International Coffee Agreement
Encyclopedia
The International Coffee Agreement (ICA) is an international commodity agreement
aimed to achieve a reasonable balance between the supply and demand
of coffee
at a higher price than would otherwise be the case. Export quotas
are the principal instruments used. The original agreement was signed in 1962 for a five-year period, and since then there have been five subsequent agreements, ratified in 1968, 1976, 1983, 1994, and 2001. The ICA 2007 will enter into force once approved by two-thirds of the exporting and importing signatory governments.
, the International Coffee Agreement of 2001 has 77 members, of which 45 are exporting members, and 32 importing.
. The war had created the conditions for a Latin American coffee agreement: European markets were closed off, the price of coffee was in decline and the United States feared that the declining price could drive Latin American countries—especially Brazil—towards Nazi
or Communist
sympathies. In 1940, the United States agreed to restrict its imports to a quota of 15.9 million bags, and other Latin American countries agreed to restrict their production. The agreement had an immediate effect, the price almost doubled by the end of 1941. After the end of the war in 1945 the price of coffee rose continuously until 1955-57 when a degree of equilibrium
was reached. Producers sought ways to maintain the price, this led to the first International Coffee Agreement. A target price was set, and export quotas allocated to each producer. When the indicator price set by the International Coffee Organization
(ICO) fell below the target price, quotas were decreased; if it rose above it, quotas were increased. Although the system had its problems, it was successful in raising and stabilizing the price.
The International Coffee Organization was established in 1963 to administer the clauses of the agreement and supervise the mechanisms in place. Until 1986 the Coffee Council, the decision-making body of ICO, approved export quotas.
In 1989, ICO failed to reach an agreement on new export quotas, causing the 1983 ICA to break down. Without an extended agreement producing countries lost most of their influence on the international market. ICO's average indicator price for the last five years previous the end of the regime fell from US$1.34 per pound, to US$0.77 per pound for the first five years after.
International commodity agreement
An international commodity agreement is an undertaking by a group of countries to stabilize trade, supplies, and prices of a commodity for the benefit of participating countries. An agreement usually involves a consensus on quantities traded, prices, and stock management...
aimed to achieve a reasonable balance between the supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
of coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
at a higher price than would otherwise be the case. Export quotas
Quota share
A quota share is a specified number or percentage of the allotment as a whole , that is prescribed to each individual entity ....
are the principal instruments used. The original agreement was signed in 1962 for a five-year period, and since then there have been five subsequent agreements, ratified in 1968, 1976, 1983, 1994, and 2001. The ICA 2007 will enter into force once approved by two-thirds of the exporting and importing signatory governments.
, the International Coffee Agreement of 2001 has 77 members, of which 45 are exporting members, and 32 importing.
History
The precursor to the ICA was the Inter-American Coffee Agreement (IACA) established during the Second World WarWorld War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. The war had created the conditions for a Latin American coffee agreement: European markets were closed off, the price of coffee was in decline and the United States feared that the declining price could drive Latin American countries—especially Brazil—towards Nazi
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...
or Communist
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
sympathies. In 1940, the United States agreed to restrict its imports to a quota of 15.9 million bags, and other Latin American countries agreed to restrict their production. The agreement had an immediate effect, the price almost doubled by the end of 1941. After the end of the war in 1945 the price of coffee rose continuously until 1955-57 when a degree of equilibrium
Economic equilibrium
In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change. It is the point at which quantity demanded and quantity supplied are equal...
was reached. Producers sought ways to maintain the price, this led to the first International Coffee Agreement. A target price was set, and export quotas allocated to each producer. When the indicator price set by the International Coffee Organization
International Coffee Organization
International Coffee Organization was initiated in collaboration with UN to enhance cooperation between nations that consume, distribute and produce coffee....
(ICO) fell below the target price, quotas were decreased; if it rose above it, quotas were increased. Although the system had its problems, it was successful in raising and stabilizing the price.
The International Coffee Organization was established in 1963 to administer the clauses of the agreement and supervise the mechanisms in place. Until 1986 the Coffee Council, the decision-making body of ICO, approved export quotas.
In 1989, ICO failed to reach an agreement on new export quotas, causing the 1983 ICA to break down. Without an extended agreement producing countries lost most of their influence on the international market. ICO's average indicator price for the last five years previous the end of the regime fell from US$1.34 per pound, to US$0.77 per pound for the first five years after.
External links
- List of members of the International Coffee Agreement of 2001 from the International Coffee OrganizationInternational Coffee OrganizationInternational Coffee Organization was initiated in collaboration with UN to enhance cooperation between nations that consume, distribute and produce coffee....
's website