1 On international commodity pacts, see generally Johnston, C., Law and Policy on Intergovernmental Primary Commodity Agreements (loose-leaf, 1976–1985)Google Scholar; Khan, K., The Law and Organisation of International Commodity Agreements (1982)Google Scholar; Ernst, E., International Commodity Agreements (1982)Google Scholar; Hallwood, P., Stabilization of International Commodity Markets (Contemporary Studies in Economic and Financial Analysis vol. 18, 1979 Google Scholar).

2 On the initial suspension of trading, see LME Suspends Trading in Tin, Am. Metal Market, Oct. 25, 1985, at 1, col. 1; Tin without Emotion, 305 Mining J. 333 (Nov. 1, 1985); Wagstyl, , Sherwell & Sulong, , Tin Trade Suspended Until Council Meets Next Week, Fin. Times, Oct. 26, 1985, at 1 Google Scholar, col. 3; Death Rattle of an Old Tin Market?, Economist, Nov. 2, 1985, at 81.

The Kuala Lumpur Tin Market, which handled lower volume than the LME and does not trade in futures contracts, also suspended trading. It reopened on Feb. 3, 1986, although the ITC reportedly still owes two Malaysian banks a total of over $200 million advanced to finance the buffer stock. A Blunt Tin Opener, Far E. Econ. Rev., Feb. 20, 1986, at 74. The Kuala Lumpur Tin Market had failed to become a major competitor of the LME partly because it allows no futures trading and partly because it allows trading only in Malaysian tin. It is now taking steps to modify the latter requirement by allowing trading in Indonesian and Thai tin. News Briefs, Am. Metal Market, June 19, 1986, at 2, col. 3. If it continues to relax restrictions in the future, it will increase its importance in the international tin market.

3 On the threat to the LME, see Putka & Truell, , Tin Crisis in London Roils Metal Exchange; Big Losses May Result, Wall St. J., Nov. 13, 1985, at 1 Google Scholar, col. 6; Tin Men in Search of a Wizard, Economist, Nov. 9, 1985, at 91.

Under pressure from the British Government, following the crisis, the LME established a committee to coordinate the formation of a clearinghouse. LME Restructuring, 306 Mining J. 405 (June 6, 1986); Salak, , LME Clearing House Unit Suggests Extending Contract Delivery Dates, Am. Metal Market, June 4, 1986, at 4 Google Scholar, col. 1.

4 On the position of the banks, see Tin Problems Just Beginning?, 306 Mining J. 185 (Mar. 14, 1986); Tin Men in Search of a Wizard, supra note 3, at 91.

5 The negotiations among member governments to bail out the ITC were marked by a lack of commitment on almost all sides. Britain alone pushed hard for an agreement, for as the home of the LME it had much to lose. Individual LME brokers faced large potential losses. The threatened exchange produced £200 million in annual revenues, and Britain also feared that a default would lead to further repercussions in London financial circles. Consumer countries for the most part blamed producer countries for having insisted on the unrealistically high floor price, which the buffer stock manager had ultimately found impossible to defend. Producer countries, particularly Indonesia and Thailand, saw no point in contributing valuable foreign exchange to support a plan, intended primarily to compensate brokers and banks, that they believed would merely smooth the inevitable fall in the tin price. Negotiations ended in March 1986, when Indonesia and Thailand notified the ITC that they would not participate in the rescue plan. See All Chocks Are Away, Far, E. Econ. Rev., Mar. 20, 1986, at 154 Google Scholar; Tin: Not So NewCo, Economist, Feb. 22, 1986, at 74; Tin Problems Just Beginning?, supra note 4, at 185.

6 LME Terminates Tin Trading, 306 Mining J. 186 (Mar. 14, 1986); Tin Goes to Court, Economist, Mar. 15,1986, at 77; Wagstyl, , Paying the Price of the Market’s Collapse, Fin. Times, Mar. 12, 1986, at 16 Google Scholar, col. 3.

