INTERNATIONAL CARTELS A cartel is a monopolistic type of organisation of German origin established originally for the purpose of restricting the output of member firms in order to keep up the price of their output .Cartel may involve the establishment of a central selling organisation. The member firms however retain their independence, except in so far to restrict their output. Cartels are common in the market structure known as oligopoly which is characterised by a relatively small number of firms. Cartels are an arrangement/organization among producers or business firms to exert control over market by influencing price of the product or setting production targets. The main purpose of cartels is to maximize profit, or to avoid losses among the member firms. An international cartel may be defined as arrangements between the producers of two or more countries for the purpose of regulating competition. An international cartel may be defined as an arrangement between producers of two or more countries for the purpose of regulating competition in the production and selling of an international commodity. According to Charles P Kindleberger,” Cartels are the international business agreements to regulate price, division of market and other aspects of competition”. So international cartels are association of producers or sellers which seeks to have monopoly power by controlling production /supply and the price. Cartels are agreements are not explicit and legal but implicit and habitual .When business enterprises come to understand that their common motive of earning profit is hurt by one others reaction, they come under the banner of cartel to avoid certain kinds of competition among themselves. Cartels are illegal in many countries as they seek to exploit the consumers by attaining monopoly powers and restrict output and investment to maintain prices at high levels. But sometimes cartels are legalised in some countries to have maximum production and have sufficient strength to international trade. In India Cartels which cause restrictive trade practices are controlled by the Monopolies and Restrictive Trade practices (MRTP). Usually, a cartel will be working in a specific industry for example, cement cartels. A well known cartel in the international market is the OPEC (Organization of Petroleum Exporting Countries) that tries to control international price of crude by setting production targets. International Air transport Association (IATA) major airlines established to setup air fares and restrict competition. The advantages of cartels are 1. It helps to lower or remove the trade barriers, which helps to promote welfare of the world economy. 2. It establishes price stability by putting an end to price stability and competition among the rival producers and thus save wasteful expenditure incurred on competitive advertisement. 3. It enables the pooling of scarce resources which is very helpful in the expansion of output at cheaper cost. Through this way it promotes economic growth. 4. It reduces economic crisis. Since the formation of cartel is based on international understanding and co-operation. 5. Cartels and trade barriers are serve themselves as a substitute for one another Disadvantages of cartels 1. There is possibility of monopolistic exploitation of consumers 2. When cartelized producers are protected against foreign competition, they can charge very high selling prices 3. Commodity suppliers are not necessarily of superior quality 4. Members of cartel are actually united by loose agreements there is a chance of dishonoring of the agreement .Therefore cartels may be short lived and ineffective in the long run. 5. An effective control over supply is essential for the success of international cartels 6. Under the cartel system established producers are protected and barriers to new entrants are created leading to inefficiency and stagnation. 7. Cartels are sometimes a threat to economic growth. *******************************
