International Coffee Organization: Regulating The Black Gold (Part II)

by Shreya Kaul

QUANTITATIVE EVALUATION

ICO’s honest endeavor is to function as a cost-effective organization since it’s funded by a miniature budget and consists of just 25 staff members. ICO is punctual in releasing Annual and Monthly Reports containing statistics related to market trends, total production and consumption, exports, imports, retail prices, etc. From a quantitative and budgetary perspective, contributions by the Members are in proportion to the number of votes which each Member held, which is determined by analyzing their coffee exports or imports in the past 4 years. Accordingly, Brazil, Colombia, European Union and Vietnam have been the principal contributors. Furthermore, USD 105 million and USD 300,000 were contributed by the Common Fund for Commodities and the ICO Promotion Fund respectively.

The above presented data (released by ICO) is crucial for global coffee oriented stakeholders for understanding the pulse of the market.

QUALITATIVE AND CRITICAL REVIEW OF THE ICO

Even though each IO attempts to attain perfection for securing global public interest, it perpetually encounters challenges that slacken its progress. The author attempts to critically and qualitatively analyze ICO’s deficiencies and obstacles, thereafter providing pertinent recommendations for issue resolution.

Even after 50 years since its inception, ICO has failed in promoting small farmers’ welfare through the endorsement of fair trade machinery which actually guarantees underprivileged farmers a sustainable wage and crop diversification opportunities in consonance with their hard work. If fair trade is appropriately actualized by ICO, small-time coffee farmers would receive adequate incentives for continuing efficient farm work.

Notably, climate change has had a significant detrimental impact on coffee farmers. Small and middle size farmers have been combating increasingly lesser access to the required resources. Further, the woes of the farmers are exacerbated by their plummeting social standards, fluctuating coffee prices and the non-fructification of the fair trade regime. Despite these challenges being apparent, the ICO has been unsuccessful in harnessing its resources to ensure that the coffee market is environmentally, socially and economically viable.

In the contemporary context, the ICO has been reeling with the grim after-effects of the Covid-19 pandemic. A composite demand and supply jolt has hit the coffee industry. This has mainly been a consequence of delayed contract fulfillment, stockpiling, market shrinking, lack of labour and social distancing and lockdown norms that have been promulgated by governments. These unfortunate developments are well beyond ICO’s control. Resultantly, Guatemala has recently exited the ICO stating its lack of direction as the major cause. For mitigating the damage of this coffee crisis and price volatility (see figure below), ICO launched the Coffee’s Next Generation Initiative for encouraging entrepreneurs and small scale family farmers involved in the coffee sector for boosting their morale in light of the merciless pandemic. The initiative provides for training and skill development in the areas of coffee-related knowledge, financing and networking.

RECOMMENDATIONS

The following practicable recommendations can be adopted by the ICO to combat the aforementioned hindrances:

For tackling the issue of unsuccessful implementation of the fair trade regime, it’s proposed that the WTO members engage in agricultural liberalization and forsaking of singular agricultural exceptions for tariffs and subsidies, thereby benefitting not just the farmers, but also the consumers.

Further, it’s also recommended that certain collusive measures need to be adopted for addressing the composite failings of the ICO (with regards to market standardization and feasibility) through increased and enhanced data collection and dissemination, intensification of membership engagement and initiation of frequent and guided dialogues amongst Members and private entities, while promoting coffee development projects.

Additionally, to prevent the spread of Covid-19 infections and to propel the global coffee demand, collaboration can be sought from international financial institutions for ensuring the reduction of coffee taxes, with the eventual aim of developing far-sighted sustainability regimes.

CONCLUSION

Having critical analyzed ICO through multifarious facets, the author would conclude this article by presenting the below figure:

It’s evident that the pandemic has led to a worldwide coffee price crisis, with significant drops in coffee shipments. The author notes that even though ICO isn’t an entirely autonomous body, it certainly possesses sufficient independence, ICC’s authority and inter-governmentality, which can be used for fulfilling its objective of guaranteeing the welfare of all the stakeholders in the coffee market. When the first ICA, 1963 was adopted, it proved to be quite impactful in handling the depressed coffee process; similarly, the current concerns of ICO, especially in face of the pandemic can be resolved through international, transparent dialogue, conscious participation and forward-looking robust Coffee Agreements, to avert a potential gigantic coffee price crisis.

Views are personal.

Image Credits: iPleaders Blog

About the Author

Shreya Kaul is currently a fourth year B.A. LL.B. (Hons.) student at Symbiosis Law School, Pune.

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