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The International Coffee Organization was established in 1963 when the first International Coffee Agreement (ICA) entered into force in 1962 for a period of five years, and it has continued to operate under successive Agreements negotiated since then. These include the ICA 1968 (and its two extensions), the ICA 1976 (with one extension), 1983 (and its four extensions), the 1994 Agreement (with one extension) and the 2001 Agreement (with three extensions). The text of the latest Agreement, the ICA 2007, was adopted by the Council in September 2007. It will enter into force once signatory Governments with two-thirds of the votes of exporting and importing Members, respectively, have deposited their instruments of ratification, acceptance or approval.
BackgroundCoffee is a tree crop which became an important commodity in international trade during the nineteenth century. Since then it has suffered from long periods of over supply and low prices followed by relatively brief periods of short supply and high prices. In more recent times, during the period of severe economic depression in the 1930s and during the second World War from 1939 to 1945, supply increased, demand fell and prices were low. In the immediate post‑war years, however, demand increased and supplies were inadequate to satisfy this rising demand. Between 1950 and 1953 stocks reached levels below the minimum needs for normal trading purposes, a situation which was exacerbated by the outbreak of the Korean War and a serious drought in Brazil, which was followed by a frost. Prices rose to unprecedented heights in 1953. This gave rise to a substantial increase in planting throughout the world and over‑production followed. Stocks increased and, in the second half of the 1950s and early 1960s, prices fell drastically. This led to an intergovernmental initiative to attempt to stabilize the market and to halt the fall in prices which had had serious economic and political consequences for a large number of coffee producing countries in Latin America and Africa.
Following a series of short-term Agreements between producing countries, a Coffee Study Group was formed to consider negotiating an Agreement to include both exporting and importing countries. The outcome of the work of the Study Group was the successful negotiation at the United Nations headquarters in New York of the International Coffee Agreement 1962. This was followed by a second five-year Agreement in 1968. These two Agreements contained provisions for the application of a quota system whereby supplies of coffee in excess of consumer requirements were withheld from the market. Under other provisions, production and diversification policies were initiated to limit supplies of coffee and promotion activities instituted to increase consumption.
The operation of these Agreements helped prices to remain relatively stable throughout the years 1963 to 1972, and production and consumption became more evenly balanced. These first two Agreements contributed significantly to strengthening the economies of the coffee producing countries and the development of international trade and cooperation.
Changes in the pattern of supply and demand, resulting in an increase in prices, led to the collapse of the quota system in 1973, and the 1968 Agreement was extended with all economic provisions deleted. The Organization continued as a centre for collecting and disseminating information and as a forum for negotiating a new Agreement.INTERNATIONAL COFFEE AGREEMENT 1976
The International Coffee Agreement 1976 was negotiated in 1975 against the background of a market situation radically different from that which had prevailed during the negotiation of the Agreements of 1962 and 1968 when the supply of coffee in excess of consumer requirements tended to depress prices. By 1975, mainly as a consequence of a serious frost in Brazil, the world's largest producer, doubts concerning the adequacy of supplies to meet demand in the immediate future were reflected in a sharp increase in prices. These considerations influenced Members when negotiating the 1976 Agreement to introduce a number of new provisions to strengthen and improve the functioning of the Organization in addition to retaining many of the provisions which had proved effective during the previous Agreements.
One of the principal new features of the 1976 Agreement was that it allowed for the suspension of quotas if prices were high and their reintroduction if prices became too low. Under this system, quotas were reintroduced in 1980. The experience gained in administering the 1976 Agreement provided a sound basis for negotiating the fourth Agreement, which entered into force in 1983.INTERNATIONAL COFFEE AGREEMENT 1983
The principal economic features of the 1983 Agreement were the following:
As under all previous Agreements, the Organization collected and disseminated data on all matters related to coffee to facilitate a rapid implementation of the economic Articles of the Agreement and redress any imbalances which might arise. It acted as a centre for studies and economic research on the production, distribution and consumption of coffee. Statistical information obtained from Members and through the operation of the Controls System was computerised for rapid access and analysis. A public database service, COFFEELINE, was established to provide a wide range of information on coffee.