7 Tin: All In, and Only Two Out, Economist, Apr. 26, 1986, at 87; Hughes, , The Tin Crisis Goes to Court, Fin. Times, Mar. 13, 1986, at 40 Google Scholar, col. 1; Tin Goes to Court, supra note 6, at 77; Tin Problems Just Beginning?, supra note 4, at 185.

8 Several agricultural commodities have also experienced at least temporary steep declines. The International Rubber Organization nearly went bankrupt in 1985 in its effort to defend a floor price before a bad harvest pushed prices up. Cocoa and coffee also dropped temporarily below official floors in 1985. Commodity Cartels Rig Wrongly, Economist, Dec. 21, 1985, at 91.

Part of the difficulty of rubber stemmed indirectly from the collapse of tin. In view of the looming loan defaults by the ITC, bankers became concerned that governments would not back the obligations of the intergovernmental organizations to which they belonged; so bankers were unwilling to accept stockpile rubber, which they feared might fall in price, as collateral for loans to finance additional rubber purchases. Clad, Tin’s Off-Market Forces, Far, E. Econ. Rev., Dec 1985, at 86, 87 Google Scholar. In retrospect, the bankers’ concerns appear to have had some justification, since the two countries most directly responsible for the ITC default, Indonesia and Thailand, are also major rubber producers.

9 Even when the depression and World War II are excluded from consideration, gaps have ranged from a surplus of 45% of consumption in 1921, to a deficit of 23% of consumption in 1959. The gap between consumption and production has exceeded 5% in two–thirds of the years from 1910 to 1978. Witzig, T., Operation of the International Tin Agreement 2 (Bureau of Mines Information Circular No. 8860, 1981)Google Scholar.

10 No study has conclusively measured short-term elasticity, since the many variables operating concurrently on the market price make the calculation difficult. Estimates have ranged from 0.1 to 0.6. Baldwin, W., The World Tin Market 103–08 (1983)Google Scholar; T. Witzig, supra note 9, at 2.

11 W. Baldwin, supra note 9, at 49–55; Tin: Potty, Economist, Nov. 16, 1985, at 101, 102. On the uses of tin, see also Robertson, W., Tin: its Production and Marketing (Contributions in Economics and Economic History No. 51, 1982)Google Scholar; Rogers, , Falling Consumption to Stabilize, Am. Metal Market, July 26, 1985, at 7 Google Scholar, col. 1 (special issue on tin).

12 Estimates of long-term elasticity of demand range from 1.1 to 1.3 (excepting one extremely divergent estimate of 5.0). W. Baldwin, supra note 9, at 104–08. In the long term, tin usage is subject to reduction by conservation, substitution and recycling. See infra part V, “Inflexible Official Price Range.”

13 Fox, W., Tin: The Working of a Commodity Agreement 112–17 (1974)Google Scholar (the best historical source generally on tin regulation, written by the ITC Secretary from 1956 to 1971); W. Baldwin, supra note 9, at 65–67.

14 W. Fox, supra note 13, at 129–90; W. Baldwin, supra note 9, at 67–74.

15 W. Fox, supra note 13, at 129–90; W. Baldwin, supra note 9, at 67–74. It also appears that the British Government, acting through the Colonial Office, played an active role in preserving unity. The British Commonwealth produced about 43% of the world’s tin and smelted about 84%. Britain’s territorial interests linked it with the high–cost producers of Nigeria as well as the low-cost producers of Malaya, and Britain’s smelters relied on the extremely high-cost Bolivian ore. It was in British interests to avoid a disruptive price war that might have forced some of these producers from the market, so Britain played a major part in advocating restriction.

