A dispute between two obscure mining companies in the former Soviet Union has ended, at least temporarily, a cartel that artificially propped up the price of potash, an important fertilizer needed by farmers around the world.
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Much of the world's potash, a form of potassium, is controlled by two export cartels, one made up of Canadian producers and one involving a company in Russia and a company in Belarus.
The potash cartels have imposed billions of dollars of extra costs on farmers and consumers, particularly in developing countries like China and India that have to import much of the fertilizer they use, according to a recent paper published by the American Antitrust Institute, a research group.
The governments of Canada, Russia and Belarus, which benefit from the cartels' price fixing through higher tax collections and mining royalties, have contributed to the problem by either exempting the cartels from antitrust laws or encouraging them to control the global market for this important commodity.
In late July, however, the Russia company pulled out of its cartel, saying that it wanted to produce and sell more potash than the arrangement allowed. In retaliation, the Belarus government last month arrested the chief executive of the Russian company, Uralkali, on trumped-up charges of abuse of power and is holding him in custody. The collapse of that cartel is likely to lead to a 25 percent decline in the price of potash, which was selling for about $400 a ton earlier this year.
Some analysts predict that the cartel's breakup will be only temporary because both companies stand to lose billions of dollars in profits by ending their partnership. Earlier this month, the chairman of Uralkali left the door open to working with the Belarusian producer again once the chief executive of his company is freed.
Reducing the grip of the potash cartels will take coordinated international action. Unfortunately, the World Trade Organization, which settles disputes involving many kinds of unfair trading practices, does not have the authority to look into anticompetitive partnerships. The potash case demonstrates why the W.T.O. needs the power to investigate and punish such behavior.
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