International Coffee Agreement 2007 - Benefits of membership
The International Coffee Agreement (ICA) 2007 is a key instrument for international cooperation in the field of coffee and membership of the Agreement is in the best interests of Governments and the world coffee industry, for political, social and economic reasons.
The ICA 2007, the seventh Agreement since 1962, was agreed by the 77 Members of the International Coffee Organization (ICO) in London on 28 September 2007. It entered into force definitively on 2 February 2011 and will last for ten years, with the possibility of extension for a further eight years. Its main objective is to strengthen the global coffee sector and promote its sustainable expansion in a market-based environment for the betterment of all participants in the sector.
The 2007 Agreement will strengthen the ICO’s role as a forum for intergovernmental consultations, facilitate international trade through increased transparency and promote a sustainable coffee economy for the benefit of all stakeholders and particularly of small-scale farmers in coffee producing countries. As was the case with the 1994 and 2001 Agreements, it has no market-regulatory clauses.
The ICA 2007 is an important instrument for development cooperation: a third of the ICO’s exporting Members are least developed countries (with low incomes and high economic vulnerability), and the Preamble specifically acknowledges the contribution of a sustainable coffee sector to the achievement of internationally agreed development goals, including the Millennium Development Goals, particularly with respect to poverty eradication.
Important innovations include a Chapter on the development and funding of coffee development projects, and the establishment of a Consultative Forum on Coffee Sector Finance, responding to the need for increased access to information on topics related to finance and risk management in the coffee sector, with particular emphasis on the needs of small and medium-scale producers. The range of statistical data is expanded, enhancing market transparency, and a Promotion and Market Development Committee oversees activities including information campaigns, research, capacity-building and studies related to coffee production and consumption.
Importance of International Cooperation on Coffee
Coffee is the one of the world’s most important commodity exports, produced in more than 50 developing countries. It makes an important contribution to socio-economic development and poverty alleviation and is of exceptional economic importance to exporting countries, some of which rely on coffee for over half their export earnings. With some 94% of the world’s coffee produced by 25 million smallholder farmers and their families, coffee is an important source of cash income and responsible for significant employment.
During the coffee crisis which lasted from 2000 to 2004, coffee prices fell to their lowest levels in 30 years, and producers saw their export earnings halve since the early 1990s, from around US$12 billion to US$5.5 billion. This had devastating social, economic and political consequences for countries throughout Africa, Asia and Latin America, leading to coffee farms being neglected or abandoned, and increasing poverty and migratory pressures.
The economic value to consuming countries can be gauged by the fact that the value of retail sales has more than doubled since the early 1990s. Coffee is responsible for significant employment, and also plays an important social role with over 600 billion cups consumed every year. If farmers are forced to neglect their farms because of low prices, the supply of quality coffee to the coffee industry in consuming countries is jeopardized.
Working towards securing a healthy world coffee economy is therefore important economically and politically in importing countries as well as being desirable from the viewpoint of encouraging sustainable socio-economic development, both to improve living standards in producing countries and to increase markets for goods produced in consuming countries.
As the only International Commodity Body for coffee, and a respected intergovernmental organization which speaks for both producers and consumers, in consultation with the private sector, the ICO has a focal role to play in channelling international cooperation by almost 80 Government and developing effective political solutions and coffee policy. Its exporting Members account for over 98% of world coffee production and its importing Members are responsible for around 83% of coffee consumption in importing countries.
A streamlined decision-making structure and low annual membership costs enable Governments to contribute to developing policies on global issues affecting their coffee industries, from sustainability to food safety, coffee quality and market transparency.
Benefits of Membership
Government relations and close contacts with the private sector: Members are entitled to appoint representatives on the International Coffee Council, which meets twice a year at the ICO headquarters in London to review the coffee market situation and develop coffee policies and priorities. Membership also facilitates close contacts with the private coffee sector through the Private Sector Consultative Board, made up of high-level representatives of exporting and importing associations, which advises the Council on matters of real practical relevance to coffee such as positive communication on coffee, food safety and sustainability.