16 The objectives were stated in Article I:

(a) To prevent or alleviate widespread unemployment or under-employment and other serious difficulties which are likely to result from maladjustments between the supply of and the demand for tin;

(b) To prevent excessive fluctuations in the price of tin and to achieve a reasonable degree of stability of price on a basis which will secure long-term equilibrium between supply and demand;

(c) To ensure adequate supplies of tin at reasonable prices at all times; and

(d) To provide a framework for the consideration and development of measures to promote the progressively more economic production of tin while protecting tin deposits from unnecessary waste or premature abandonment.

International Tin Agreement, 1953, Art. I, included in United Nations Tin Conference, 1950 and 1953, UN Doc. E/CONF.12/12 (1954).

17 International Tin Agreement, supra note 16; W. Fox, supra note 13, at 205–311; W. Baldwin, supra note 9, at 74–84.

18 T. Witzig, supra note 9, at 8; W. Fox, supra note 13, at 226–42. Since the early 1960s, the United States has gradually sold “surplus” tin from the stockpile, reducing the total to about 175,000 tons at present.

19 Article XIV of the first ITA provided:

Participating Governments. . . [s]hall not dispose of non-commercial stocks of tin except upon six months’ public notice, stating reasons for disposal, the quantity to be released, the plan of disposal, and the date of the availability of the tin. Such disposal shall protect producers and consumers against avoidable disruption of their usual markets. A Participating Government wishing to dispose of such stocks shall, at the request of the Council or of any other Participating Government which considers itself substantially interested, consult as to the best means of avoiding substantial injury to the economic interests of producing and consuming countries. The Participating Government shall give due consideration to any recommendation of the Council upon the case.

International Tin Agreement, 1953, supra note 16, Art. XIV.

20 Second International Tin Agreement, included in United Nations Tin Conference, 1960, UN Doc. E/CONF.32/5 (1961); W. Baldwin, supra note 9, at 84–86.

21 Third International Tin Agreement, included in United Nations Tin Conference, 1965, UN Doc. TD/TIN.3/5 (1965).

22 Fourth International Tin Agreement, included in United Nations Tin Conference, 1970, UN Doc. TD/TIN.4/7/Rev.1 (1970).

23 Fifth International Tin Agreement, included in United Nations Tin Conference, 1975, UN Doc. TD/TIN.5/11 (1976), reprinted in C. Johnston, supra note 1, Binder 2, App. IV.8.01; W. Baldwin, supra note 9, at 92–94; U.S. General Accounting Office, Report to the Congress by the Comptroller General of the United States: The Fifth International Tin Agreement—Issues and Possible Implications (1976). On the feared profusion of commodity cartels in the wake of OPEC’s success, see the three articles in Foreign Pol’y, Spring 1974, at 57 (Mikdashi, Collusion Could Work; Krasner, Oil Is the Exception; Bergsten, The Threat Is Real).

24 On the successful control of price fluctuations, see W. Fox, supra note 13, at 389. Fox analyzes short–term price fluctuations for 1924–1970, concluding that “[i]n general . . . it can be properly claimed that the post-war agreements have substantially smoothed down short-term fluctuations.” See also The Great Tin Crash, Economist, Nov. 2, 1985, at 15, 16 (“the tin agreement was, until this week, bragged about as the great success among the international commodity agreements”); Bleiberg, , Tin in a Box, Barron’s, Nov. 18, 1985, at 11 Google Scholar, col. 1 (“the ITA for years was widely hailed as a shining example”); W. Fox, supra note 13, at 397 (“the weapons of the tin agreement have been justified”).

25 Id., supra note 9, at 94–95.

26 Id. at 95–96.

27 Chaikin, , Evidence of Market Manipulation in Tin Has Emerged, 3 Company L. 27 (1982)Google Scholar; Shao & Behrmann, , Tin-Price Crisis Threatens to Cause Rift Between Consuming, Producing Nations, Wall St. J., Feb. 24, 1982, at 42 Google Scholar, col. 2; Tin: Swapping Cartels, Economist, June 26, 1982, at 81.

