Bridges Weekly Trade News Digest • Volume 8 • Number 31 • 22nd September 2004
US To Rejoin The International Coffee Organisation
On 15 September the US government formally announced its intention to rejoin the International Coffee Organisation (ICO), the intergovernmental organisation responsible for the global coffee industry. Although the US was one of the founding members of the organisation in 1963, it left in the early 1990s following the breakdown of the ICO’s quota system. US Assistant Secretary of State for Economic and Business Affairs Anthony Wayne made the announcement at a special event that included members of the ICO, including its Executive Director Nestor Osorio as well as representatives from USAID and the National Coffee Association of the US.
As a new member of the ICO, the US will be joining debates on issues such as the ICO’s plan to improve coffee quality, diversification programmes to enable producers to switch to other crops, promotion of coffee consumption, and sustainable coffee production. In 2001 a new International Coffee Agreement was negotiated which sets objectives for signatories in all these area. The ICO also seeks to address the current coffee crisis — characterised by oversupply and a steady decline in prices at the farm gate — by focusing on improving coffee quality through the Coffee Quality-Improvement Programme. Many ICO initiatives and negotiations require not only the support of producer countries, most of which are members, but also of consumer countries, the US being the largest in this category.
US announcement meets with critical acclaim
A number of different organisations greeted the US announcement with optimism. Phil Bloomer, Head of Oxfam International’s Make Trade Fair Campaign, said, "We look forward to seeing the US play a constructive role at the ICO to develop programs that can help alleviate the crisis for more than 25 million small coffee farmers throughout the world." Colombia’s ambassador to the US, Luis Moreno, added, "560,000 Colombian families depend on coffee for their sustenance. Having the US as the largest consumer [back in the ICO] will create an environment in which we can address issues of poverty, and in which we can address challenges like what we have seen in Colombia".
In related news, on 10 September an alliance of coffee farmers, trade and industry, non-governmental organisations and unions completed a draft Common Code for the Coffee Community (CCCC) in Hamburg, Germany (see the upcoming issue of BRIDGES Trade BioRes, 25 September 2004). The code, which has yet to be signed, includes goals such as minimum salaries, the eradication of child labour, allowing trade union membership and adherence to international environmental standards on pesticide and water pollution.
Background on the coffee crisis
The US decision comes at a time when the global coffee industry is in a state of acute crisis. Coffee prices are at their lowest levels in over 30 years. Several developing countries heavily dependent on coffee exports, including Burundi, Ethiopia and Nicaragua, have seen their income from coffee decrease dramatically in the past decade. Problems of oversupply and low prices have hit small producers in developing countries particularly hard. The retail price of a cup of coffee has stayed roughly the same or even increased while the price that coffee farmers receive has been in a continued downward spiral (see BRIDGES Trade BioRes, 2 June 2003, http://www.ictsd.org/biores/03-06-02/inbrief.htm). The value of retail sales of coffee has doubled since the early 1990s from US$30 billion to US$65 billion although producers have seen their share of retail sales during the same time period halve from around US$12 billion to US$5.5 billion. For small farmers declining prices have a direct impact on overall household revenues and access to basic needs.
This problem is the partially the result of the historic failure of the international community to renew the International Coffee Agreement (ICA) in the early 1990s. Following price fluctuations in the 1950s and 60s, several ICAs were signed under the auspices of the ICO that set quotas for how much coffee was to be produced. Coffee is in this way a typical commodity of export interest to developing countries that was under a system of quotas for the 60s, 70s and 80s. These quotas helped keep prices stable and sufficient to cover producer’s costs of production and living. With the collapse of quotas in the early 90s, says the ICO, "prices immediately dropped to around half their previous level and remained at these lower levels for over four years." A number of different factors compounded the crisis by increasing the supply of coffee and thereby lowering prices. Vietnam entered the market as a major coffee producer, as did other countries. Furthermore, frosts that adversely affected the Brazilian crops in 1995 and 1997 led prices to increase sharply, but only temporarily. The most profitable part of the coffee industry has meanwhile become the processing, roasting, and marketing, which is concentrated in a few major multinationals based in developed countries. This has led coffee producers, many who have been growing coffee for generations, into poverty for lack of decent prices or better alternatives. A variety of initiatives have been created to try to make the coffee industry more sustainable and assist producers.
"Oxfam applauds US intention to rejoin International Coffee Organization (ICO)," OXFAM INTERNATIONAL, 15 September 2004; "United States to Rejoin the International Coffee Organization," ICO, 16 September 2004; "US to rejoin International Coffee Organization," AXCESS NEWS, 15 September 2004; "Sustainability in the Coffee Sector: Exploring Opportunities for International Cooperation," UNCTAD and IISD, 2003.