July 8, 2008

The International Coffee Agreement is currently being ratified. Will it solve the coffee crisis?

I wrote yesterday about the on-going crisis in cocoa farming. Transnational corporations have not delivered on their undertakings to end child slavery in their supply chains. Low prices, which fuel exploitation, are exacerbated by corporations encouraging new producers to enter the market at any sign of price increases. It has been proposed that there should be an international secretariat to oversee cocoa supply management. This may be an appropriate issue to be addressed in the Simultaneous Policy. On the other hand, those who believe that a free market should set prices without any controls are welcome to put forward alternative views and vote accordingly. See:

Cocoa is not the only food commodity in crisis. Coffee is another that has been the subject of much study and campaigning. A few years ago, Oxfam launched a report called Mugged: Poverty in Your Coffee Cup and a campaign aimed at improving the position of coffee farmers. Amongst its recommendations was that the oligarchy of coffee processors source an increasing percentage of their coffee from Fair Trade certified producers. One of them, Nestlé, made a public relations splash of its launch of a Fairtrade-marked coffee, though drew much criticism for using it to cover up its negative impact on coffee farmers, particularly as the number of farmers involved represented just 0.1% of those dependent on the company. See:

Oxfam also called for a Commodity Management Initiative, with proposed outcomes including: "Producer and consumer country governments establishing mechanisms to correct the imbalance in supply and demand to ensure reasonable prices to producers. Farmers should be adequately represented in such schemes."

In its latest update, Oxfam is claiming some progress through a new International Coffee Agreement, signed in September 2007. The agreement can be downloaded from the site of the International Coffee Organisation. See:

These developments should make it clear that in calling for policies to address global problems, the Simultaneous Policy campaign is not being outlandish. Such policies are being developed as we speak, with varying degrees of democratic accountability and transparency. The SP campaign does not necessarily have to include new proposals. Adopters can be forward existing measures for discussion and approval through the democratic process. Significantly, however, it is the people who are in charge of this process, not vested interests who play countries off against each other.

The International Coffee Agreement has, like many international agreements and conventions, a similarity with the Simultaneous Policy in that it is due to come into force when a trigger level of governments party to it have ratified it. Given that this may not happen, the Agreement is to come into force provisionally on 25 September 2008. If the trigger level isn't reached by 25 September 2009, its provisional nature may be extended, those governments that have ratified it can decide it comes into force amongst themselves, or it will fall. The International Coffee Organisation is tracking the state of ratification.

One thing the Agreement does not talk about it setting quotas. Rather Articles 36 states:

Sustainable coffee sector

Members shall give due consideration to the sustainable management of coffee resources and processing, bearing in mind the principles and objectives on sustainable development contained in Agenda 21 adopted by the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992 and those adopted at the World Summit on Sustainable Development held in Johannesburg in 2002.

'Giving due consideration' to sustainable development is a formulation which could be satified by a note in the minutes of a meeting, rather than having a tangible impact.

Quotas, or some other form of market control trying to meet supply and demand more closely, are disliked by business interests as market distortions. Yet it is also a market distortion for Nestlé to encourage farmers in Vietnam and China to enter into coffee production, so further exacerbating supply. It is also a market distortion when the oligarchy of coffee processors has the power to compel farmers to accept below the cost of production when competition for buyers is particularly great.

Tarif barriers on processed coffee is another market distortion and one recognised in the International Coffee Agreement, which states in Article 37:

Standard of living and working conditions

Members recognize the need of developing countries to broaden the base of their economies through, inter alia, industrialization and the export of manufactured products, including the processing of coffee and the export of processed coffee, as referred to in sub-paragraphs (d), (e), (f) and (g) of paragraph (1) of Article 2 [definitions of different types of processed coffee]. In this connection, Members should avoid the adoption of governmental measures which could cause disruption to the coffee sector of other Members.

What this means in practical terms is a little unclear. On the one hand it recognizes that export countries can keep more of the value-added phase in their countries by industrializing and exporting processed coffee, but on the other hand this should not cause disruption to other Members. If processing becomes more local to production, would this not be to the detriment of processing in industrialized countries?

That the issue of trade barriers is being addressed, show how global problems such as the poverty of coffee farmers cut across other issues. In the context of the Simultaneous Policy, there could be further linkage, with the true cost of transport being factored in through, for example, a tax on carbon emissions.

The International Coffee Agreement is limited to coffee. It involves importing and exporting governments and international organisations as Members and is to have a Private Sector Consultative Board consisting of growers, exporters, importers and roasters.

The Simultaneous Policy enables a bigger picture view in other regards. The coffee crisis impacts on other issues such as food security, poverty, the environment and involvement in the drugs trade (an attractive cash crop when coffee prices collapse). These are issues that the world has to deal with or suffer the consequencies. A cross-cutting and joined up response where vested interests are not in the driving seat should produce better solutions.

The book Global Obligations for the Right to Food (order on the right) suggests governments should be giving consideration to food security in any case when developing global governance procedures, which is what the International Coffee Agreement is. The analysis of existing human rights instruments by Professor George Kent in the opening chapter of the book contains the following :

"Generally if you have the capacity to protect someone from great harm or you can deliver great benefits and you can do that at small cost or risk to yourself, then you are obligated to do so."

Governments have yet to be convinced of this argument, but we, as individuals, may do so and SP provides the mechanism.

To increase the incomes of coffee farmers, the impact on consumers will be minimal as the percentage of a the price of a cup of coffee that goes to farmers is very small. In the Oxfam report the breakdown suggests that a farmer receives just US$ 0.14 for supplying the coffee for a bag of soluble coffee costing US$ 26.40. If SP Adopters were asked to accept a regime which would more fairly distribute the rewards through the supply chain, affecting the final price slightly or not at all, and were being asked to do so by Adopters along that chain, then an seemingly unresolvable problem could be resolved.

Under the present system, it is the unremitting driving down of costs by those who hold power in the supply chain that results in such inequality in the sharing of rewards.

There were problems last time a quota system was tried, with free-riders producing poor quality coffee and the way some governments divided up licences. These should be learned from in designing whatever system more effectively matches supply and demand. Experts in this field are very welcome to submit proposals for consideration by other SP Adopters. See the Simpol websites for information on how to do so.

1 comment:

Arya said...


I invite you to read a copy of a letter addressed to Nestor Osorio - Executive Director of the ICO - with regards to the role & responsibility of the ICO and the ICA's in the (ongoing) coffee "crisis" which has led to the ECONOMIC GENOCIDE of millions of coffee farmers worlwide.

I welcome you comments & feedback.

Thank you.



Link: http://yajnacentre.blogspot.com/2008/06/coffee-crisis.html