28 Agreement Establishing the Association of Tin Producing Countries, done Mar. 29, 1983, 23 ILM 1009 (1984). On the initial formation of the association, see Tin: Swapping Cartels, supra note 27, at 81. Several factors make the success of a producer cartel, if one is attempted, very unlikely. Tin is subject to conservation, substitution and recycling; therefore, an artificially high price would lead to a decrease in consumption. The number of producers is large enough and disparate enough that some would be tempted to remain outside a cartel as “free riders.” Even governments have difficulty controlling exports by their private producers. Finally, the United States could use its massive stockpile to supply the market and drive down prices.

29 Sixth International Tin Agreement, UN Doc. TD/TIN.6/14/Rev.1 (1982), reprinted in C. Johnston, supra note 1, Binder 2, App. IV.8.02.

30 UN Conference on Trade and Development, Decision of Meeting Convened under Article 55(3) of the Sixth International Tin Agreement, UN Doc. TD/TIN.6/15 (1982) (putting the Sixth ITA into force provisionally); Muhamad, Tin: The Market May Never Be the Same After a Year of Trauma, Engineering & Mining J., March 1986, at 61.

A proposal has already been put before the ITC to create a small tin study group to succeed the ITA upon its expiration in June 1987. The study group would gather data on tin production and consumption for the use of members in planning output and usage. Replacing the ITA with such a study group would effectively end the regulation of tin. Salak, , Study Group May Replace Tin Council, Am. Metal Market, June 3, 1986, at 1 Google Scholar, col. 4.

31 Sixth International Tin Agreement, supra note 29, Art. 14 and Ann. A. Votes are reapportioned annually and whenever any change in membership or in the category of a member occurs.

32 Id., Art. 28(3).

33 Id., Arts. 32–34. A formula taking into account the tin price and the percentage of physical tin in the buffer stock determines whether a simple distributed majority or a two-thirds distributed majority is required to declare a control period.

34 See Tin: Swapping Cartels, supra note 27, at 81; W. Baldwin, supra note 9, at 95–96.

35 The floor price, which since 1972 has been set in Malaysian dollars, remained unchanged at M$29.15/kg from the introduction of the Sixth ITA in 1982 until the 1985 collapse. The Malaysian dollar, however, is tied to the U.S. dollar, which rose for most of the 1982–1985 period. Despite the unchanged floor price, therefore, the tin price rose in relation to most currencies. The British pound was especially weak during much of that period; therefore, the price on the LME, denominated in British pounds, had to be pushed up almost continuously to keep it in line with the floor set in Malaysian dollars. One proposed method of moderating the influence of currency fluctuations is to set the official range according to a basket of currencies. See Williamson, , Weak Prices to Reflect Persistent Market Woes, Am. Metal Market, July 26, 1985, at 10 Google Scholar, col. 1 (special issue on tin); Tin without Emotion, supra note 2, at 333.

36 Hard Times for Tin Mines, 305 Mining J. 125, 126 (Aug. 23, 1985). On the role of substitution, the relationship between the price of primary tin and the quantity of secondary tin recycled has not been conclusively established. A study comparing tin prices and secondary tin production in the United States from 1922 to 1940 found that “the recovery of secondary tin is markedly responsive to changes in the price of virgin tin, but this responsiveness operates only within a certain range.” It is estimated that secondary tin accounts for about 4% of world consumption. W. Robertson, supra note 11, at 118–23 (quoting K. Knorr, Tin under Control 40 (1945)). 37 Rogers, supra note 11.

38 Tin Mines Tragedy, 305 Mining J. 389 (Nov. 22, 1985). These production jumps, even in high–cost mines, throw doubt on the repeated claims of producers that their operations are profitable only with strong support prices. Consumers point out that producers’ stated “cost” often includes the taxes and royalties paid to the government by the mining companies. W. Baldwin, supra note 9, at 97; Impact of Tin Prices on Producers, 305 Mining J. 355 (Nov. 8, 1985). On taxation of mining, see generally Gillis, M., Bucovetsky, M., Jenkins, G., Petersen, U., Wells, L. & Wright, B., Taxation and Mining (1978)Google Scholar.

