What is the International Coffee Agreement?- And how does it affect what you – and the world – pay for the ready availability of coffee?

What is the International Coffee Agreement?- And how does it affect what you – and the world – pay for the ready availability of coffee?

Let’s put a few facts on the table to start from. Coffee is a major economic force in the world. That delicious brew that we enjoy hot, cold, iced, spiced, frapped, creamed and dozens of other ways has been referred to as the poor man’s luxury because it is a luxury that is affordable to most people in the world. Keeping it affordable, unfortunately, has often meant that those farmers who depend on coffee for their sustenance often live at subsistence levels. At the same time, even a small rise in prices can substantially affect the import balances of many major countries, including the United States, so there is a major interest in keeping prices low. In addition, weather and other conditions greatly affect the supply of coffee on the global market.

Before 1963, when the U.N. created the first International Coffee Agreement (IPA) pact, coffee prices often fluctuated wildly due to variances in supply and demand. The IPA established the International Coffee Organization (ICO) to help oversee the export and import of coffee among its member countries. The IPA is an agreement among member countries to abide by certain policies and encourage specific behaviors. Specifically, the IPA 2007 is focused on supporting the development of a stable coffee economy in the developing companies that rely on coffee exports the most. The principles and policies supported by IPA include greener coffee initiatives, educational initiatives and sustainable farming information and technical assistance to farmers. Despite this, a few persistent myths have made some countries, notably the U.S., reluctant to sign the agreement.

Myth #1: The IPA regulates coffee prices and exports.

The IPA has not contained regulatory clauses since 1994. The ICO provides a forum where governments and coffee producers can come together to resolve differences and work out agreements, as well as offering support for coffee initiatives to stabilize the production of quality coffee and a sustainable coffee economy.

The importance of a sustainable coffee economy to the world cannot be understated. Most of the countries that rely on coffee as a major export are developing nations. Many of those nations rely on the sale of coffee for more than fifty percent of their annual export earnings. With over 25 million small farmers and their families producing some 70% of the coffee for the world, coffee production is one of the most important means of contributing to socio-economic development and eradicating poverty.

Coffee is also a significant economic force in the countries that import it. The increasing rate of coffee consumption since the early 1990s has provided hundreds of thousands of jobs in various sectors from transportation to entrepreneurship. While the IPA may contribute to maintaining higher wholesale prices for coffee beans in the short term, the longer term effects of a collapse of coffee prices would be devastating on so many levels.

Myth #2: Higher wholesale prices for coffee are the main reason that coffee will become more expensive.

In fact, the price of the coffee beans from which coffee is made is one of the smallest costs in your cup of latte goodness – a matter of a few cents. But those beans then had to be transported, packaged, transported again, and probably again and again before reaching your coffee shop. The fact is, if you want to see coffee prices at your local coffee shop come down, you’d do better to support the development of alternatives to gasoline than to oppose the adoption of IPA.