Cartelisation blamed for rise in global commodity prices

IANS, April 30, 2012

Cartelisation is leading to volatility in global commodity markets and keeping the prices high, causing damage to countries like India which is heavily dependent on imports to meet energy requirements, a report said.

A joint publication by NGO CUTS International and Centre for Economic Policy Research titled “Trade, competition and pricing of commodities” suggested that there was need for effective cooperation among countries to curb the menace of cartelisation.

“Cartels are both exclusionary and exploitative,” said Hassan Qaqaya, head, competition and consumer policies branch, United Nations Conference on Trade and Development (Unctad) after releasing the report.

The report was released on the occasion of the 13th Unctad meet in Doha last week.

Qaqaya said there was need to improve cross-border cooperation and intelligence-sharing among national competition agencies. “In this regard, lessons can be drawn from the experience of consumer protection regimes in the world where cross border cooperation is quite advanced and effective.”

Secretary general of Consumer Unity and Trust Society International Pradeep S. Mehta suggested the need for creating an “international competition fund” out of cartel fines imposed by rich countries.

“Countries adopt a beggar-thy-neighbour policy and thus allow export cartels to operate freely,” said Mehta.

“This is one area where capacity building is required urgently for developing countries to be able to deal with such cartels through extra territorial jurisdiction. They also need resources and effective cooperation from the rich countries, because just the law will not help them to deal with them,” he said.

The report pointed out that many developing countries were heavily dependent on primary commodities but received only a small part of the total value chain.

On the other hand, a small number of international traders and retailers controlled the large segments of the value chain in the commodities like coffee, fertilisers and potash. “The situation is exacerbated as many countries including the USA do not prohibit export cartels.”

Mehta suggested five multilateral solutions to address the current lack of adequate governance of export cartels.

These are: strict World Trade Organization (WTO) disciplines on export restrictions; other possible WTO remedies against injury caused by export cartels – like reverse anti-dumping; formation of countervailing buyer alliances; a multilateral agreement on trade and competition and creation of an international competition authority.

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