TN295 IC-8860, 1981 to; ". .';■'':.■-■. ■■ S '. " , ' ' ' • - ■*- n^ - o ■ • V*^'*y' "o^*^'*V V-r^\/ %^^-'*/ -^,-*.T.'^- -o^ ..7 * ^ '-?!, * • ^o^^^ .^'\ V-^' ^^s >v. • • • «•* o > :. -"-^^o^ .=' s> .."• .* -.0 ^^-n^. ■q,. *., •5 .LVL% ■> .^'% »- « ^5 ic ^^ Bureau of Mines Information Circular/1981 Operation of the International Tin Agreement By Thomas J. Witzig UNITED STATES DEPARTMENT OF THE INTERIOR ^^i-^2^.^,^^2^, /Oi^(AM^^ ^^y^^^<^^. Information Circular 8860 Operation of the International Tin Agreement By Thomas J. Witzig UNITED STATES DEPARTMENT OF THE INTERIOR James G. Watt, Secretary BUREAU OF MINES As the Nation's principal conservation agency, the Department of the Interior has responsibility fcr most of our nationally owned public lands and natural resources. This includes fostering the wisest use of our land and water re- sources, protecting our fish and wildlife, preserving the environmental and cultural values of our national parks and historical places, and providing for the enjoyment of life through outdoor recreation. The Department assesses our energy and mineral resources and works to assure that their development is in the best interests of all our people. The Department also has a major re- sponsibility for American Indian reservation communities and for people who live in Island Territories under U.S. administration. R9S This publication has been cataloged as follows: Witzig, Thomas J. Operation of the International Tin Agreement. (Information circular / United States^ Bureau of Mines ; 8860) Bibliography: p. 20 Supt. of Docs, no.: I 28.27:8860. 1. Tin industry. 2. Conunercial treaties. I. Title. II. Series: Informa* tion circular (United States. Bureau of Mines) ; 8860. TN295.U4 [HD9539.T5] 622s [338.2'7453] 81-607844 AACR2 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 CONTENTS Page Abstract 1 Introduction 2 Purpose of International Commodity Agreements . 2 History of international cooperation in the tin market 2 Early agreements, 1921-46 4 The International Tin Council 4 Principles and objectives of the tin agreements . . 5 Mechanics of the tin agreement 6 Membership and voting 6 The buffer stock 6 Buffer stock financing 7 Page Export quotas 7 United States activities as a nonmember 8 The U.S.S.R. and the tin market 10 Production, consumption, and use of tin 11 The Fifth International Tin Agreement 12 Operations of the agreement 12 Status of the agreement 15 The Sixth International Tin Agreement 17 Summary and discussion 18 References 20 Appendix 21 ILLUSTRATIONS Page 1. World production and consumption of tin, 1910-78 2 2. High, low, and average prices of Straits tin, prompt delivery, New York, 1910-79 3 3. Surplus or deficit of production, as a percentage of consumption, 1910-78 3 4. Average Penang monthly price of tin, and ITC price ranges, export control periods, and buffer stock holdings, 1972-79 13 5. Average LME cash price of tin, and ITC price ranges, export control periods, and buffer stock holdings, 1956-72 14 TABLES 1. Membership, percentages, and votes in the Fifth International Tin Agreement 6 2. Tin stockpile objectives, 1944-80 8 3. Tin stockpile acquisitions, 1949-60 8 4. U.S.S.R. trade in tin, 1955-72 9 5. Disposal of tin from the U.S. strategic stockpile 9 6 World tin mine and smelter capacity, mine production, primary consumption, and tin reserves 11 7. Compound rates of growth of mine production for major metals 12 8. Principal uses of primary tin. United States and world, 1975 12 A-1. World production and consumption of tin, and surpluses and deficits, 1910-78 21 A-2. Yearly extreme and average prices of Straits tin, prompt delivery, New York, and yearly surpluses and deficits of tin, as a percentage of consumption, 1910-79 22 A-3. Export control periods under the agreements 2? A-4. Price ranges in the tin agreements 2^ A-5. Buffer stock operations during agreements 2^ A-6. Tin prices, 1956-79 24 A-7. Tin prices and taxes in Malaysia, Thailand, and Bolivia, 1957-79 24 OPERATION OF THE INTERNATIONAL TIN AGREEMENT by Thomas J. Witzig^ ABSTRACT This Bureau of Mines report is a background study of tiie international Tin Agree- ment. Attempts at stabilizing the tin market prior to the agreement are detailed, as well as the conditions and negotiations that set up the agreement. Details of the five consecutive 5-year agreements beginning in 1956 are presented, with emphasis on membership and the agreements' primary tools: the buffer stock and export con- trols. Attention is focused throughout on the United States activities during the period, especially with regard to its strategic stockpile, and its involvement with the agreement culminating in its membership, for the first time, in the fifth agree- ment beginning in 1976. Considerations leading to the U.S. decision to join are detailed, and U.S. activities in the negotiations for the sixth agreement are pre- sented. The status and outlook for the agreement are discussed, and evaluations of the effectiveness of the agreement and its components are reviewed. Industry economist, Branch of Economic Analysis, Bureau of Mines, Washington, D.C. INTRODUCTION The International Tin Agreement (ITA) is the oldest of International Commodity Agreements (ICA).^ Formed in 1956, the ITA was supported by a history of interna- tional cooperation in the tin market reaching back to 1921. Tin is the only nonagricultural commodity to be represented by an ICA {18y and, as such, serves as an example for proposed ICA's dealing with other mineral commodities. The United States became a member of the ITA for the first time with the fifth 5-year ITA beginning in 1976. This action followed a period of formal and informal U.S. cooperation with the International Tin Council (ITC), the body that controls and operates the ITA. Membership marked a departure from the traditional U.S. minerals policy of noninterference in minerals markets (5). This paper presents the background of the ITA and U.S. involvement and focuses on the ac- tivities of and outlook for the agreement. PURPOSE OF INTERNATIONAL COMMODITY AGREEMENTS The economic purpose of an ICA is essentially the stabilization of price at a level consistent with a rea- sonable return to producers and an assurance of sup- ply to consumers at a fair price (24). Secondary goals deriving from this are preventing excessive export earnings fluctuations, increasing export earnings, es- pecially for less-developed countries (LDC), increasing investment and exploration, and promoting long-term equilibrium between production and consumption {23). In the case of tin, the lastest agreement (the Fifth ITA) also states several related goals. These include the promotion of tin consumption, increasing processing in the producing countries, improving technical and economic efficiency, insuring the fair allocation of sup- plies in the event of a shortage, taking measures to alleviate difficulties such as unemployment in produc- ing countries in case of an oversupply, and reviewing tin disposals from noncommercial stockpiles (10). As will be seen, this latter provision has a substantial bearing on the U.S. relationship with the ITC, in light of history and current policy. HISTORY OF INTERNATIONAL COOPERATION IN THE TIN MARKET A need for stabilization of the tin market, that is, an equalization of supply and demand at a stable price, is based on the historic volatility of the price of tin and of the gaps between production and consumption. As can be seen in figure 1, surpluses or deficits between production and consumption of tin have existed during most years since 1910. Excluding the Depression and World War II, the gaps have ranged from a surplus of 36,000 long tons, or 45 percent of consumption, in 1921, to a deficit of 34,200 long tons, or 23 percent of consumption, in 1959. The differences between pro- duction and consumption have been less than 5 per- cent during only one-third of the years from 1910 to 1978. Supply and demand for tin are said to be relatively price inelastic in the short term and have been esti- mated to have coefficients of elasticity of 0.42 and between —0.1 and —0.5, respectively (4). In other words, the percentage changes of supply and demand will be less, in the short run, than the percentage changes in price. The converse of this is that price changes to a greater extent in response to changes in supply or demand. That is, small changes in the supply of or demand for tin result in relatively larger changes in its price. Figures 2 and 3 show that as well as having a marked imbalance between production and consump- tion, the tin market has seen periods of substantial short-term price volatility. These gyrations in price can jeopardize stable operations for marginal and high-cost producers, such as the lode mining operations of Bo- livia. Contributing to price instability Is the structure of the tin-producing industry. Tin producers are usually either small, individual operators or large, capital In- 'A commodity agreement is a market agreement among produc- ing and consuming nations. This is as opposed to a cartel, which is an agreement among producers only, "to divide markets among themselves, fix prices, exclude would-be competitors, or otherwise try to increase joint monopoly p'ices." (3) ' Italic numbers in parentheses refer to items in the list of refer- ences preceding the appendix. FIGURE 1. — World production and consumption of tin, 1910-78. Excludes China, the U.S.S.R., the German Democratic Republic, North Korea, and the Republic of Korea. Starting 1950, tin metal; previously tin-in-concentrates. Data for this figure are in table A-1. 