O

i

MM

H M|

..c

Jl-0

H.o

5 C

K

a..

f.

-

If "jrj!l fl

li fe ft

8 a

51 t I

S K 5 t !

2

USSB: Volume of Foreign Trade in Selected ComoditieB Selected& (Continued)

MO.O T

W.2

mm

*

BS.6

ft.6

BHMIWWU BaitHH*I

MAM

Ketner UBfli UK

BHH

W-it

Cottoe

of vnichJ OomiIi' Olu

DmH ll

1

terMr*

I

I

i

1

I ail till

Table 3

USSR: Production of Selected Caessodlties Selected

petroleum Chromite fj Tungsten ore b/

Zinc c/ Lead c/ Tin cj

Industrial wood d/ Ginned cotton treadgraln (wheat and Sugar sJ

Thousand metric tons Thousand metric tons Thousand Metric tons Thousand metric tons Thousand metric tons Thousand metric tons Million cubic meters Thousand netric tons KillIon metric tons Thcjsand metric tons

.

3

W.

C3-2

0 Tl

Data refer to the estimated chronic oitide (CrjOj) content of the oret

refer to the estimated tonnage of tungsten concentrates,ercent tungsten trioxlde.

not destined to be burned as fuel. This category includes such primary wood products as sawprops, and pulpwood.

sugar. Including refining of importa of raw cane.

-

source references

Interim Co-ordinating Committee for International Commodity

Arrangements. 8 Review of International Commodity Problems, New U.

Hflcn Wu. Two Decades of Soviet Foreign Trade, Ph.D. Disser-

tation, Barvard- II9. U. 3- State. United States Treaties aad Other International Agreements,t U-

.

5- UN. Treaty Series,. U. 6. .

7- CIA. Cessation of Soviet Exports of Tin to the

U, jS3. Role of the USSR In tbe International

Tin

9- State.Current Economic DevelooeentB, Policy Report,

11.

FAQ. Commodity

. U.

Foreign Agriculture, Including Forelun Crops and

Markets. Hew Long-Term Coffee Agreement Comes into p.

tate.esearch Memorandum7. 1. OFF Udi,

-ytfi-'

Original document.

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