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Reviewing the ICO's members' positions.

Reviewing the ICO's members' positions

Seven months after the economic provisions of the ICA collapsed, and without a re-implementation in sight, the time has come for a review of the main players' positions, an assessment of their evolution and an evaluation of the chances of progress.

On the consumers' side, the clearest position is that of the U.S. Administration, which has stated from the beginning that it would support an economic agreement providing in sufficient quantities the coffee types most in demand, and insuring fair pricing (i.e. doing away with a two-tier market subsidizing non-members at the expense of signatories). While neither the U.S. Trade Representative's favored approach, an agreement based on stocks retention, nor a global quota system, have made progress towards a consensus, the U.S. Administration remains open and positive toward an economic ICA. After well publicized pleas by Colombia and other producers, it is apparently working on various options and is a prime candidate to introduce a comprehensive proposal when the time comes and if need be.

The U.S. trade, on the contrary, not having to bear the burden of a foreign policy or of issues far more global more than coffee, overwhelmingly favors a free market: Trading without quotas guarantees importers access to the coffee types they want, and permits them to sell to non-members at the prevailing price, not with the huge discounts (up to 60%) that were mostly the rule up to last year. While the Administration has the upper hand in the negotiating process, any agreement must be ratified by Congress, something difficult to achieve against the will of the trade or of the general public.

In Europe, things are more confused: The E.C. position is by law the resulting force of 12 national positions which encompass all tendencies. France favors any measure boosting coffee prices, while Britain and the Netherlands see the coffee world as a buyers' market and give priority to the consumers' needs. Therefore, a united position implies a lot of compromising and much moderation.

Europe, as a result, would probably back an achievable proposal, but is very unlikely to introduce one.

Other member consumers have positions similar either to the U.S. Administration or to individual European countries, and will choose attitudes along those lines.

Non-member consumers have traditionally not been involved. One sizable exception involves Eastern Europe, where several nations were, last year, not too far from joining: The USSR, East Germany and potentially Czechoslovakia were, as late as last June, given as likely new members. Representing 25 to 30 percent of non-member consumers, they would, if they joined, marginalize the remaining outsiders whose consumption would not exceed six million bags, eight percent or less of the total disappearance.

The considerable upheaval of the last months implies that Eastern Europe now has to tackle more urgent problems than joining the ICO or not. However, a major point remains that the demand for more consumer goods (among which coffee is prominently mentioned) was one of the triggers for the emancipation saga. The gradual new order will involve as much restructuring as assistance from the West, in commodities as in everything else. New membership in the ICO is thus likely...with time.

Among producers, the whole range has been covered, from static to frantic, from vague to clear-cut, from traditional to imaginative.

Colombia's frantic attempt to provisionally reinstate the status-quo which had just failed seemed at first hopeless and messy, but made enough noise to involve the U.S. top authorities, maybe reinforcing the American benevolent approach. A status-quo is out of the question but any U.S. proposal will be due, in part, to Colombia's agitated lobbying.

Brazil remains an enigma, although Mr. Collor de Melo's victory bodes well for the private exporters, who see the ICA as the raison d'etre of the IBC, and who therefore oppose it strongly. With coffee representing no more than seven percent of Brazilian exports and with huge uncertainty over monetary and debt issues, the coffee policy is probably not one of the President Elect's priorities. A clear position will have to wait for new men and for precise figures over the next crop. Final forecasts of 22 or 28 million bags will command different attitudes.

For Africa, and especially for OAMCAF Robusta producers, the motto is "No undue rush." "OAMCAF INFO," the group's newsletter, has repeatedly stated that the July resolution provided for 27 months (of which 20 remain) and that the first months should be used to do away with unjustified preconceptions like "Good Arabica versus Bad Robusta," "Selectivity as a consumer's need," etc...All weighted, African coffee authorities seem to favor and to forecast a quasi resumption of the old system as of 1991/1992, after all producers have firstly felt the cost of having no quotas, and secondly convinced all consumers of the absolute necessity to cooperate. This is what Minister Wapakabulo, of Uganda, chairman of the council, wants to tell Brazil, but only when Brazil is able to act, which is why the trip was postponed.

Indonesia's position is arithmetic and clear-cut: Yes to new quotas as long as Indonesia's share yields more income than a free market, which implies a substantial market share increase.

As to the Centrals, and by extension the Other Milds, they have far been the most active and creative party: Realizing that there was no coming back to the past, they undertook to boost the price of their coffees by devising a clearer retention scheme, somehow the U.S. approach of last year applied to one coffee type. Although details of implementation could gain in precision, the psychological effect coupled with the Mexican frost and the uncertainty over Colombian stocks (as the French saying goes, "Start helping yourself and God will take over. . .") have maintained prices well over 80 cents with prospects to establish a range above $1. At these levels, to quote several Other Milds officials, "We can survive." This approach delights the American Administration which sees a solution to its proteges' pains, the avoidance of a conflict with the U.S. trade, and less pressure to rebuild an economic ICA. In addition, the question of Mexico and Colombia joining the scheme, something important for its long term viability, is given more negotiating time thanks to the frost and stocks problems in those two countries.

If the September 1991 deadline means anything, the next plenary session of the ICO must get things moving towards restoring economic clauses. So far, the minds have just not met. Some sectors in the producer world begin to whisper that, maybe, a new agreement is not needed, joining Brazil which has clamored it all along. With differential between coffee types back to 30-35 percent, other producer groups need an ICA more than ever. The April Council, if and when it takes place, will have a lot of work to reconcile the two approaches.
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Title Annotation:International Coffee Organization
Author:LeBlache, Pierre E.
Publication:Tea & Coffee Trade Journal
Date:Feb 1, 1990
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