700 HIGH LOW 600 500 - 1 ll 400 ~ 1 300 - 1 V 1 1 / 200 - A i 100 A J n 1 1 1 1 1 1 1910 1920 FIGURE 2. — High, low, and average prices of Straits tin, prompt delivery, New York, 1910-79. After 1975, American Metal Market composite New York tin price. Data for this figure are in table A-2. tensive and often government-owned producers. The Senate Foreign Relations Committee reviewed the relationship of pricing and production (25). The economic incentive among small owners who do not see themselves as influencing price is to assume price as a given. They maximize revenue by maximizing output. Assuming little or no fixed costs among these operations, they will continue to produce until price falls to a level that will not cover wages or other daily operating expenses. In the large capital intensive mining operations, economic incentives will cause the firms to maxi- mize production in order to lower per unit produc- tion costs. This incentive to maximize production will continue even if the operation is losing money, as long as the fixed cost of operation plus some percentage of daily operating costs are covered (sic). [More properly ". . . as long as the daily operating costs plus some percentage of fixed costs of operation are covered" — Author.] In cases of government ownership, mining opera- tions might well continue in the face of heavy losses for reasons of domestic politics or balance of payment needs. In such cases the government subsidizes tin output. In both the case of the small entrepreneur and the large capital intensive mine, the economic incen- tives to the firm cause overproduction in the stag- 1910 1920 - 1930 - 1940 - 1950 - 1960 1970 - 1980 SURPLUS OR DEFICIT, percent FIGURE 3. — Surplus or deficit of production, as a percentage of consumption, 1910-78. Data for this figure are in table A-1. nant market, driving prices down to or below cost levels and eventually closing mines and reducing output. Cyclical surges in demand, therefore, can- not be met causing prices to inflate rapidly. The market mechanism in tin does not regulate pro- duction very effective. Developing countries thus have an interest in keep- ing price at a level high enough to keep marginal pro- ducers in operation, for purposes of maintaining both employment and the export earnings needed for further development. Consuming nations benefit, it is argued, by the increasing, and thus assured supplies forthcom- ing from such operations (2). Several aspects of the tin market suggest the feasi- bility of a commodity agreement. First of these is the relatively small number of major tin producers in the world. In 1977, eight countries accounted for almost 90 percent of world production (9). The bulk of this production is geographically centered in Southeast Asia. These producers generally do not consume tin to any great extent, while the major consuming nations do not produce tin to any great extent. Consequently, both producers and consumers are seen as having a mutual interest in some sort of cooperation. Additional factors are the short-term price inelasticity of supply and demand, making stabilization desirable, and the fact that most of the producing nations are LDC's and are dependent on tin exports for much of their eco- nomic well-being. This latter factor, coupled with the substitutability of other materials for tin in some of its uses, makes the possibility of a cartel-like producers' arrangement less likely. Early Agreements, 1921-46 Formal agreements among tin producing countries began with the Bandoeng Pool in 1921. This agreement was between the tin producing Federal Malay States (now Malaysia) and the Netherlands East Indies (now Indonesia). Following the postwar price collapse of 1920, the two governments held sizable stocks that they had bought in unsuccessful attempts to support prices. The pool was an arrangement to hold the stocks of the two governments and the smelter at Singapore off the market until prices had risen to an acceptable level. The quantity held for most of the period was approxi- mately 17,000 long tons, about 15 percent of world production in 1921. Although prices did not rise until well after the stocks were on hand, Fox credits the pool, as well as rising consumption, with a significant increase in prices (7). Sales from the pool, beginning in 1923, are similarly credited with restraining in- creases in price and reducing fluctuations between the highest and lowest prices. The pool was depleted by 1925 and "in the eyes of its proponents, the pool had proved conclusively that a degree of control over stocks meant a degree of control over price" (7). The sale of the stocks marked the end of the Bandoeng Pool. The 1920's saw a sustained boom in tin production, consumption, and price. Consumption and production were roughly matched until 1927, when substantial excesses in production began to become apparent, along with an initially gradual decline in prices. This decline continued until 1929, when the drop became precipitous with the Great Crash and the collapse of consumption, particularly in the United States. Earlier in June 1929, a group of companies representing some 20 percent of world production, formed the Tin Pro- ducers Association. The purpose of the association was to stockpile the excess supplies of tin arriving at the companies' smelters in order to maintain prices within a certain range. However, membership in the association was not large enough to counteract the surplus of tin on the market. A high degree of depend- ence on the recovery of U.S. consumption and the con- tinued high production of nonmembers caused the as- sociation, even with the addition of the Netherlands East Indies and the major Bolivian producers, to be largely ineffectual. Voluntary restrictions on production also proved to be useless. This realization, and the drastically reduced reve- nues from the tin trade, led the governments of the major tin producing nations to form the International Tin Control Scheme, sometimes referred to as the first international tin agreement, in 1931. Essentially an outgrowth of the Tin Producers Association, the objec- tive of the agreement was to achieve an equilibrium between production and consumption through govern- ment-enforced export quotas. The participants formed the International Tin Committee to oversee the agree- ment. The first agreement did not provide for any buffer stock but could only affect the market during times of overproduction through the export quotas. The second and subsequent agreements extended controls to in- clude producers' stocks. The second agreement, in 1934, also provided for "the absorption of surplus stocks" by a small buffer stock (7). The buffer stock replaced a privately held "international tin pool," which operated from 1931 to 1934. This pool held and released approximately 21,000 tons of tin and, accord- ing to Fox, had a real effect on stabilizing prices (7). However, the buffer stock was much smaller than the pool, and by the end of 1935 it had been exhausted with little effect on the market (24). During the third agreement (1937-41), representa- tives of the two major tin-consuming nations (the United States and United Kingdom) served as nonvot- ing advisors to the committee. Through these repre- sentatives, the United States expressed its dissatisfac- tion with the price levels the committee had set and indicated that high prices could push consumers into reducing the use of tin or increasing the use of substi- tutes (7). The U.S. view was that a firm estimate of production costs was necessary to insure the estab- lishment of reasonable price ranges. During the life of the agreements no such studies were made with this end in mind. In 1938, a new buffer stock was created in response to declining prices. The stock bought and sold tin until the beginning of World War II, at which time it was quickly liquidated. During the war, the agreement's control measures ceased to have effect, and although the agreement remained in existence, the Allies Com- bined War Materials Board handled the allocation of tin, primarily to the end of building up U.S. supplies. The Board, after the war, set up the Combined Tin Committee, which performed the same function, albeit on a much more widespread scale, until its dissolution in 1949. The International Tin Council The present-day International Tin Council (ITC) has its roots in the International Tin Study Group of 1948- 56. Independent of previous tin control agreements, the study group was set up along the lines of the interna- tional Havana Conference of 1947, encouraging a wide- spread membership. The Havana Charter, drafted at the conference but never ratified by the major nations," laid down principles of international trade that have been viewed by the world community as authoritative (24). Chapter VI of the charter, dealing with intergov- ernmental commodity agreements, set the guidelines for and enunciated the objectives, principles, and cir- cumstances of commodity agreements. The chapter states the conditions that must exist before a com- modity agreement can be entered into. These condi- tions are development of a surplus of a primary com- modity that would cause serious hardship to producers or development of widespread unemployment or un- deremployment in connection with a primary commod- '' Chapter VI of the charter was adopted by the Economic and Social Council of the United Nations in 1965. ity arising from difficulties relating to the commodity that, in the absence of specific governmental action, would not be corrected by normal market forces in time to prevent undue hardship to producers or work- ers (24). Additional principles governing commodity control agreements include designing the agreements so as to assure the availability of supplies adequate at all times for world demand at reasonably stable prices, allowing votes for consuming nations equal to those for producing nations, making provisions to afford the satisfying of demand from the most economic sources, and the adoption of programs by the participating countries to make internal economic adjustments for the purpose of correcting the commodity problem in- volved (24). The Tin Study Group produced four drafts of a tin agreement, each an evolution of the previous. The final one was to be adopted as the document that would become the First International Tin Agreement. The agreement was approved by the United Nations Tin Conference in Geneva at the end of 1953, was ratified by the participating governments, and took effect on July 1, 1956. While conferences and discussions had been held under the auspices of the United Nations, the final agreement was, and is, independent of it. PRINCIPLES AND OBJECTIVES OF THE TIN AGREEMENTS The First International Tin Agreement ran from July 1, 1956, to June 30, 1961. It reaffirmed the basics of Chapter VI of the Havana Charter, stating that "a bur- densome surplus of tin is expected to develop and is likely to be aggravated by a sharp reduction in pur- chases of tin for noncommercial stocks" (13). This statement was included after the United States an- nounced that it would be halting the purchase of tin for its strategic stockpile (7). The stated objectives of the agreement were to prevent or alleviate the prob- lems of widespread unemployment and excessive price fluctuations, to provide for adequate supply of tin at reasonable prices, and to promote the more economic production of tin at reasonable prices, as stated ear- lier. The agreement also put in place the control ma- chinery, under the auspices of the International Tin Council. The Council is responsible for the buffer stock and export quotas, and arranges for the quarterly meet- ings of the representatives of the member nations. Operations of the Council are discussed in a later section. The second agreement (July 1961 to June 1966) changed its thrust with respect to noncommercial stockpiles (that is, the U.S. stockpile) by expressing concern for the possible harmful effects of a liquida- tion of such stockpiles. A desire for consultation and advance notice in the event of a liquidation was stated.