This paper focuses attention on the United Nations Conference on Trade and Development (UNCTAD) sponsored Common Fund (CF) proposals to finance commodity price stabilization by the scheme known as the Integrated Programme for Commodities (IPC). The CF-IPC proposal is a key element in the developing countries' demand for a New International Economic Order (NIEO), and emphasises the net benefits that could accrue to both producers and consumers of primary commodities from the implementation of price stabilization schemes.
Common Fund buffer stocks for selected primary commodities will, under the proposals, be used to stabilize prices within bands of the secular trend of price increases. These selected commodities include five of Australia's major exports - wool, wheat, sugar, beef and iron which provide one-third of the nation's export earnings. Therefore in this study the repercussions of the CF-IPC proposals on Australia's major export commodities have been analysed in detail.
One of the primary aims of this thesis is to systematically examine the rationale, and the structure of the CF-IPC proposals mainly from the stance of prospective benefits that Australia could reap through stable international trade. Another important objective of this study has been to analyse the important international problem of security of supplies, a recent top-priority item for most advanced economies. In the Australian context the problems that security of supplies and the issue of "commodity power" raise have been reviewed in this thesis. Particular attention has been paid to the examination of the problem of food security and security of supply of industrial raw materials.
The acceptance of the CF proposals by advanced countries symbolises a major break-through in an international commodity market that has been manipulated up to date by a handful of oligopolistic firms. The CF-IPC scheme seeks to reduce the economic distress of those commodity exporters who because of market distortion are periodically confronted with shortages or surpluses. The failure of the free market has led most nations to intervene in the vital commodity market, and therefore the paper analyses market intervention - the policies, reasons, and theoretical principles. Methods of stabilization and measurement of instability and elasticity are also discussed.
Instability is show to exist in the market for Australia's exports and a specific attempt is made to analyse action by government and producers to stabilize prices. Market demand and supply with respect to Australia's exports are analysed and an assessment is made of the future market prospects for these exports from two perspectives - either with MNC control, or with CF global co-operation. As the feasibility of the CF will eventually depend on the spectrum of benefits outweighing the costs in the long-run, this paper looks at various cost estimates of buffer stocking operations. It also looks at cheaper storage methods than those currently in use, and highlights the fact that there is a grave danger of overplaying the costs in an economic analysis and thereby ignoring potential benefits.
The conclusion of the paper is that the benefits of the CF are less perceptible and not amenable to quantification compared with costs. But for those who appreciate global stability, security of supplies, the provision of "basic needs", and steady economic growth from steady commodity prices the CF must be seen as a worthwhile investment.