39 Sixth International Tin Agreement, supra note 29, Art. 1(b).

40 Muhamad, supra note 30, at 63.

41 Tin Mines Tragedy, supra note 38, at 389; China Urged to Curtail Exports, Am. Metal Market, Sept. 18, 1985, at 4, col. 3; Robb, , Brazil Wary of Joining World Groups, Am. Metal Market, July 26, 1985, at 11 Google Scholar, col. 1 (special issue on tin); Tin: Cookson in Brazilian Marketing Deal. . ., 306 Mining J. 352 (May 16, 1986); Tin without Emotion, supra note 2, at 334.

42 W. Baldwin, supra note 9, at 97.

43 Robb, supra note 41 (quoting José Maria Gonçalves de Lima, executive secretary of the Sindicato Nacional da Indústria da Extração do Estanho). Presumably the “rules” that are not appropriate for Brazil are the export controls.

44 See W. Baldwin, supra note 9, at 97.

45 See Hard Times for Tin Mines, supra note 36.

46 See Robb, supra note 41.

47 W. Baldwin, supra note 9, at 97.

48 Tamarkin, , Smuggling Threatens Ailing World Tin Industry, Wall St. J., July 30, 1984, at 20 Google Scholar, col. 1.

49 Thailand’s Tin Troubles, 305 Mining J. 301 (Oct. 18, 1985); Tin without Emotion, supra note 2; Efforts to Curb Tin Smuggling Helped Stabilize World Market, Am. Metal Market, May 15,1984, at 8, col. 2. Much of the tin smuggled into Singapore is smelted at the one private refinery, operated by Kimetal Private Ltd., which reported 1983 sales of $158 million. Malaysia tried to pressure Singapore into closing the smelter, but Singapore refused. Tamarkin, supra note 48.

50 Sixth International Tin Agreement, supra note 29, Art. 21. Contributions must be in cash, equivalent to the value of the apportioned tonnage.

51 Tin Mines Tragedy, supra note 38, at 390.

52 Tin: Swapping Cartels, supra note 27.

53 A number of traders had sold tin short in the belief that lower prices were imminent, selling futures contracts primarily to the buffer stock manager. Tin prices did not fall, however, and, as delivery dates approached, the buffer stock manager was virtually the only source of physical metal (although tin was in a long-term period of oversupply). As the squeeze became acute, and de Koning offered to sell only at a very high price, the backwardation (the premium for delivery on one day rather than the next) rose to £800/ton. The LME suspended trading and imposed a backwardation limit of £90/ton. Tin Market Confusion, 305 Mining J. 1 (July 5, 1985).

On de Koning himself, see Edwards, , Man in the News: Test of Mettle for the Tin Man, Fin. Times, Oct. 26, 1985, at 6 Google Scholar, col. 1. De Koning, a Dutchman, was selected for the post as a compromise between producers and consumers. Although the Netherlands is a consumer country, it is traditionally sympathetic to concerns of developing countries and has strong ties with Indonesia, a major producer.

54 Sixth International Tin Agreement, supra note 29, Art. 1.

55 Tin Mines Tragedy, supra note 38, at 390–91.

56 In fact, the Sixth ITA does not specifically permit the buffer stock manager to trade in futures contracts of any kind. Failure to address such important questions is a major weakness. The Agreement should spell out the manager’s duties in greater detail. The International Natural Rubber Agreement furnishes a good comparison. It provides that its buffer stock manager may trade in futures contracts of certain specified types, and it requires complete and detailed monthly reports on all buffer stock transactions. International Natural Rubber Agreement, 1979, UN Doc. TD/RUBBER/15, Art. 31 (1979), reprinted in C. Johnston, supra note 1, Binder 2, App. IV. 10.01.

57 Tin Mines Tragedy, supra note 38, at 390–91.

58 Id.