^ The objectives of the agreement included a more de- tailed definition of "reasonable prices," substituting for that term the phrase "prices which are fair to con- sumers and provide a reasonable return to producers" (14). The third agreement (July 1966 to June 1971) spe- cifically cited commodity agreements as being helpful to secure short-term stabilization of prices, long-term development of primary commodity markets, and as- sisting economic growth, particularly in developing producing countries. Also, "the importance to tin pro- ducing countries of maintaining and expanding their import purchasing power" was stated as a matter of policy for the first time (75). The fourth agreement (July 1971 to June 1976) added as a principle the "desirability of achieving the expan- sion of tin consumption in both developing and indus- trialized countries" {11). Significantly, the wording of the fifth agreement was changed to the "desirability of improving efficiency in the use of tin ... , as an aid to the conservation of world tin resources" {10). This occurred during the period when the tin market changed from a position of oversupply to one of under- supply. Both the fourth and fifth agreements specifi- cally stated the purpose of conforming to the principles of the United Nations and its Conference on Trade and Development. ^ It should be noted that although the United States was not a member of the agreement and thus not bound by it, it in fact paid heed to the effects of disposals on the world tin economy, as will be seen later in this report. MECHANICS OF THE TIN AGREEMENT The major features of the tin agreement are the membership and voting, the buffer stock and its financ- ing, and export quotas. Details of these are discussed in the following. Membership and Voting Nations are members of the ITC as either producers or consumers of tin. Votes are apportioned to con- sumers on the basis of their average consumption dur- ing the three latest years, with the exception of the U.S.S.R. which votes on the basis of its imports of tin.^ After five votes are given each country, each country's percentage of total consumption is used to allocate votes for a total among consumers of 1,000 votes. The votes of the producers are allocated roughly according to production, also for a total of 1,000. Each producer also begins with five votes. Both consumer and pro- ducer votes are adjusted regularly to take into account changes in production or consumption. Member coun- tries and their votes are shown in table 1. As can be seen, the United States has the largest block of votes besides Malaysia. Among the producers, only Australia is a significant consumer of tin, and its votes are apportioned according to its exports. For the other producers, exports roughly equal production (7). As mentioned previously, the U.S.S.R., a major producer, has its votes assigned by its imports of tin, and is thus a consumer member. Bolivia almost did not join the Fifth ITA. Unique among the major producers, Bolivia's tin deposits are located in high-altitude, hard-rock formations with de- clining ore grades. This makes Bolivia the highest cost producer in the ITC, hence its demands for higher floor prices in the agreement as well as regular revisions of floor prices to conform to production costs. Bolivia has other problems with its tin industry that contribute to its higher costs. Tin production dropped after nationali- zation of the three major tin-producing companies in 1952 and has only been slowly rebuilt, with the pro- ducers operating with antiquated machinery. There is great labor unrest due to the harsh working conditions at the mines that, combined with the political power of the mine unions and the fact that Bolivia counts on tin for almost half of its total export earnings {20, pp 149- 159), makes tin extremely important to Bolivia's econ- omy and a highly volatile political issue. After almost a year of hesitation Bolivia did sign the agreement and is an important factor in ITC policymaking. The Buffer Stock The buffer stock is a method of affecting the basic supply-demand relationship of the tin market. By in- creasing supply when prices are high and demand when prices are low, the buffer stock manager (BSM) tries to maintain tin prices between the floor and ceil- TABLE 1. — Membership, percentages, and votes in the Fifth International Tin Agreement Votes 69 189 159 363 27 167 26 1,000 'The U.S.S.R. does not release consumption figures, thus its re- quest to use imports as estimated by the ITC. This considerably reduces its voting power. Country Percentage PRODUCERS ' Australia 6.67 Bolivia 19.04 Indonesia 15.95 Malaysia 37.06 Nigeria 2.30 Thailand 16.76 Zaire 2.22 Total 100.00 CONSUMERS 2 Austria 0.28 Belgium-Luxembourg 1.83 Bulgaria .52 Canada 2.87 Czechoslovakia 1 .90 Denmark .23 France 6.04 Germany, Federal Republic of 8.24 Hungary .91 India 1.79 Ireland .05 Italy 3.67 Japan 18.12 Netherlands 2.15 Norway .31 Poland 2.79 Romania 1 .84 Spain 2.50 Turkey .70 United Kingdom 7.64 United States 28.42 U.S.S.R 6.23 Yugoslavia .97 Total 100.00 ' Percent of world production as of Oct. 1, 1979. ' Percent of world consumption as of July 1, 1979. Source: International Tin Council. ing prices set by the ITC. The floor and ceiling prices are set during the quarterly meetings of the ITC and may be adjusted each quarter. The range between the floor and ceiling is divided into lower, middle, and upper sectors. These sectors determine if the BSM will buy, sell, or do nothing. If the market price of tin is above the ceiling, the BSM must sell tin until either the buffer stock is exhausted or the price falls below the ceiling. In the upper sector, he may sell or buy tin to prevent too rapid a rise in price, provided he is a net seller of tin. The BSM may not operate in the mar- ket when the price is in the middle sector without the express permission of the Council and, in the lower sector, provided he is a net buyer of tin he may buy or sell to prevent too steep a fall in price. If tin prices fail below the floor, the manager must buy tin until the market price is above the floor or until his funds are depleted. The Council, or its executive chairman if the Council is not in session may at any time suspend buffer stock operations if it believes they will not achieve their purpose. The buffer stock price ranges are expressed in ring- 7 21 10 30 22 7 58 78 13 21 5 38 165 24 8 30 21 27 11 73 257 60 14 1,000 git ^ or Malaysian dollars (M$) per picul ° and are those prices found in the Penang Straits Tin IVIarket or the London Metal Exchange (LME), or any other market the Council might recognize. It should be noted that the manager is under no obligation to operate in the lower or upper sectors, but must act only when prices ac- tually reach the floor or ceiling. The buffer stock is the only tool available for defending the ceiling while ex- port controls may^ augment the buffer stock to defend the floor. Buffer Stock Financing The buffer stock is made up of mandatory contribu- tions of tin metal or cash equivalents from the produc- ing countries and similar, but voluntary contributions from the consuming countries. Prior to the fifth agree- ment contributions came only from the producers, al- though voluntary contributions would have been ac- cepted from anyone. Currently, the optimal size of the buffer stock is set equal to 20,000 metric tons of tin or their cash equivalent from the producers, and up to a like amount from the consumers. Cash equivalents are accepted based on the floor price of the agreement at the time the contribution is announced. This is the major reason that all contributions to date have been in cash. The Council may decide the proportion of the stock that will be accepted in cash. The size of each country's contribution is apportioned by its percentage as set by the Council for the allocation of votes. Physi- cal tin is to be received by the manager at London Metal Exchange warehouses and is to be of a brand registered with and recognized by the LME. In addition to these contributions, the Council may borrow for the purpose of the buffer stock or to supplement its re- sources. Upon termination of the agreement buffer stock op- erations cease, and the buffer stock and its fund, with any tin metal valued at an appropriate market price, are liquidated. The total of the two is divided among contributing nations. Any surplus above the actual con- tributions is apportioned according to the size of indi- vidual contributions and the time they were held by the buffer stock. Contributions are repaid in the same pro- portion of tin or cash for each country, with each hav- ing the option of having its tin sold and being repaid entirely in cash. Prior to liquidation the manager allo- cates enough funds, either from the buffer stock ac- count or through the sale of tin, to meet all expenses of liquidation. Any residual funds are then repaid to the contributing countries. Of the consumer members of the ITC, so far the Netherlands, France, the United Kingdom, Denmark, Belgium, Japan, Norway, and Canada have made cash contributions. Although at the commencement of the agreement the United States had stated that it would not contribute to the buffer stock, it did state that its position would be reconsidered. Since then, several bills were put before Congress for disposal of tin from the strategic stockpile and in December 1979 the Sen- ' Prices were expressed in £ sterling until the pound was floated in 1972 at which time the price was switched to ringgit (Malaysian dollars (M$)). ^A picul Is ISSVa pounds. ate sent to the White House a disposal bill (H.R. 595) {26) that included a donation of up to 5,000 long tons of tin to the buffer stock. The President signed the bill December 29, 1979. The proposed contribution to the buffer stock broached two areas of disagreement. First, the United States proposed that the donated tin be valued at its market price, rather than at the floor price at the time of its donation. The producers argued that when the tin was sold from the buffer stock, prices would be depressed, and if the tin were to be valued to the U.S. account at the higher market price at the time of the donation, the stock would be forced to take a loss, to be made up by other contributions upon liquidation. A compromise was reached in October 1980 valuing the tin at the price it actually sells for. Since this contribution is the first to be made in tin metal in the history of the ITC, the precedent on valua- tion is important. Secondly, the producers were con- cerned that any contribution of metal to the buffer stock, which under the ITC rules would immediately be sold since market prices were above the ceiling, would depress the market. This also gives the producers more reason to attempt to raise ceiling prices. These producers would prefer a contribution in cash. Nego- tiations between the ITC and the United States were underway in late 1980 to make arrangements for the donation of an initial increment of 1,500 metric tons. Export Quotas The ITC's other price control tool, export controls, is designed to restrict the supply of tin to prevent or reverse a fall in price. Basically, the Council is em- powered to hold down exports from the producer mem- bers of the agreement when it has determined that buffer stock operations would not be sufficient to main- tain prices above the floor. To this end. Council rules state that export control may not be instituted when the amount of tin held by the buffer stock will likely be less than 5,000 metric tons at the beginning of the control period, and it may not be continued if the amount is likely to be less than 10,000 metric tons at the beginning of the next control period. Control pe- riods are a calender quarter in duration. The Council may, with a two-thirds vote of both consuming and producing countries, revise