South Centre Analytical Note - August 2005

EXECUTIVE SUMMARY (excerpt)

A supply management programme can be defined as a policy tool that controls
the production and supply of a commodity in order to achieve a desirable price
objective in a relevant market. The relevant market could be domestic or
international. Many governments in developing countries, NGOs, civil
societies, producer organisations and academics have recently voiced their
support for the reintroduction of supply management programmes for
addressing some aspects of the commodities problem.

The importance of supply management as a mechanism for addressing certain
aspects of the problems of tropical cash crop commodities is justified by
multiple cases of market failure, particularly structural oversupply of
commodities, which market forces cannot fully correct. However, supply
management schemes are neither applicable to all commodities nor panaceas
to the commodities to which they can be applied.

Supply management programmes can be broadly categorised into domestic
(national) and international schemes based on the nature of commodities
covered under them and on their objectives. By the nature of commodities
covered by the scheme, it means whether the commodities are tradable
domestically or internationally. By objective, it means whether the primary
target of the scheme is the domestic or international market.

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