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Editorial.

I'm not so sure I would label the International Natural Rubber Agreement an "outrage to consumers and an outrage to free enterprise" as U.S. Senator Hank Brown (RCO) did, but I wouldn't call it a vehicle that stabilizes prices and assures supplies as its proponents do. Brown believes that all international commodity agreements create cartels which undermine U.S. business interests. Maybe they do. INRA didn't create any cartels. There have been informal and organized "cartels" in the natural rubber trading business for decades.

INRA hasn't created price stability either. A look at what happened in 1994 and 1995 should put to rest any argument that this is a function of the agreement. As for assuring supplies, I believe the meteoric rise in NR prices in '94 and '95, which INRA couldn't curtail even after selling off all of its buffer stock, probably would have more to do with encouraging maintaining and expanding supplies. I also feel the real value of natural rubber is slowly being recognized, negating the need for this so-called support.

Natural rubber is still the optimum elastomer in many applications. Plus it's green. It's a renewable resource with a production process that is non-polluting. In fact, it's beneficial to the environment as the trees absorb [CO.sub.2]. The intrinsic value of NR is slowly being realized.

INRA was first implemented in 1979 and for most of its existence the main purpose was supply assurance. Its ineffectiveness at stabilizing prices wasn't exposed until the last couple of years. There may be some justification in continuing the pact for the supply assurance purpose since NR's competition among growers is not other elastomers but other crops that might bring a greater yield in terms of money per acre.

But another factor has surfaced since the first ratification. That's the increasing movement downstream by the rubber producing countries. The top six producers, Indonesia, Thailand, Malaysia, Brazil, India and China, are now ranked in the top 12 of consuming nations. The first three are relatively new, while the latter three consume most of their countries' output. The separation between producing country and consumer is eroding. Malaysia alone plans to invest $200 million in machinery for rubber product manufacturing by the year 2000.

INRA is not an outrage and hasn't undermined U.S. business interests as Sen. Brown claims. But is it really necessary?
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Title Annotation:International Natural Rubber Agreement
Author:Smith, Don R.
Publication:Rubber World
Article Type:Editorial
Date:Aug 1, 1996
Words:394
Previous Article:Management.
Next Article:Yokohama Rubber announced that the company name of Yokohama Aeroquip, a subsidiary in Japan, will be changed to Yokohama Hydex.
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