the quantities that the buf- fer stock must hold. The quantity of tin each producing country is al- lowed to export during a control period is determined in proportion to its production or export figures for the last four consecutive quarters before the proposed control period during which no control period was in effect. Allowances are made if that amount falls below some minimum, and allowed exports are reduced if the country is unable to export the allowed amount. This latter provision is intended to allow the Council to control actual exports more precisely by allowing one country to make up for shortfalls in exports by another country. The exporting countries are responsible for controlling their own exports and while the Council has no police powers, in the event a country exports more than it is authorized, the Council's powers allow it to reduce that country's export quota for the next control period, require a buffer stock donation not to 8 exceed the amount by which the exports exceeded the quota, or reduce its rights to participate in the liqui- dation of the stocl — Less than 0.5 percent. W Withheld to avoid disclosing company proprietary data. NA Not available. ' Includes other tin alloys, wrought tin, and powder. THE FIFTH INTERNATIONAL TIN AGREEMENT The Fifth International Tin Agreement is the current agreement, and was originally scheduled to run from July 1976 to June 30, 1981. At the January 1981 meeting of the ITC the delegates voted to extend the agreement for 1 year because of difficulties in the negotiations for the sixth agreement. The fifth agreement's most notable aspect is that the United States became a member for the first time. Prior to signing the agreement, the United States had been opposed to membership in commodity agreements, and thus the Fifth ITA marks a major departure from previous policy. The specific issues in- volved are discussed in a later section. With the entry of the United States, the agreement has as members all the major tin producing and con- suming nations, except China and Brazil. China, as mentioned earlier, is a major producer and consumer and exports some 20 to 25 percent of its tin production (17). Brazil did not join the fifth agreement because it feared damage to its infant industry if the ITC found it necessary to impose export controls. Representatives of Brazil have been active in the negotiations for the sixth agreement and they apparently consider their tin industry to be sufficiently developed for Brazil to join the agreement. OPERATIONS OF THE AGREEMENT ITC price ranges, buffer stock holdings, and Penang market prices for tin from 1972 to 1979 are shown in figure 4. The period includes the change from the pound sterling to the Malaysian ringgit in mid-1972, the GSA sales of the early 1970's, " and the entire fifth agreement to date. The fifth agreement began with almost no buffer stock holdings in tin. The limited hold- ings were quickly exhausted in early 1977 trying to de- fend the ceiling, leaving the entire stock in cash since then. Export controls were imposed for three quarters of 1973, part of the time when the buffer stock manager was selling tin. Price ranges for the Agreement have consistently lagged behind the price trend since 1976, effectively denying the buffer stock any opportunity to replenish its tin and so help moderate future price increases. Market prices during the fifth agreement have been below the ceiling on three occasions, and " Compare buffer stock sales of approximately 20,000 metric tons from mid-1973 to mid-1974 with GSA sales (table 5) of almost 40,000 long tons (40,642 metric tons) during the same period. as of the end of 1980 had on no occasion been below the upper sector of the price range. During the four earlier agreements (see fig. 5), prices were above the ceiling on four separate occasions, for a total of 49 months, and were below the floor for 1 month, at the time of the massive Soviet exports in 1958. Price ranges have been raised at least twice in every agreement but the first, and the ranges have increased, approximately tripling along with a tripling in price, since 1973. Including the control period of 1973, export controls were in place on three occasions for a total of 57 months. The first of these occasions is credited with success- fully defending the floor price in the face of excess supply and declining demand. However, for a large proportion of the time, the buffer stock was selling tin, in effect replacing some production. This placed the ITC in the position of reducing production while de- pleting its ability to moderate future price increases. Shortly after the control period, Soviet tin exports shrank and, as demand picked up through the early 13 2,400 2,100 1,800 1,500 O 1,200 a. 900 600 300 4th AGREEMENT ! EXPORT I CONTROLS I 1/19/73 9/30/73 1700 M$ 1,500 M$ 1,350 M$ AVERAGE PENAMG PRICE EX WORKS I 5th AGREEMENT 1200 M$ 1.075 M$ 1000 M$ 950 ■M$ 900 M$ FLOOR 583 M$ I I 635 M$ 1972 1973 1974 1975 1976 1977 1978 1979 FIGURE 4. — Average Penang monthly price of tin, and ITC price ranges, export control periods, and buffer stock holdings, 1972-79. Data for this figure are in tables A-3 — A-6. 1960's, prices increased, culminating in very large increases in 1963-65, with prices above the ceiling from November 1963 until July 1966, when the ceiling was raised with the third agreement. Importantly, the United States, afer discussions with the ITC, sold large quantities of tin, which brought prices down from their peaks of 1964-65.'" In October 1966, the United States '^GSA sales from 1962 to 1968 were approximately 93,000 long tons, or §4,664 metric tons, and net buffer stock transactions amounted to purchases of 11,471 metric tons. agreed in principle with the ITC to moderate its sales if they appeared to be in conflict with buffer stock opera- tions of the ITC (7). This effectively marked U.S. agree- ment with the price moderating activities of the Coun- cil. After the stockpile disposal program ended, the United States sold no significant quantities of tin at the same time that the buffer stock was buying tin. The second period of export control, from September 1968 through December 1969, occurred when slightly depressed prces had remained in the lower sector of 14 2.500 2.000 - 1.500 - 1,000 500 - 25 Q o 20 - 15 - 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 FIGURE 5. — Average LME cash price of tin, and ITC price ranges, export control periods, and buffer stock holdings, 1956-72. Data for this figure are in tables A-3 — A-6. the price range for a number of months. Although the floor was not actually threatened and the buffer stock had cash equivalent to approximately 5,000 long tons of tin, controls were imposed (7). Shortly afterwards, consumption revived and prices increased, almost ex- ceeding the ceiling before the controls were lifted. The Council then adopted the policy of encouraging producers to increase their production. This period also saw buffer stock sales while export controls were in effect, for the purpose of preventing too large an increase in price. Fox (7) reports that "the episode reflected little credit on the stabilizing policy of the Council. During the 15 months of control the London tin price (monthly average basis) rose by £316 per ton or by about one-quarter, a rise higher almost than any movement shown since the Council came into exist- ence, except in 1964-65 when the Council was outside the field of influencing prices." Under circumstances similar to those before the sec- ond control period, controls were imposed in January 1973 when prices entered the lower sector of the price range. They remained in effect until September 1973, when prices were about to break the ceiling. '^ Buffer stock sales, which had continued throughout the control period, resulted in the buffer stock being almost sold out by the time controls were lifted and subsequently, when prices rose dramatically through the middle of 1974, GSA was again the only exogenous supplier of tin to the market. Prices declined after the cessation of the GSA sales, but this may have been due more to the recession of 1974-75. During the period covered by the fifth agreement (1976-81), there have been no ex- port control periods or purchases or sales of any magnitude by either the buffer stock or GSA. '' It should be noted that the export quotas under the controls of 1968-69 and 1973 were fairly lenient in comparison with controls of 1957-59 (see table A-3). The first intended a reduction of approxi- mately 4 percent, and the second was intended only to freeze ex- port levels. Also, evasion of the quotas existed to some extent (7). Black-market dealings in tin also presented, as they still do, signifi- cant additions to supply from Southeast Asia. 15 STATUS OF THE AGREEMENT The United States experience as a member of the fifth agreement will serve as prologue to its experience in the sixth. The United States has participated in the U.N. tin conferences since the first one in 1950 and sent a delegation to the conference negotiating the fifth agreement.'" The delegation's objective was to nego- tiate an agreement which the United States could join if a decision to join was made (5). The other members of the agreement greatly desired to see the United States become a member in order to bring the largest consumer of tin under the agreement's auspices. Also, the issue of stockpile disposals, which were of great concern to the ITC, would then be under the scrutiny of the ITC to a greater extent (12). To this end. Article 43 of the agreement obligates a member to consult the ITC on its plans for stockpile disposals and re- quires that such disposals "shall be made with due regard to the protection of tin producers, processors and consumers against avoidable disruption of their usual markets" (70), and with due regard to its effects on the tin economies of the producing nations. The United States had already agreed in principle in 1966 to do just this. The desire for the United States to join probably re- duced the producers' effectiveness in insisting on man- datory consumer contributions to the buffer stock. This issue was opposed by the United States on the grounds that without such a provision the agreement could be considered a treaty and thus subject only to ratification by the Senate (5). A donation would require approval of the entire Congress. The consumer viewpoint was adopted, and such contributions were made voluntary. On September 1, 1975, Secretary of State Henry Kis- singer announced (5) that the United States intended to sign the agreement and that, "We welcome its em- phasis on buffer stocks, its avoidance of direct price fixing, and its balanced voting system. We will retain our right to sell from the strategic stockpile, and we recognize the right of others to maintain a similar pro- gram." (6) The decision was a shift in U.S. policy regard- ing minerals and, to an extent, regarding commodities in general. During the 1950's the United States held the view that noninterference in markets resulted in the most efficient allocation of resources and thus was skeptical of commodity agreements. While it recognized that certain commodity