Quotas and controls remained in effect for most of the subsequent yearsunder the 1983 Agreement until February 1986 when market prices exceeded the trigger point for their suspension. Under the provisions of the Agreement, the Organization continued to operate its full range of activities in a non‑quota period (other than quotas and controls). Market prices fell below the trigger point for the reintroduction of quotas and controls in December 1986. After lengthy negotiations, quotas and controls were reintroduced on 6 October 1987 and remained in effect until 4 July 1989. On that date the Council recognized that it would not be able to negotiate a new Agreement in time for it to enter into force on 1 October 1989 when the 1983 Agreement was due to terminate. It decided, therefore, to recommend to Governments the extension of the 1983 Agreement for a period of two years from 1 October 1989 to 30 September 1991, with its quota and controls provisions suspended. The verification of stocks was also discontinued, as were the provisions relating to production policies; in addition a decision was taken to wind up the activities of the Promotion Fund.
Members accepted the recommendation of the Council and the 1983 Agreement was duly extended. The extension was designed to allow time for the negotiation of a new Agreement. Throughout the first year of the extension of the Agreement Members continued to develop ideas on finding solutions to the problems encountered during the operation of the 1983 Agreement. Negotiations for a new Agreement were initiated but, despite the stated political will and constructive spirit of Members, the negotiations were inconclusive. In these circumstances the Agreement was extended for an additional year until 30 September 1992, in order to allow additional time for the continuation of consultations among Members to identify the framework for a new International Coffee Agreement.
The process of negotiating a new Agreement gained new impetus with the fall of prices to record lows during coffee years 1990/91 and 1991/92, and the Council agreed to a further extension of the Agreement until 30 September 1993. At the same time it decided to establish a Working Group to carry out a wide-ranging review of all proposals and ideas on future cooperation on coffee matters. This duly led to the formation of a Negotiating Group which was given a mandate to negotiate a new Agreement based on a universal export quota system. However, in spite of extensive negotiations, it proved impossible to reach a satisfactory conclusion by the required deadline of 31 March 1993. The Council therefore resolved in June 1993 to extend the Agreement until 30 September 1994 in order to maintain the Organization as a forum for international cooperation on coffee matters and to allow time to negotiate a new Agreement. This time, Members concentrated on negotiating an Agreement which did not set out to regulate coffee prices. This process concluded successfully with the negotiation of the International Coffee Agreement 1994, which entered into force on 1 October 1994.
Under the provisions of the 1994 Agreement the work of the Organization focussed on areas such as:
Six major projects valued at over US$50 million were approved between 1995 and 2000. Funding was mainly secured from the CFC, but significant co-funding from other bodies such as the European Union and bilateral donors was achieved. Areas covered included quality improvement, pest control and improvement of marketing structures. Studies were carried out in areas such as coffee price determination and volatility, organic coffee, and the formation of a global research network on coffee. Seminars were held on coffee and its environmental impact and a new body, the Coffee Industry and Trade Associations Forum (CITAF) was formed to provide a voice for the private sector, allowing representatives of industry associations in producing and consuming countries to come together to address matters of common concern.
The Organization also made use of remaining resources in the Promotion Fund established under the 1976 and 1983 Agreements to embark on a promotional programme in new markets, specifically
In July 1999 the International Coffee Council adopted Resolution 384 providing for the extension for two years from 1 October 1999 of the ICA 1994. In addition a Negotiating Group, chaired by Mr. Arnoldo Lopez Echandi of Costa Rica, was established to draft the text of a new Agreement by 30 September 2000.
A new Article on standards of living and working conditions encouraged Members to give consideration to improving the standard of living and working conditions of populations engaged in the coffee sector. Another new Article on Promotion established a Promotion Committee composed of all Members of the Organization and provision for contributions pledged by Members and other interested parties. Two other new Articles formalised the involvement of the private coffee sector in the work of the Organization through the Private Sector Consultative Board and the holding of regular World Coffee Conferences, bringing high-level government and private sector representatives to discuss matters of common concern.
INTERNATIONAL COFFEE AGREEMENT 2007
The text of the seventh International Coffee Agreement, the 2007 Agreement, was agreed by the 77 Members of the International Coffee Council, meeting in
The overall objective of the Agreement 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. Other new objectives include:
The Agreement recognizes the contribution of a sustainable coffee sector to the achievement of internationally agreed development goals, including the Millennium Development Goals (MDGs), particularly with respect to poverty eradication. New provisions include:
In place of the Executive Board, which has been eliminated, three new Committees (a Projects Committee, a Promotion and Market Development Committee and a Finance and Administration Committee) will assist the Council in its work.
The 2007 Agreement will have a duration of ten years, with the possibility of extending it for up to a further eight years. On 25 January 2008, the Council approved Resolution 436 designating the International Coffee Organization as the Depositary for the ICA 2007.