Making Coffee Good to the Last Drop: Laying the Foundation for Sustainability in the International Coffee Trade

Georgetown International Environmental Law Review, Winter 2004 by Brown, Grace H

American traders . . . had no concern for what was happening to the landscape of [coffee] supplying countries. American consumers knew virtually nothing of the ecological or social circumstances that supported their daily rituals: a first morning cup at home, a mid-morning coffee break at the workplace, and then a final cup with dessert in the evening.

- Richard P. Tucker1

I. INTRODUCTION

Unknown to most U.S. coffee drinkers, an unprecedented combination of coffee oversupply, low coffee prices, and poor bean quality has erupted into a global coffee crisis.2 This crisis threatens the quality of life for coffee farmers, harms the biodiversity of coffee-growing ecosystems, and endangers the health of both coffee growers and consumers.3 These problems were mitigated in the short-term from the early 1960s to the late 1980s when the coffee market was regulated under a series of International Coffee Agreements.4 In 1989, the rigid Agreement structure was abandoned in favor of a liberalized coffee market, a move supported by the United States, to bring greater wealth to all the players in the coffee industry.5 However, instead of producing these intended profits, the unregulated market catalyzed negative social and environmental spillover effects that continue to worsen. Activist groups, in response, mobilized to fill the regulatory void by organizing various coffee labeling initiatives geared to channel buying-power towards certain "sustainable" coffee brands.6 Yet these private initiatives to build a more sustainable international coffee trade have proven inadequate because consumer coffee campaigns remain disorganized and ineffective.

This paper analyzes why current initiatives have inadequately addressed the negative social and environmental spillover effects caused by the failures of the unregulated coffee market. Accordingly, I recommend new actions that coffee activists and the U.S. government should take to build a sustainable coffee trade for producers, suppliers, other industry players, and coffee drinkers. In Part II, I explore the background of the international coffee trade and the reasons for the current coffee crisis. In Part III, I explain how existing public and private initiatives have failed to deal with the problems caused by the unregulated coffee market. In Part IV, I draw from the "best practices" of other sustainable trade models and suggest similar WTO-compliant actions that should be taken to revive current public and private initiatives. First, activists should organize a more robust consumer campaign by promulgating a uniform sustainable coffee label. second, the United States should implement national coffee standards and address the coffee issue in future trade negotiations with producing countries. The negative spillover effects caused by the failures of the unregulated coffee market will only worsen if left to the free market. Thus, I conclude by arguing that revitalized private and public initiatives are needed to make headway against current problems and to lay the foundation for a sustainable international coffee trade.

II. THE INTERNATIONAL COFFEE TRADE

A. COFFEE'S GLOBAL IMPORTANCE

Coffee is a remarkably vital commodity in the global economy.7 Coffee is second only to oil as the most profitable legal export commodity in the world, with revenues from coffee sales exceeding U.S. $70 billion annually.8 Two-thirds of the world's coffee is produced in Latin America, with the remainder coming from African and Asian producers.9 Coffee is also a significant source of export income for many developing countries.I0 For example, Mexican coffee exports to the United States account for one-third of Mexico's total agricultural exports. ' ' In turn, coffee is the third largest import into the United States, behind oil and steel respectively. The United States is the world's largest coffee consuming country, while the United States, the European Union, and Japan together import 80% of world production.12

Coffee is also one of the few internationally traded commodities predominantly produced by small farmers.13 Of the 25 million coffee farmers worldwide, approximately 75% are smallholders of land.14 Smallholders often form cooperatives to harvest their coffee together; these cooperatives are the economic backbone of their smallholder communities.15 Cooperatives in coffee communities have financed schools and hospitals, built bridges and other major infrastructure projects, and provided training for farmers.16 However, low coffee prices have forced farmers to abandon their fields, leaving many communities and national economies unstable. Thus, the "disappearance of a viable coffee sector has undermined years of social and economic investment by the industry. Farmers have not only lost their livelihoods, but have lost their way of life."17

B. THE RISE AND FAEL OF COFFEE MARKET REGULATION

The coffee market has historically been plagued by severe price fluctuations because of the inelastic nature of coffee supply and demand in the short term.18 In basic economic terms, inelasticity indicates the fact that "production and consumption do not change significantly with changes in price."19 This inelasticity makes the instability of the market for coffee the highest ranked, tied with the cocoa market, among all agricultural products.20 Even with a drop in coffee prices, coffee farmers are unlikely to reduce production, and hence supply, because farmers are so dependant on the trade and have few alternatives to growing other crops.21 On the flip side, even with a drop in prices, demand does not change because consumers do not see changes in the price due to the structure of the coffee industry. The coffee industry is a strict oligopsony, where a few global coffee roasters acquire beans from farmers by way of a small number of middlemen.22