markets did not operate effi- ciently, until the Fifth International Tin Agreement they were said to be only in the agricultural commod- ity sector. During the early 1960's and the Kennedy round of trade negotiations, "U.S. policy increasingly viewed commodity agreements as a potential means of transferring income from industrialized to developing countries, thus supplementing our foreign aid and gain- ing some political advantage" (5). It was at this time that the United States joined agricultural commodity agreements for wheat, coffee, and sugar. In the later 1960's and early 1970's, policy swung back to its tradi- tional free market stance and was again skeptical of commodity agreements. The view was that commodity '♦Conferences were in 1950, 1953, 1960, 1965, 1970, 1975, and 1980-81. The United States participated actively in all of them ex- cept the one in 1960, which it attended only as an observer. agreements operated "to stabilize prices above the long-run equilibrium of supply and demand" (5). And a distrust of commodity agreements' ability to accom- modate conflicting views grew from experience with previous agreements. The 1970's brought increased volatility in commodity prices, in part generated by the success of OPEC in imposing cartel prices on oil. Increasing energy costs affected the mineral-exporting LDC's to a much greater extent than they did the developed nations, exacerbat- ing their export earnings problems. These inflationary pressures brought a degree of solidarity to the LDC's and demands for a new International Economic Order intended to transfer wealth from the developed to the developing nations. Concurrently, U.S. policy was being reviewed in the wake of raw-materials shortages and the commodity price boom of 1972-74. It was seen as possible that extreme price volatility and commodity shortages would become the new order of affairs. Con- cern for U.S. dependence on energy and raw mate- rial supplies led to the Trade Act of 1974, "which per- mits U.S. negotiators to seek agreements assuring that it and other countries enjoy continued access to supplies of strategic resources at prices fair to both producers and consumers." Combined with the neces- sity for developed nations to compromise on other commodity issues in order to achieve cooperation among oil-consuming nations, "the stage was set for a State Department initiative to reevaluate U.S. com- modity policy" (5). Prior to the U.S. decision to join the tin agreement, debate was carried on among the concerned executive departments by the Economic Policy Board/National Security Council Interagency Task Force on Com- modity Policy. Participating agencies were the Depart- ments of State, Treasury, Commerce, and Interior, the GSA, the Council of International Economic Policy, and the Office of Management and Budget. The task force voted against recommending that the United States join the agreement. The issue was basically di- vided between the policies of free trade and noninter- ference in the mineral market, the views held by Treas- ury and Interior, and the State Department view that political advantages were to "be gained by accomodat- ing the desires of LDC's in establishing commodity agreements to stabilize prices." Treasury also thought that to join the Agreement would not produce any bene- fit and would prove costly by a reduction in U.S. flexi- bility in disposing of stockpiled tin to moderate prices. Finally, "this policy decision went all the way to the President, and at that time foreign policy criteria were paramount" (2), so the United States decided to join. The Senate ratified the agreement on September 16, 1976, by a vote of 71 to 17, indicating that the agree- ment was relatively uncontroversial at the time. During the fifth agreement the United States has been the leading consumer opponent of increases in price ranges. Opposition is based in part on the view that high taxes in producing countries have restricted production and caused shortages and higher prices and that these high prices do not represent a long-term trend. Too, the view is held that the high prices and price ranges encourage substitution that could reduce 16 consumption and production in tine future. Also, the United States has opposed the producers' view that taxes should be included in the cost of production and that cost of production should be the exclusive base for determining price ranges. The United States has held that other factors must be open for consideration with regards to price range adjustment. Since the first Council session under the Fifth ITA, in July 1976, the United States has opposed, with varying amounts of support from other consuming na- tions and with varying degrees of success, every pro- posed increase in the price range. The first successful price increase proposal, in December 1976, was a com- promise between the proposed 10-percent increase in the floor and 14-percent increase in the ceiling and a smaller increase, 5 percent for the floor and 8 percent for the ceiling, which the United States would go along with. The compromise increase, 7.5 percent in the floor and 12 percent in the ceiling, was passed with only the United States voting against. In early 1977, the ITC established the Economic and Price Review Panel (EPRP), a group of four producers and four consumers that conducts semiannual studies of tin in- dustry conditions and reports to the Council the "ap- propriateness" of the current price range. The panel was established in response to the controversy in the price range discussions and because of Bolivia's threat not to ratify the Fifth ITA. After its first meeting the panel, which included the U.S. representative, recommended to the Council that the price range was not appropriate and should be raised. However, the size of the increase was intensely debated, the United States favoring a minimal increase and the producers and several consumers favoring and passing increases of 12 and 13 percent, respectively, in the floor and ceiling. The United States abstained from the voting only in order to avoid voting against a U.S. inspired resolution calling on producers to take domestic action to in- crease production that had been added to the price range increase proposal. At the next meeting, in January 1978, the United States, with the Federal Republic of Germany, Japan, Canada, and Hungary, voted down a request to raise the floor M$200 and the ceiling M$100. A similar pro- posal at the April meeting was voted down by the United States, the Federal Republic of Germany, the United Kingdom, Japan, and Canada. In July 1978, after the EPRP had been unable to reach a consensus, the producers negotiated with the consumers that were normally aligned with the U.S. position. They came to a "gentlemen's agreement" to raise the floor price from M$1,200 to M$1,350 and the ceiling price from M$1,500 to M$1,700 in exchange for a producer com- mitment not to request any further price range in- creases for 1 year. The producers' original request was for an increase from M$1,200 to M$1,500 for the floor and from M$1,500 to M$1,900 for the ceiling. The United States had been willing to accept increases to M$1,250 for the floor and M$1,700 for the ceiling, argu- ing that there was no economic justificaiton for an in- crease over M$1,250 for the floor. The increases were approved by the Council without a vote. Bolivia opposed the "gentlemen's agreement" and continued to request that the price range be adjusted further upward. The July 1979 meeting of the ITC was the first upon expiration of the "gentlemen's agreement" and again, after some disharmony, a compromise increase in the price range was approved. The United States, the Fed- eral Republic of Germany, and the United Kingdom voted against it, as did Bolivia, which argued that the increase was inadequate. The increase for the floor was from M$1,350 to M$1,500 and for the ceiling was from M$1,700 to M$1,950. Attempts to arrive at another "gentlemen's agreement" were unsuccessful, although the major consumers agreed amongst themselves not to discuss the price range issue for another year. Pro- ducer attempts to increase the range at the January 1980 ITC meeting were unsuccessful. Increases to M$1,950 and M$2,400 for the floor and ceiling, respec- tively, were voted down by consumers. However, in April 1980 producers and consumers agreed to an in- crease of 10 percent in the price ranges, from M$1,500 to M$1,650 for the floor and from M$1,950 to M$2,145 for the ceiling. The members also agreed informally not to change the ranges for 1 year. During the summer and fall of 1979, the proposed dis- posal of tin from the U.S. strategic stockpile became a major issue in the ITC. The U.S. position was that the sale of tin would have no detrimental effect on the market in that the market had already discounted the effect of the sales and that a large part of the tin would go to replenish inventories, which had declined substantially. The producing countries, expecially Bo- livia, believed the sales would result in a long-term de- cline in tin prices and disinvestment within the tin min- ing industry. GSA planned to sell by auction some 500 metric tons of tin during each 2-week period, up to a maximum total of 10,000 metric tons per year. This would allow a moderation of sales if the market ap- peared to be affected. Bolivia charged that the United States was involved in economic aggression and op- posed any sales at all. It had been reported that some of the producers actually welcomed the sales, since the GSA would eventually run out of tin and the possibility of sales would no longer hang over the market. GSA auctions began in July 1980 and through the end of 1980 only a small amount of tin had been sold. THE SIXTH INTERNATIONAL TIN AGREEMENT 17 Negotiations for tlie Sixth International Tin Agree- ment took place in Geneva, Switzerland, from April 14 to May 14, 1980. Problems arose dividing the con- sumers and producers, leaving them unable to agree to a sixth agreement. Further talks in December 1980 a!30 failed, and the fifth agreement v*/as extended for 1 year beyond its normal June 1981 closing date. The major issues of dispute were the existence of export controls and the size of the buffer stock. U.S. proposals on both of these issues differed sharply with producers' desires. The United States, in continuing its longstanding opposition to export controls, called for their elimination from a sixth agreement. The United States believes that the free market should operate if prices fall below the floor and the buffer stock has bought up to the limit, contending that export con- trols exacerbate long run price volatility, reduce invest- ment in the tin industry and hinder defense of the price ceiling. Also they tend to hurt efficient or new pro- ducers and freeze existing production patterns. Since the imposition of export controls has been the only ef- fective way to defend the floor price during previous agreements, producers strongly support them and would not agree to their removal. The United States be- lieves that a properly sized buffer stock would be suffi- cient to defend the floor and to this end proposed a stock