Price bands systems
Price bands systems: mechanisms for the management of commodity prices. Two main varieties occur. The first is a mechanism maintained by some countries to ensure that the price on internal markets of mainly agricultural commodities is kept in a certain relationship to the international market price to afford domestic producers a measure of protection. The way this is done is that when the price of the imported product is high compared to the domestic price, the tariff is lowered. If the imported price is low compared to the domestic price, the tariff is raised. Some have therefore described this kind of price band system as a variable tariff. The second variety of price band systems underpins the operations of buffer stocks. The simplest system consists of three bands, related to the market price of the commodity. When the price is low, the manager may buy. When it is at a medium level, the manager may buy or sell. When the price is high, the manager usually sells.
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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