Coffee policy development: Membership allows access to a unique forum where producing and consuming countries can discuss key issues and difficulties relating to international coffee trade, and develop timely policies and solutions. For example consideration of contamination from mould formation resulted in a multi-year US$6 million project to reduce mould formation and the incidence of Ochratoxin A (OTA) in coffee. This project was designed to increase both the safety of coffee and farming income in the developing world. Joint implementation of the 5-year project by the ICO with the Food and Agriculture Organization in Asia, Africa and Latin America has already led to a decline in average OTA intake from coffee in Europe. This, in turn, convinced the EU to abandon a proposal to impose a maximum limit for OTA in green coffee, saving the coffee industry in excess of US$100 million annually. In the case of the 2000-2004 crisis of low prices in the sector, the ICO developed an approach to improve the world supply and demand balance which included promoting initiatives to increase consumption, improving quality and establishing a diversification programme which could encompass efforts to undertake specific projects to generate complementary earnings for growers, such as the introduction of new crops, without eliminating coffee growing itself.
Coffee sector finance: A Consultative Forum on Coffee Sector Finance facilitates consultations on topics related to finance and risk management in the coffee sector, with a particular emphasis on the needs of small- and medium-scale producers and local communities in coffee producing areas. Forums deal with topics ranging from aggregation as a platform through which access by small farmers to finance and risk management can be achieved more effectively, to assisting producing countries to engage with multilateral institutions and donors and leverage resources for growers.
Coffee development projects: Membership of the ICO has enabled countries to participate in coffee development projects, currently totalling US$104 million. These are examples of practical assistance by the ICO to the world coffee economy, contributing to sustainable development and poverty reduction in coffee-producing developing countries. Typical action areas involve general coffee problems so that the projects can have an impact in various countries. They include coffee market development, where the ICO has sponsored projects aimed at promoting coffee price risk management access to credit, the development of commodity exchanges, and the strengthening of the commercial and management capacity of producers. The ICO has also promoted projects designed to reduce the incidence of major pests and diseases affecting coffee, such as the coffee berry borer, tracheomycosis and coffee white stem borer, thereby increasing crop quality and revenue for small farmers. In the light of changes at the Common Fund for Commodities, the ICO is reviewing its role on projects which may in the future include assistance with designing projects, matching projects with the priorities of multilateral donors and ensuring that donor agencies are aware of the requirements of the global coffee sector.
Quality coffee: Quality coffee is essential to the world coffee industry and is widely seen as a key means of increasing global coffee consumption. The ICO Coffee Quality-Improvement Programme establishes target standards for exportable coffee such as maximum moisture content, and plays an important role in improving the quality of coffee on the world market in the interests of both producers and consumers. Some 29 producing countries are currently participating in this Programme, covering over 68% of world coffee exports. The consumer benefits from higher overall quality standards in coffee blends, and producing countries benefit from the reduction in the current surplus through elimination from the market of sub-standard coffee, as well as higher prices for better quality coffee. Membership of the ICO enables countries to contribute to efforts to improve the quality of coffee which is in the long-term interests of their coffee sectors.
Increasing demand for coffee: Efforts to promote consumption have a key role to play in achieving a balanced and more sustainable world coffee economy. Membership allows countries to take part in initiatives to promote consumption, such as the Step-by-Step Guide to Promote Coffee Consumption in Producing Countries, which provides practical guidelines to increase demand for coffee. The Organization has also sponsored the creation of the ICO Coffeeclub, a collaborative community on the Internet where participants can interact and develop ways of increasing worldwide consumption in traditional markets and producing countries. Under the 2007 Agreement, an Action Plan to promote consumption includes the goal of promoting value through quality, health, sustainability and differentiation, by building a multi-stakeholder network of partners. It also aims to support producing countries in de-commoditizing coffee through programmes to increase income, with a particular focus on small growers, with the ICO acting as a facilitator.
Positive communication on coffee: ICO Members benefit from the ICO’s ability to mobilize cooperative initiatives with representatives of the private coffee sector in producing and consuming countries. One example is positive communication on coffee – with the ICO working with the private sector to disseminate positive information on coffee to the media and other interested parties. The ICO’s Health Care Professions – Coffee Education Programme, which disseminates information about the various positive health effects of coffee drinking, is an example of great benefit to the coffee sector.
Training and information: ICO Members also benefit from workshops and seminars for Members on topics such as Achieving sustainable supply in the coffee market, Geographical Indications, gourmet coffee and organic coffee which bring together leading experts in these fields, as well as high-level World Coffee Conferences held on a regular basis.
Information and resources: Members have access to objective and comprehensive information on the world coffee market, with regular reports on the market situation and economic studies to inform their decision-making, and comprehensive statistical data on the world coffee trade and economy (around 200,000 records processed each year). The ICO’s website (www.ico.org) provides up-to-date and comprehensive information, while cooperation with organizations such as the International Trade Centre has resulted in practical tools such as a Coffee Guide website with extensive information about the international coffee trade.