size of 70,000 metric tons and recommended mandatory contributions from both consumers and producers. The 70,000-ton stock size was based upon an econometric model and would, in the U.S. view, be an effective stock size. Producers strongly opposed the proposal and instead argued for a stock size of 30,000 metric tons, a reduction from the fifth agreement's rec- ommended stock size. After further negotiations the United States said that it would agree to export controls as a last resort in return for a larger buffer stock. Nego- tiations in March 1981 were scheduled to discuss the issue. Several other issues were not negotiated because of the deadlock on export controls and the buffer stock and will be matters of contention before a sixth agree- ment can be settled. The producing nations proposed that the matter of assigning votes in the Council be changed. Currently, the practice of giving each of the 23 consuming nations at least five votes results in the remaining 885 votes being distributed by consumption percentages. The producers' proposal would give each member at least 15 votes, resulting in 650 votes being left to be distributed by percentage. Using the current percentages the United States would get a total of 201 votes, Japan would get 133 votes, and the Federal Republic of Germany would get 69 votes. The three- nation total would be 403 votes, compared to the cur- rent 500 vote total. At the same time, since there are only seven producers the 15-vote proposal would change their relative voting power to a much lesser extent. The United States made a counterproposal that would increase the voting power of both large con- sumers and producers, by reducing the minimum num- ber of votes allowed each country to one. Since the consumers would have approximately three times the votes freed to be allocated by percentages, the United States would gain 22 votes, while the largest producer, Malaysia, would gain only 5 votes. Producers are arguing that the buffer stock ranges, as they are now, are inadequate. They are in favor of a new system based on a weighted average of produc- tion costs and a market trend. Bracketing this would be ceiling and floor prices set 15 percent above and below it. They argue that such a system would be continuous process, eliminating the need to regularly negotiate new price ranges. This would give an ad- vantage to the producers in the ITC, in light of their limited success so far in achieving their desired price range increases. No formula for calculating the refer- ence price has been proposed and consumers, who have in the past opposed any indexing of price ranges, will oppose such a system for the sixth agreement. In addition, the United States and other consumers have long felt that producer royalties and taxes should not be included in the cost of production when determining floor prices.'^ They believe that such increases in costs reduce profitability, investment, and efficiency in the industry and result in long-term reductions in produc- tion. They feel that the consuming nations should not be forced to subsidize producing nations' tax systems. The U.S. position on changing the price range struc- ture is to establish a fixed reference price with a stabilization band about it, with the reference price to be reviewed once a year. This, it is believed, will fix the price range more closely to the long-range trend and be less affected by short-term fluctuations. Two other proposals are being made by the pro- ducers that will be opposed by the consumers. First, it has been proposed that buffer stock donations be made in cash only. This would make it easier to defend the floor and more difficult to defend the ceiling. Secondly, ITC approval of government tin disposals has been sought. Consumers, particularly the United States, op- pose this for much the same reason as the producers oppose ITC authority over their taxation policies. These issues will be the most contentious during the renegotiation, while several differences will likely be settled more amicably. Among these settlements some of the. significant ones will probably be producer com- mitments to pursue policies insuring increased avail- ability of tin, ITC support for research into increasing the production and consumption of tin, that only two Council sessions be held each year, requirements for a price range review upon explicit movements in ex- change rates, and the percentage of consumption represented by countries ratifying the agreement neces- sary to achieve definitive entry into force. '^The effective tax rate in each of the three high-tax countries is shown in table A-7. Since taxation is considered to be an internal matter, there is strong opposition to any ITC authority over it. 18 SUMMARY AND DISCUSSION The positions taken by the producing and consum- ing nations for the negotiation of the Sixth International Tin Agreement highlight the differing viewpoints on the advantages and disadvantages of the tin agreement and commodity agreements in general. The concept of fair and stable prices, which is the primary goal of the agreement, is being viewed from two perspectives, that of the producer and that of the consumer. The pro- ducer view, particularly that of Bolivia, is that the price should be stabilized at some point above production costs. Producer proposals that the floor price be set equal to Bolivia's production costs, '^ which are high, are bound to conflict with the consumers' view that prices be stabilized about the long-term market trend, as well as conflicting with economic efficiency theory (3). The dichotomy reflects the interests and philoso- phies of the producers and consumers (that is, in this case, the LDC's and the developed countries respec- tively). The stated economic advantages of the tin agree- ments goals to consuming nations are basically two- fold: the assurance of supply and the moderation of rising prices. The first is most important in the short term, as substitution and efficiency can alleviate shortages in the long run. It can be argued that the agreement can actually subvert its purpose through the mechanisms of the buffer stock and export controls. The results of one model show that the operations of an inadequatly sized buffer stock can cause higher overall prices than if there were no stock. Such a buffer stock could, at the price ceiling, aggravate future price increases by satis- fying demand at a level higher than if the price had been allowed to rise and then, if the buffer stock is completely sold out, leaving a shortage of supply. At the floor price the use of export controls, which if stringently applied are identical to production quotas, can cause disinvestment within the industry, which can cause future supply shortages when demand picks up. They also conflict with producers' desires to main- tain employment and export earnings, but in the long run may benefit producers through future, higher prices. Thus, one argument is that such market control mech- anisms serve to destabilize price {18). The benefits of the agreement as perceived by the producers and covered at the beginning of this report, are both more numerous and of much greater impor- tance to them. Since most of the producers are LDC's and for many of them the tin industry is a major one, such benefits are a vital matter economically and politically. For this reason, perhaps, it is not surprising that the tin-producing nations have made greater and more numerous efforts to control the market than have the consuming nations. According to one view, how- ever, such efforts are actually attempts at accruing a semblance of monopoly profits at prices above the long term trend (3). Another view, though, is that the absence of backwards vertical integration within the industry is evidence that monopoly prices do not, pres- ently at least, exist (25). Disadvantages to producers from commodity agree- ments may exist primarily from possible substitution and efficiencies in the use of tin at artificially induced higher prices, as well as the already mentioned pos- sible disinvestment and lowered production and employ- ment when export quotas are enforced. Consuming nations, particularly the United States, also believe that imposing export controls results in lowered production being spread throughout the industry. Efficient produc- ers then do not reap the benefit of a larger share of the market, and less efficient producers stay in the market, causing average costs of production to be higher and discouraging technological advances and expansion by more efficient producers. For the LDC's the matter of inefficient production is probably secondary to the de- sire to maintain employment and exports. Maintenance of a floor price without export con- trols is seen as producing the benefit of production stability, which is of most use to that segment of the industry employing capital-intensive methods." One study, however, states that "buffer stocks will always be less advantageous than production cuts when the price elasticity of demand is less than — 1.0 at the time of disposal, even if stockholding costs are disregarded. The reasoning is that below this elasticity level at the time of disposal, production for stocks will not be eco- nomical because marginal revenue is negative, and additional sales from stocks will reduce profits, even if their production and shortage costs are zero" {17). One further disadvantage to the operation of a buffer stock is the possibility of speculative manipula- tion of the market. If it becomes known that the buffer stock holds little material and if prices are near or above the ceiling, a buying surge could deplete the stock and render it unable to defend any furtuher price increases. At the floor, knowledge that export controls can prevent further drops in price makes such specula- tion futile. The success of the five International Tin Agreements is debatable. On the one hand, ITC officials state that the agreements do work and are worthwhile pursuing, while on the other hand consumer representatives claim no real economic benefits and cite possible political advantages as their primary value. '° Looking to the history of the agreement, it can be seen that the floor price .has been successfully defend- ed on all but one occasion, and then the floor was broken for a very short time and in the face of ex- tremely unusual circumstances. Most reports credit the defense of the floor to the ITC, while one claims that the ITC was defending fairly low floors to begin with (18). This study shows that floor prices were more than 15 percent below ex-post trend prices during 14 of 19 years covered, ave'-aging more than 18 percent be- "^ If the commodity agreement fulfills its purpose, this would re- sult in price stabilization somewhere between a floor (production cost) and a ceiling, hence, a price somewhat higher than costs to the highest cost producer. "The small producers, mostly gravel pump operations, have rela- tively low fixed overhead costs and thus enter and leave the Indus- try fairly easily (25). '» U.S. Government officials have said that membership should not be expected to confer economic benefits or secure access to tin supplies and cite political benefits such as better relations with LDC's as their primary advantages {23). 