High American officials told Congress yesterday that the United States is willing to participate in international commodity agreements only if they reduce inflationary pressures in this country.
Regardless of pressure from exporting countries, the United States will reject efforts that would increase prices above normal market trends, they said.
This policy approach to commodity agreements, a main point of concern among the poor countries of the Third World, was laid out in detail for the first time by two Carter administration specialists, Julius L. Katz, assistantsecretary of state for economic and business affairs, and C. Fred Bergsury for international affairs.
In testimony before a House Banking subcommittee, they said commodity agreements could help stabilize widly fluctuating prices, and that the United States would support agreements for commodities this country exports (such as wheat) and imports (such as tin and sugar).
Bergsten held out hope that the 1976 coffee agreement, which will have no practical effect on prices before 1980 because the Brazilian frost is now holding prices so high, will eventually benefit consumers.
The administration's cautions acceptance of individual commodity agreements, he said, is based less on a foreigh-policy reponse to demands of poor nations for stabilization of export earnings and more on an effort to reduce inflationary pressures in the United States.
They reiterated U.S. willingness, expressed at the concluding session of the so-called "North-South" dialogue at a Paris conference a week ago, to discuss "a common fund" to finance individual commodity agreements.
But Katz also repeated that the U.S. intention is to deal with such funding on a case-by-case basis, and not to approve the $6 billion general fund for a group of 18 commodities proposed last year by the National resolution of the United National Conference on Trade and Development.
"Having said what commodity agreements can do," Katz testified, "I would have to emphasize that we do not view commodity agreements as a instrument to increase resources transfers to developing countries by fixing prices above their equilibrium levels."
Bergsten said that excessive price declines, as well as excessive rises in commodity prices, can trigger inflation. The increases result in an obvious "ratcheting up of the general consumer price index," he said.
The seemingly paradoxical result of excessive price declines causing inflation comes from the loss of business incentive to invest in new capacity, which over time reduces supply.Katz noted, for example, that coffee agreements in 1962 and 1968 were based on the notion that coffee "was in permanent surplus."
In retrospect, Katz said, these orderly marketing agreements kept prices too low, both in absolute terms and in relation to prices of other commodities. While those agreements - which governed coffee prices from 1962 to 1972 - kept the bottom from falling out of the market, Katz said, they also discouraged new investment.
Bergsten predicted that "significant commodity price instability will continue throughout the remainder of the 1970s and possible beyond."
Because private markets "cannot be expected to deal with these problems satisfactorily," it becomes a responsibility of governments, he argued.
The technique the U.S. officials advocated is the creation of "buffer stocks," rather than production controls, which the United States believes are inefficient and tend to be price-boosting. Buffer stocks are built up at an agreed-upon price floor and sold at an agreed-upon ceiling. When supplies are excessive, the buffer stocks ease market presures and tend to keep the price up. When supplies are short, sales of the buffer stocks tend to "check price rises," Bergstein said.
He said that for products the U.S. imports, it is in the country's interest of support large buffer stocks. He criticized the Ford administration for joining the International Tin Agreement last year but "refusing" to contribute to the tin buffer stock.
At the Paris conference, Secretary of State Cyrus R. Vance said the Carter administration would ask for congressional approval of a contribution of 4,500 to 5,000 tons out of the U.S. strategic stockpile to a tin buffer stock.