Price equalization mechanism
Price equalization mechanism: a mechanism designed to ensure that market prices for commercially produced and traded commodities, and therefore returns to their producers, do not fluctuate excessively. This aim is seen as promoting the orderly development of the industry by assuring producers of more predictable remunerative returns. At the same time, it is thought to benefit consumers who can look forward to modest price changes at any one time. Such mechanisms operate in many different ways. The main challenge for all of them is to ensure that it does not turn into a subsidy. This can be done if the producers are responsible for the funding of the mechanism. In this way, price signals will not be ignored. See also buffer stocks, common agricultural policy, floor price, international commodity agreements and price band system.
Source: http://ctrc.sice.oas.org/trc/WTO/Documents/Dictionary%20of%20trade%20%20policy%20terms.pdf
Web site to visit: http://ctrc.sice.oas.org
Author of the text: W. Goode
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