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Information Central: The International Coffee Organisation finds its place in a free-market system

From the May 2011 issue.

There was a time when the International Coffee Organisation was considered a problem by much of the industry it served. Today’s ICO is recognised as a vital source of information and a forum to address climate change and sustainability.

The geopolitics of coffee have a rich, colourful history, one that Scott Duke Harris explores with the ICO’s Jose Sette and others.

The 1980s were a time of tumult and opportunity – and the same was true for the global coffee industry. Millions of consumers awakened to the appeal of smooth Arabicas as Starbucks brought quality brews to the masses. But, major traders and roasters also complained that opportunities were being lost because the industry had shackled itself to a complex set of export and import quotas when markets wanted to be free.

Today, the International Coffee Organisation (ICO) prides itself as a source of solutions for the industry. But back then, many said, the ICO and its rules were the problem.

In a July 1989 bulletin, a major German coffee trader, Bernhard Rothfos AG, declared that the reigning International Coffee Agreement had “failed because it was unable to adapt to changing market conditions…  Not permitting major consumer access to all the quality coffee they needed became increasingly irritating and was aggravated by the fact that production of finest Arabica quality grew disproportionately in the last 10 years. So the coffee was there, but the ICO took it upon itself not to allow a sufficiently large volume into the loyal member consuming countries.” 

A two-tier market, the company said, became “one of the disagreeable by-products. Of course it was objectionable that non-member consumers should buy at cheaper prices. However, this became totally unacceptable when member consumers saw exactly the high quality they required passing by on its way to the non-members at heavily discounted prices.”

But, things changed. Only four months after that harsh critique, the ascendance of free market principles helped bring down the Berlin Wall, setting the stage for the collapse of the Soviet Union. And, when the ICO adopted its next agreement in 1994, the quota mechanisms were gone.

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