19 low the trend for all years. At the same time, price ceilings were less than 15 percent above the ex-post trend in all but 3 years, averaging 1.2 'percent above the trend for all years. The price bands themselves, then, were such that there was little pressure upon the price floor during most of the agreement and thus little was needed to defend it. At the other end of the price band, ceilings were frequently broken, often for substantial periods of time, perhaps more than if the price ranges had been more realistically set. It is also argued that the price ranges have been rather easily adjusted upwards, following price trends (7) rather than successfully restraining price increases. The United States has long said that the price ranges have been raised too frequently and too much. How- ever, the price ranges have been consistently below the long term trend, and the purpose of the agree- ment is to moderate fluctuations about the trend. Other than successful defense of the price floors or ceilings, effectiveness of the agreements can be de- bated on their success in moderating price fluctuations. Fox (7) and others say that they have been successful in this respect, and cite reduced fluctuations during the period in which the five agreements have been operat- ing as compared with previous time periods. However effectiveness must be judged against what would have happened during the same time in the absence of the agreement. A simulation of the period, with and without the ITA, concludes that the buffer stock and export controls have had a minor effect on the market, and, in fact, states that the U.S. strategic stockpile has had a far more influential role. Simulation results show that GSA activities resulted in substantial reduc- tions in price fluctations and a reduction of one-third in the instability of producers' income around its trend (18). As mentioned previously, another study concludes that the stockpile has behaved as a buffer stock. The common theory behind the ITA's lack of success in de- fending the ceiling is that the buffer stock is too small, and it may be increased in size in the next agreement. The manner in which the buffer stock is financed can also be important to its effectiveness. Prior to the U.S. contribution of tin metal, all contributions have been in cash. Unless prices are in the lower sector of the price range when tin can be bought, a cash contribu- tion will not affect the market. A Commerce Department paper states that contributions in either cash or metal will have an equal effect if a member sells tin to gener- erate a cash contribution in the upper sector and buys tin to generate cash in the lower sector. While true in the case of a metal contribution in the lower sector, such a cash contribution in the upper sector presumes the availability of tin to be sold by the contributor in addition to normal tin sales. Except in the cases of na- tions with a tin stockpile, this seems unlikely in time of high prices (that is, relatively high demand), par- ticularly for consumers. While at the lower end of the range a metal contribtuion would restrict supply (un- less it came from government stocks) and a casli con- tribution could be used to purchase tin, at the upper end such financing could be self-defeating. Since the only price influencing effect of the buffer stock in the upper sector is to increase supply, either a cash or a metal contribution will be effective only if additional tin is brought to the market. Also, such contributions could have an opposite effect if they increased the time it took for the tin to be sold. A partial solution to the problem of financing the stock in the upper sector is to limit sales from the stock in the sector, thus avoiding a depletion of the stock and allowing it to influence prices over a longer period of time. Many arguments in defense of the tin agreements' effectiveness quite often cite their intentions and lon- gevity rather than their achievements {1-2, 6) and somewhat belatedly point out the operations of the U.S. stockpile and the inadequate size of the buffer stock. The findings of one opposing study (78) seem more ap- propriate: (1) The Tin Agreement has only marginally reduced the instability of prices and producer income. Of far greater importance in this respect have been U.S. Government Stockpile transactions of tin made outside the Tin Agreement. (2) The ITA has endured while other agreements have failed, in part because it has lacked effective power, in the face of the United States strategic stockpile, to make critical price decisions which would otherwise have intensified producer-con- sumer conflict. (3) If the ITA had been designed from the beginning as an effective market stabilizer along the lines en- visaged for other products, there is a good chance it would have fallen apart. This study suggest that a buffer stock size adequate to defend the ceiling in the absence of the GSA (in the range of 40,000 to 70,000 metric tons during 1966-74, "would have required far greater financial commitments and considerably longer time horizons than could reasonably be expected from most governments" (18). 20 REFERENCES 1. Allen, H. W. How the Tin Agreement Works. Inter- net. Tin Council, London, 1971, 22 pp. 2. . The International Tin Agreement: Why It Works. Pres. at 1st Internat. Metals Commodities Conf., New York, Dec. 15, 1975, Reprint from Tin Internal., December 1975, 3 pp. 3. Caves, R. E., and R. W. Jones. World Trade and Payments. Little, Brown and Co., Boston, Mass., 1973, 574 pp 4. Chabra, J., E. Grilli, and P. Pollack. The World Tin Economy: An Econometric Analysis. World Bank, Washington, D.C., 1978, 41 pp. 5. Charles River Associates. The U.S. Decision to Join the International Tin Agreement: A Case Study. Report prepared for BuMines (contract J0188183) 1978, 88 pp.; available for inspection at Division of Analytic Studies, Bureau of Mines, Washington, D.C. 6. De Koning, P. A. A. Commodity Agreements. Metals Anal, and Outlook, No. 8, August 1979, pp. 26-28. 7. Fox, W. A. Tin: The Working of a Commodity Agree- ment. Mining Journal Books Limited, London, 1974, 418 pp. 8. Gauntt, G. E. Market Stabilization and the Strategic Stockpile. M.S. Thesis, Pennr State Univ., State College, Pa. 1979, 92 pp. 9. Harris, K. L Tin. BuMines MCP 16, July 1978, 17 pp. 10. International Tin Council. The Fifth International Tin Agreement. London, 1975, 53 pp. 11. . The Fourth International Tin Agreement. London, 1970, 54 pp. 12. . The International Implications of United States Disposal of Stockpile Tin. London, 1973, 28 pp. 13. International Tin Agreement. London, 1954, 80 pp. (including French and Spanish trans- lations). 14. . The Second International Tin Agreement. London, 1960, 44 pp. 15. . The Third International Tin Agreement. London, 1965, 143 pp. (including French and Spanish translations). 16. Nag, A. Recycling Ease Gives Aluminum an Edge Over Steel in Beverage Can Market Battle. The Wall Street Journal, New York, Jan. 2, 1980, p. 30. 17. Roskill Information Service, Ltd. Tin. London, 2d ed., 1977, 471 pp. 18. Smith, G. W., and G. R. Schink. The International Tin Agreement: A Reassessment. The Royal Eco- nomic Soc, London, No. 86, December 1976, 14 pp. 19. Snyder, G. H. Stockpiling Strategic Materials. Chandler Pub. Co., San Francisco, Calif., 1966, 314 pp. 20. U.S. Bureau of Mines. Minerals Yearbook, 1978-79. Volume III, Area Reports: International. 1981, 93 ch., 1250 pp. 21. . Tin. Ch. in BuMines Mineral Commodity Summaries, 1979, pp. 168-169. 22. U.S. Congress. Defense Industrial Base: New Stockpile Objectives. Joint Comm. on Defense Pro- duction, 94th Cong., 2d sees., pt. 3, Nov. 24, 1976, 108 pp. 23. U.S. General Accounting Office. The Fifth Interna- tional Tin Agreement: Issues and Possible Impli- cations. Report to the Congress ID-76-64, Aug. 30, 1976, 35 pp. 24. U. S. International Trade Commission. Interna- tional Commodity Agreements. A Report to the Subcommittee on International Trade of the Com- mittee on Finance. U.S. Senate, 94th Cong., 1st sess., November 1975, 189 pp. 25. U.S. Senate. Fifth International Tin Agreement. Committee on Foreign Relations, Exec. Rept. No. 94-37, 94th Cong., 2d sess., Sept. 8, 1976, 18 pp. 26. . H.R. 595. 96th Cong., 1st sess., Apr. 4, 1979, 3 pp. 27. . Inquiry Into the Strategic and Critical Mate- rial Stockpiles of the United States. Hearings Be- fore the National Stockpile and Naval Petroleum Reserves Subcommittee. Committee on Armed Services. 87th Cong., 2d sess., pt. 5, July 18-19, 23, 31, Aug. 1,3, 1962, 321 pp. 21 APPENDIX TABLE A-1. — World production and consumption of tin, and surpluses and deficits, 1910-78' Surplus or Surplus or Surplus deficit Surplus deficit Produc- Consump- or as a Produc- Consump- or as a Year tion, long tion, long deficit, percentage Year tion, long tion, long deficit. percentage tons ^ ^ tons' long tons ' * of consumption tons 2 3 tons ' long tons ^ * of consumption 1910 116,000 118,000 — 2,000 — 1.7 1945 88.000 96,500 — 8,500 -8.8 1911 117,000 118,000 — 1,000 — .9 1946 89,000 112,000 — 23,000 — 20.5 1912 125,000 125,000 1947 112,500 123,500 — 11,000 -8.9 1913 134,000 130,000 4,000 3.1 1948 151,500 129,000 22,500 17.4 1914 124,000 110,000 14,000 12.7 1949 161,500 114,000 47,500 41.7 1915 128,000 127,000 1,000 .8 1950 174,000 152,000 22,000 14.5 1916 126,000 119,000 7,000 5.9 1951 168,000 140,000 28,000 20.0 1917 130,000 127,000 3,000 2.4 1952 162,000 125,000 37,000 29.6 1918 124,000 120,000 4,000 3.3 1953 174,000 126,000 48,000 38.1 1919 122,000 111,000 11,000 9.9 1954 176,630 134,200 42,400 31.6 1920 123,000 124,000 — 1,000 -.8 1955 169,800 143,900 25,900 18.0 1921 116,000 80,000 36,000 45.0 1956 166,900 150,100 16,800 11.2 1922 123,000 132,000 — 9,000 -6.8 1957 158,200 143,000 15,200 10.6 1923 126,000 134,000 — 8,000 —6.0 1958 121,100 136,200 15,100 11.1 1924 142,000 138,000 4,000 2.9 1959 114,000 148,200 — 34,200 -23.1 1925 146.000 150,000 — 4,000 — 2.7 1960 145,900 162,200 — 16,300 -10.1 1926 143,000 146,000 — 3,000 — 2.1 1961 135,700 165,900 — 30,200 — 18.2 1927 159,000 150,000 9,000 6.0 1962 144,200 165,100 — 20,900 — 12.7 1928 178,000 169,000 9,000 5.3 1963 142,000 166,200 — 24,200 — 14.6 1929 196,000 184,000 12,000 6.5 1964 141,000 173,800 — 32,800 — 18.9 1930 179,000 163,000 16,000 9.8 1965 148,200 173,100 — 24,900 — 14.4 1931 144,000 141,000 3,000 2.1 1966 154,700 175,800 — 21,100 — 12.0 1932 100,000 105,000 — 5,000 — 4.8 1967 177,200 174,900 2,300 1.3 1933 88,000 133,000 — 45,000 -33.8 1968 187,800 180,300 7,500 4.2 1934 120,500 123,000 — 2,500 — 2.0 1969 183,300 187,300 — 4,000 — 2.1 1935 138,000 146,000 — 8,000 — 5.5 1970 183,600 185,600 — 2,000 — 1.1 1936 181,000 156,000 25,000 16.0 1937 206,000 189,000 17,000 9.0 1971 185,900 189,400 — 3,500 — 1.9 1938 165,000 150,000 15,000 10.0 1972 190,700 192,000 — 1,300 — 7 1939 167,500 154,000 13,500 8.8 1973 187,300 214,200 — 26,900 — 12.6 1940 235,000 151,000 84,000 55.6 1974 179,800 200,300 — 20,500 — 10.2 1941 246,000 173,000 73,000 42.4 1975 177,300 174,700 2,600 1.5 1942 121,000 113,000 8,000 7.1 1976 182,200 195,700 — 13,500 —6.9 1943 139,000 90,500 48,500 53.6 1977 179,500 184,300 — 4,800 — 2.6 1944 100,000 100,500 — 500 — 5 1978 189,900 184,600 5,300 2.9 ' Excluding China, the U.S.S.R., the German Democratic Repub lie. North Korea, and the Republic of Korea. ^ Starting 1950, tin metal; previously, tin-in-concentrates. 