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1 May 2012 | Adam Leach
Revenue generated from fines for cartel activity should be used to create a fund to support developing countries in commodity markets, according to NGO CUTS International.
The recommendation came as the NGO, with the Centre for Economic Policy and Research, published the report Trade, competition and pricing of commodities. The Consumer Unity Trust Society International said there is a growing need for action to be taken in relation to cartels - organisations that generally consist of producing states that manage the supply and demand of a particular commodity.
It said although many developing countries are heavily reliant on primary commodities as exports, such as coffee, fertilisers and potash, they often only receive a small amount of the total value of trade in the materials. Instead, a small number of large international traders and retailers control large segments of the supply chain.
Pradeep Mehta, secretary general at CUTS International, said: “Countries adopt a beggar-thy-neighbour policy and thus allow export cartels to operate freely. 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.”
In a speech to launch the report, Mehta called for the World Trade Organization to impose stricter restrictions on exports and greater remedies for parties hurt by cartels. Most significant was the call for an international body to be formed, an International Competition Fund, which could take action on cartels on a global scale.
A key problem identified was there is a disincentive for individual countries to bring in regulations against cartels over fears that it will put them on an uneven footing with the countries that do not take such action. CUTS International said this highlighted the need for coordinated, international action.