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TRADE: U.S. Takes a Step Towards the Coffee Table

Sanjay Suri

LONDON, May 21 2004 (IPS) - The United States is considering rejoining the International Coffee Organisation later this year, a U.S. trade official indicated Friday.

The signal came following a meeting of the International Coffee Organisation (ICO) in London this week. The U.S. delegation attended as observers.

As the world’s largest consumer of coffee, participation of the United States could transform the functioning of the ICO. The United States imports about 20 million bags of 60kg each a year, the traditional way of measuring coffee exports.

The U.S. delegation sounds cautious for now. U.S. trade delegates only discussed the terms on which the United States may join the ICO, trade official Andrew Stephens told media representatives Friday.

The ICO meeting laid “a firm foundation for concluding our deliberations in taking a decision on joining the ICO in the near future,” Stephens said.

The ICO has been more than keen for the United States to join. To that end it amended the controversial resolution 407 of the ICO that the United States has objected to.

Resolution 407 comprised several recommendations that members were required to implement for improvement of the quality of coffee. These included limits on defects both for the high quality Arabica variety and the more common Robusta.

The ICO has now made adherence to quality standards voluntary. Members are only “requested” now to uphold certain standards, “bearing in mind the voluntary nature of this programme.”

ICO executive director Nestor Osorio told media representatives Friday that the change was justified because the ICO had no means to enforce Resolution 407.

“Resolution 407 as it was meant (is) an obligation without means of enforcement, without sanctions or ways to enforce it,” Osorio said.

That has now been replaced by Resolution 420. “This maintains quality standards and an improvement programme as something to be encouraged and promoted,” director of operations at ICO Pablo Dubois told IPS.

The United States had objected to Resolution 407 on the ground that it amounted to a trade restriction. “But they did not object to the concept of a quality improvement programme,” Dubois said.

Resolution 407, though not enforceable, did lead many countries to take measures to improve the quality of coffee, Dubois said. That aim has been retained in the new resolution “to improve consumption, encourage sustainability and to work for consumer satisfaction,” he said.

Inclusion of the United States in the ICO can bring a lot of benefits, he said. “As the world’s largest single consumer the United States has a very strong coffee industry, and a lot of consumer groups,” Dubois said. It could also support the ICO in encouraging the consumption of coffee, he said.

“Potentially the United States could also help with additional funding for coffee development projects,” he said. The ICO has a 60 million dollar budget for promotion of coffee funded largely by the United Nations and the European Union.

A U.S. decision to join would not have a direct bearing on coffee prices, which have been slowly recovering this year. “But it would indicate a commitment to a more sustainable coffee economy,” Dubois said. “People cannot be expected to continue to make losses.”

Low coffee prices in recent years have shattered hundreds of thousands of producers around the world. But from a composite indicator price of 41 cents a pound in September 2001, the price of coffee has recovered to around 60 cents a pound at present.

(It is usual in the coffee trade to speak of trade in terms of 60kg bags, but of price in terms of pounds; 2.2 pounds make a kilogram.)

The composite indicator combines the average price of coffee taking 65 percent Arabica and 35 percent Robusta.

The price recovered from an average of 48 cents in 2002, and 52 cents last year to its present level, despite a small drop in April. That drop was only “a marginal correction”, Osorio said. It had nothing to do with the fundamentals of coffee, and could have been caused by players who entered the coffee market to speculate, he said.

The ICO is now preparing for new strategies after the expected inclusion of the United States in October this year. The United States quit the ICO about ten years ago in protest against what it saw as ICO attempts to control prices through quotas.

The ICO now talks a different language that the United States is far happier with. The ICO has to work “in the economic climate in which we live,” Osorio said. The strategies “used to be protest 20 years ago, now it is a market approach.”

Inclusion of the United States in the ICO is an important goal, Osorio said. “When you are trying to obtain the best results in international cooperation, and that is so important for 50 producing countries that depend on coffee to some extent, then inclusion of importing countries is a part of that scheme of cooperation.”

The ICO is planning to work hard to get the United States to the coffee table. “If things move along in a positive manner, and there are still things to clarify in terms of the administrative side of the agreement, the United States could be a member of the organisation by the first of October, 2004,” Osorio said.