'Starting 1970, metric tons. * Minus figures indicate deficits. Source: American Metal Market. 22 TABLE A-2. — Yearly extreme and average prices of Straits Tin, prompt delivery, New York, and yearly surpluses and deficits of tin, as a percentage of consumption, 1910-79 Surplus or Surplus or Year Price, cents per pound ' deficit as a Year Price, cents per pound ' deficit as a . percentage of consumption ^ percentage of consumption * High Low Average High Low Average 1910 38.75 31.75 34.27 — 1.7 1945 52.00 52.00 52.00 -8.8 1911 48.50 37.60 42.68 — .9 1946 70.00 52.00 54.58 — 20.5 1912 51.05 42.05 46.43 1947 94.00 70.00 77.94 —8.9 1913 51.00 36.75 44.32 3.1 1948 103.00 94.00 99.25 17.4 1914 65.00 28.50 35.70 12.7 1949 103.00 77.50 99.32 41.7 1915 57.00 32.00 38.66 .8 1950 163.50 74.125 95.56 14.5 1916 56.00 37.50 43.48 5.9 1951 184.00 103.00 128.31 20.0 1917 86.00 42.50 61.65 2.4 1952 121.50 103.00 120.44 29.6 1918 110.00 70.00 86.80 3.3 1953 121.50 78.25 95.77 38.1 1919 72.50 52.75 65.54 9.9 1954 101.00 84.25 91.81 31.6 1920 65.00 32.50 50.36 — .8 1955 110.00 85.75 94.73 18.0 1921 39.00 25.50 30.00 45.0 1956 113.75 92.875 101.26 11.2 1922 39.00 28.75 32.58 -6.8 1957 103.00 87.125 96.17 10.6 1923 51.50 37.50 42.71 -6.0 1958 99.625 86.50 95.09 11.1 1924 59.00 40.00 50.20 2.9 1959 104.875 98.00 102.01 — 23.1 1925 64.50 50.00 57.90 — 2.7 1960 104.75 99.25 101.40 — 10.1 1926 72.50 58.50 65.30 — 2.1 1961 125.75 100.125 113.27 — 18.2 1927 71.00 56.125 64.37 6.0 1962 124.25 107.375 114.61 — 12.7 1928 57.75 45.75 50.46 5.3 1963 133.00 108.125 116.64 -14.6 1929 50.375 38.375 45.19 6.5 1964 217.00 131.375 157.72 -18.9 1930 39.75 23.75 31.70 9.8 1965 200.875 148.50 178.17 — 14.4 1931 27.50 20.60 24.46 2.1 1966 183.00 153.50 164.02 — 21.0 1932 25.625 18.35 22.01 — 4.8 1967 156.00 151.25 153.40 1.3 1933 55.80 21.80 39.12 -33.8 1968 167.75 141.25 148.11 4.2 1934 56.65 50.00 52.16 — 2.0 1969 187.50 152.50 164.43 —2.1 1935 54.00 45.75 . 50.39 — 5.5 1970 188.00 160.50 174.13 — 1.1 1936 53.50 40.50 46.42 16.0 1971 177.50 172.00 174.36 — 1.9 1837 66.625 41.00 54.24 9.0 1972 183.75 170.50 177.47 -.7 1938 46.75 35.00 42.26 10.0 1973 345.00 177.75 227.48 — 12.6 1939 75.00 45.00 50.18 8.8 1974 473.25 280.00 395.75 -10.2 1940 58.00 44.75 49.82 55.6 1975 378.25 300.75 339.83 1.5 1941 55.00 50.10 52.01 42.2 1976 NA NA 379.82 -6.9 1942 52.00 52.00 52.00 7.1 1977 NA NA 534.60 —2.6 1943 52.00 52.00 52.00 53.6 1978 NA NA 629.58 2.9 1944 52.00 52.00 52.00 -.5 1979 NA NA 753.9 NA NA Not available. ' After 1975, AMM Composite New York tin price. ^ Minus figures indicate deficits. Source: American Metal Market. TABLE A-3. — Export control periods under the agreements Period of export control First agreement: 12/15/57- 3/31/58 4/ 1/58- 6/30/58 7/ 1/58- 9/30/58 10/ 1/58-12/31/58 1/ 1/59- 3/31/59 4/ 1/59- 6/30/59 7/ 1/59- 9/30/59 10/ 1/59-12/31/59 1/ 1/60- 3/31/60 4/ 1/60- 6/30/60 7/ 1/60- 9/30/60 ' Metric tons after 1969. Source: International Tin Council Permissible export amount, long tons ' Period of export control Permissible export amount, long tons ' 27,000 23,000 23,000 20,000 20,000 23,000 25,000 30,000 36,000 37,500 37,500 Third agreement: 9/19/68-12/31/68 1/ 1/69- 3/31/69 4/ 1/69- 6/30/69 7/ 1/69- 9/30/69 10/ 1/69-12/31/69 Fourth agreement: 1/19/73- 3/31/73 4/ 1/73- 6/30/73 7/ 1/73- 9/30/73 42,950 38,000 38,750 39,500 41,500 35,040 42,644 42,644 TABLE A-4. — Price ranges in the tin agreements 23 Sector Period of Floor operation price Lower Middle Upper £ PER LONG TON 7/ 1/56-3/22/57 640 640- 720 720- 800 800- 880 3/22/57-1/12/62 730 730- 780 780- 830 830- 880 1/12/62-12/ 4/63 790 790- 850 850- 910 910- 965 12/ 4/63-11/12/64 850 850- 900 900- 950 950-1,000 11/12/64-7/6/66 1,000 1,000-1,050 1,050-1,150 1,150-1,200 7/6/66-11/22/67 1,100 1,100-1,200 1,200-1,300 1,300-1,400 11/22/67-1/16/68 1,283 1,283-1,400 1,400-1,516 1,516-1,633 1/16/68-1/2/70 1,280 1,280-1,400 1,400-1,515 1,515-1,630 £ PER METRIC TON 1/ 2/70-10/21/70 1,260 1,260-1,380 1,380-1,490 1,490-1,605 10/21/70-7/4/72 1,350 1,350-1,460 1,460-1,540 "" 1,540-1,650 M$ PER PICUL' 7/ 4/72-9/21/73 583 583- 633 633- 668 668- 718 9/21/73-5/30/74 635 635- 675 675- 720 720- 760 5/30/75-1/31/75 850 850- 940 940-1,010 1,010-1,050 1/31/75-3/12/76 900 900- 980 980-1,040 1,040-1,100 3/12/76-5/7/76 950 950-1,000 1,000-1,050 1,050-1,100 5/7/76-12/9/76 1,000 1,000-1,065 1,065-1,135 1,135-1,200 12/9/76-7/15/77 1,075 1,075-1,150 1,150-1,250 1,250-1,325 7/15/77-7/14/78 1,200 1,200-1,300 1,300-1,400 1,400-1,500 7/14/78-7/20/79 1,350 1,350-1,450 1,450-1,600 1,600-1,700 7/20/79-3/13/80 1,500 1,500-1,650 1,650-1,800 1,800-1,950 3/13/80 2 1,650 1,650-1,815 1,815-1,980 1,980-2,145 ' A picul is 133-1/3 pounds. * Source: Metals Week, Mar. 17, 1980. Price range had not been changed prior to publication of this paper. NOTE.— Beginning in January 1981, ITC price ranges are to be expressed in Malaysian dollars per kilogram (M$/kilo). Source: International Tin Council. Ceiling price 880 880 965 1,000 1,200 1,400 1,633 1,630 1,605 1,650 718 760 1,050 1,100 1,100 1,200 1,325 1,500 1,700 1,950 2,145 TABLE A-5. — Buffer stock operations during the agreements, metric tons {18) Year and quarter Purchases ' First agreement: 1957, II 3,978 1957, III 406 1957, IV 11,162 1958, I 7,254 1958, II 874 1958, III 51 1958, IV 1959, I 1959, II 1959, III 1959, IV 1960, I 1961, I 51 1961, II Second agreement: 1962, III 1,834 1962, IV 1,488 1963, I 5 1963, II 1963, III 1963, IV Third agreement: 1966, IV 36 1967, I 1,498 1967, III 1,961 1967, IV 1,336 1968, I 3,526 1968, II 991 1968, III 2,123 1969, II ' Net purchases. ^ Net sales. ^ At the end of period stated. Sales ' Holdings ■ Year and quarter Purchases ' Third agreement— Con. 1969, III 1969, IV 1970, I 1970, II 1970, IV 262 1971, I 1,460 Fourth agreement: 1971, III 785 1971, IV 3,160 1972, I 1,462 1972, II 20 1972, III 2,012 1972, IV 2,348 1973, I 1973, II 1973, III 1973, IV 1974, I 1974, III 1974, IV 20 1975, I 2,751 1975, II 8,937 1975, III 112 1975, IV 8,129 1976, I 1976, II Fifth agreement: 1976, III 1976, IV 1977, I *The stock was exhausted Jan. 13, 1977. Source: International Tin Council. Sales ■ Holdings ■ 3,978 4,384 15,546 22,800 23,674 23,725 26 23,699 2,342 21 ,357 7,143 14,214 2,885 11,329 1,118 10,211 20 10,191 10,242 10,242 1,834 3,322 3,327 1,971 1,356 193 1,163 1,163 36 1,534 3,495 4,831 8,357 9,348 11,471 2,885 8,586 818 7,768 3,104 4.664 732 3,932 2,962 970 1,232 2,692 3,477 6,637 8,099 8,119 10,131 12,479 2,004 10,475 406 10,069 5,329 4,740 3,739 1,001 859 142 20 122 142 2,893 11,830 11,942 20,071 440 19,631 16,809 2,822 924 1,898 1,092 806 806 «0 24 TABLE A-6.— Tin prices/ 1956-79 (Average LME, 1956-June 1972; average Penang, July 1972-79) Year Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. 1956 814.2 805.5 805.5 764.3 748.2 742.2 749.9 769.4 788.9 805.2 852.3 806.1 1957 789.2 770,8 770.7 774.2 765.4 762.5 753.2 740.0 739.7 731.6 730.2 730.6 1958 730.7 731.5 731.3 730.9 730.8 730.3 731.2 730.4 718.1 740.8 757.6 756.4 1959 758.7 772.5 779.5 782.3 784.2 788.4 792.3 792.9 792.7 794.1 795.4 789.2 1960 791.4 792.4 787.5 790.6 785.1 793.2 812.5 801.6 804.9 804.4 800.6 795.5 1961 783.6 792.8 814.6 837.3 862.2 893.9 913.7 945.4 952.9 945.3 964.3 949.3 1962 946.6 951.5 962.0 949.3 919.5 876.0 862.9 851.8 851.3 855.7 873.5 859.4 1963 851.8 852.1 856.1 880.7 905.3 907.5 901.2 904.6 934.0 939.8 974.9 1,010.4 1964 1,041.4 1,109.1 1,073.0 1 ,043.4 1,054.4 1,183.1 1,251.5 1,271.8 1,425.6 1,584.1 1,488.3 1,317.1 1965 1,254.6 1,230.6 1,301.0 1,431.0 1,529.7 1,499.1 1,439.4 1 ,484.5 1,527.1 1 ,455.4 1,386.4 1.404.1 1966 1,424.7 1,406.9 1,369.0 1,365.4 1,338.4 1,277.8 1,275.5 1 ,244.0 1,225.8 1,219.8 1 ,204.4 1,210.0 1967 1,198.5 1,201.1 1,203.8 1,216.2 1,218.7 1,221.9 1,220.2 1,194.5 1,185.4 1,190.5 1,214.9 1,351.4 1968 1,323.1 1,316.7 1,317.5 1,314.9 1,305.8 1,306.0 1,301.7 1 ,296.8 1,300.0 1,316.9 1,405.4 1,379.5 1969 1,366.7 1,373.7 1,372.9 1 ,398.8 1,420.9 1,430.7 1,456.1 1,469.3 1,468.7 1,496.5 1,542.2 1,616.3 1970 1,601.3 1,569.6 1,581.4 1,604.2 1,557.8 1,476.8 1,458.0 1,508.3 1,518.9 1,528.8 1,506.9 1,457.2 1971 1,444.2 1 ,442.8 1 ,469.3 1 ,484.5 1,466.5 1,436.9 1,439.9 1,419.9 1,416.4 1 ,402.0 1,431.1 1,417.1 1972 1,411.9 1,413.4 1,475.2 1,497.0 1,466.6 1,456.6 622.40 623.92 627.48 622.02 609.82 619.79 1973 629.46 634.79 636.99 623.53 628.98 652.65 690.52 694.76 688.35 704.99 788.59 853.11 1974 910.79 1,072.10 1,165.15 1,290.62 1,302.80 1,300.57 1,129.42 1,238.16 1,162.02 1,002.62 983.20 947.86 1975 989.89 996.77 954.35 947.92 932.69 933.66 956.04 1,001.13 987.38 957.03 956.29 953.50 1976 960.24 1,002.96 1,064.80 1,084.64 1,144.70 1,172.41 1,263.60 1,195.01 1,178.24 1,195.72 1,221.25 1,250.80 1977 1,394.64 1,525.47 1,557.27 1,434.73 1,458.73 1 ,440.37 1,543.32 1 ,665.86 1,659.78 1,815.92 1,804.71 1,751.86 1978 1,680.48 1,686.67 1,573.75 1,534.42 1,644.32 1,718.85 1,709.73 1,770.38 1,866.17 1,950.92 1 ,975.38 1,820.00 1979 1,792.21 1,886.52 1,950.92 1,951.52 1,967.36 1,984.48 1,951.50 1,894.13 1,946.40 2,005.48 2,056.72 2,126.00 ' Pounds per long ton, January 1956-December 1969; pounds per metric ton, July 1972 to present. uiy ^\illi 10 present. Source: International Tin Council. January 1970-June 1972; and Malaysian dollars per picul TABLE A-7. — Tin prices and taxes in IVIalaysia, Thailand, and Bolivia, 1957-79 Malaysia Thailand Bolivia Price, Year Price, Amount Tax as Price, Amount Tax as US$ per Amount Tax as M$ per of tax % of Baht per of tax. % of pound of tax, % of picul M$ price picul Baht price (N.Y.) US$ price 1957 373 56 15 2,479 639 26 0.96 (') 0) 1958 369 56 15 2,487 641 26 .95 (') (') 1959 397 60 15 2,696 694 26 1.02 (') (') 1960 394 60 15 2,715 696 26 1.01 (') (•) 1961 447 71 16 3,028 777 26 1.13 0.18 16 1962 448 71 16 3,025 776 26 1.14 .19 16 1963 455 73 16 3,095 793 26 1.16 .19 16 1964 619 99 16 4,196 1,068 ■ 25 1.57 .32 20 1965 703 112 16 4,767 1,211 25 1.78 .21 12 1966 645 103 16 4,367 842 19 1.64 .16 10 1967 600 97 16 4,059 765 19 1.53 .12 8 1968 566 90 16 3,834 708 18 1.48 .11 7 1969 626 100 16 4,248 812 19 1.64 .16 10 1970 665 106 16 4,479 870 19 1.74 .20 11 1971 632 101 16 4,334 833 19 1.67 .17 10 1972 627 100 16 4,642 911 20 1.77 .21 12 1973 686 109 16 5,800 1,200 21 2.27 .42 19 1974 1,137 263 23 9,653 2,163 22 3.96 1.21 31 1975 964 185 19 8,235 1,801 22 3.40 .96 28 1976 1,147 267 23 9,205 2,051 22 3.74 1.00 27 1977 1,588 451 28 13,159 3,280 25 5.33 1.72 32 1978 1,743 471 27 15,305 4,472 29 5.89 2.00 34 1979 1,959 535 27 18,281 5,484 30 7.54 2.00 36 ' Data not given in source. ' For years in which more than one tax rate was applicablbe, tax rate in effect for the longest period was used for whole year. ^ Amount of tax calculated by applying tax rate to yearly average prices, *. All numbers rounded. Source: U.S. Dept. of Commerce. o U. S. GOVERNMENT PRINTING OFFICE : 1981 356-919/9933 8433 -p. '.^ism: ^s^-^^^ ^yjc^** ^^^^-^^ v^igr*" .«,^''^^. "o '^O / V ^°-n* • « ' -lO 1^ ..-o. U o ^-.^^' -^^^^^ « V-^l* •'^^^ ^^