COMMODITY POLICY AND ECONOMIC DEVELOPMENT,

Alternative sources are discussed of foreign exchange, and conclusions are made that none of these are likely to compensate fully for the decline in commodity prices. A commodity-by-commodity discussion of the impact of a system of effective international price-fixing agreements on the foreign exchange earnings of underdeveloped countries, both individually and in the aggregate is presented. The Memorandum then analyzes the conditions required to make such agreements effective in fixing prices, and also analyzes the arguments for and against entering agreements of this nature, whether or not effective. On the basis of this analysis and discussion, given certain assumptions about demand elasticities, a system of price-fixing commodity agreements to establish long-run monopoly prices for five commodities, could result, over the current decade, in an average annual increase of foreign exchange earnings of nearly 800 million to the less developed countries. Finally, it is pointed out that many countries export corps unsuited to the commodity agreement technique, and would not be helped by these agreements. Author