1. Globalization and the Coffee Industry
By Oleg Nekrassovski
The present paper discusses three aspects of the global coffee industry. The first aspect
is the dependency in the coffee trade and the development of the coffee trade. The second
aspect is the environmental impact of the global coffee trade. And the third aspect is coffee
trade agreements. The paper first discusses fluctuations in coffee prices in Tanzania’s coffee
exporting market and the economic meaning of this phenomenon. Next the paper discusses the
start of Starbucks’ spread into India and the associated trade agreements. Then, it gives a
thorough description of various types of coffee cultivation and their associated environmental
impacts. Finally, the paper discusses the nature and function of the International Coffee
Organization.
The consumption of coffee in the developed world, doubtlessly affects those in the
developing world. Tanzania, for example, is Africa’s fourth largest coffee producer after
Ethiopia, Uganda, and Ivory Coast (Ng’wanakilala, 2011). And according to a trader at a leading
Tanzanian coffee exporting company, prices at Tanzanian coffee auctions tend to fluctuate in
response to the size of orders that Tanzanian coffee exporters intend to supply to their clients
(Ng’wanakilala, 2011). The clients of these exporters must be mostly the developed countries
because all of them have the money for massive coffee consumption, but lack the climate for
its production. Be as it may, the above described price fluctuations on the Tanzanian coffee
market are easy to understand with even the most basic economic laws. According to basic
economic theory, the free market price, of a consumer good, increases the moment the
demand for that good is increased. Hence, the more Tanzanian coffee is bought by the
developed world, the more poor Tanzanian coffee growers will receive for their produce. And
the more coffee is consumed at the individual level in the developed country, the more coffee
will be bought by that country from a developing, coffee-producing, country. Considering the
fact that many developing countries are coffee producers, and that the above described
economic law is universal, any increase in the consumption of coffee by the people in the
developed world increases the average income and hence the standard of living of people in
the developing world.
According to the article “Coffee days” (2011), cheap chain coffee shops have
significantly changed the social space of urban India. Up to now, India’s cheap chain coffee shop
market has been dominated by two Western coffee chains, Barista and Café Coffee Day (Coffee
days, 2011). This is about to change as the North American coffee chain giant, Starbucks, has
announced that it is beginning its long-awaited invasion of India (Coffee days, 2011). To make
the job easier, Starbucks made a deal with India-based Tata group. According to this deal, Tata
Coffee (a member of the Tata group) will supply Starbucks with coffee beans from its
plantations in south India. While Starbucks, for its part, will open a few coffee shops, most likely

2. in Taj hotels, all of which are managed by the Tata group (Coffee days, 2011). According to
Starbucks chairman, Howard Schultz, the reason for Starbucks’ late entrance into Indian market
lies in problematic Indian retail regulations (Coffee days, 2011). This supports a well known
economic premise, that any regulation of the local economy impedes free trade and the
formation of a global economy.
McCook (2008), in his description of a relevant primary source, states that intensified
coffee production first appeared in Latin America in the 1970s. This form of cultivation involves
the extermination of most other plants that create shade, the cultivation of hybrid coffees with
the highest yields, fertilization of the soil with chemical fertilizers, and the extermination of
parasitic coffee vermin with chemical pesticides (McCook, 2008). A different form of coffee
cultivation, introduced to Latin America more recently, is called organic cultivation. It is
characterized by the production and application of organic inputs through an intensive use of
labour (McCook, 2008). Organic cultivation, just like intensified cultivation, is science based. It
relies heavily on botany, ecology, and other sciences (McCook, 2008). The specific techniques of
organic coffee cultivation are quite varied. One of them is the careful terracing of coffee plants
and farms; a technique which helps to prevent soil erosion. Another, is a deliberate
accumulation of organic debris, such as leaf litter and humus, to enrich the soil. And yet
another, is the retainment rather than extermination of diverse species of shade trees; a
practice which has proved effective in increasing the yield of organic coffee farms (McCook,
2008). Thus, according to McCook (2008), the ecological benefits of organic farming are
undeniable.
A recent study by Martinez-Torres, described by McCook (2008), of contemporary
coffee farming in Mexico, goes to great length to show that organic farming is no less
productive than intensified farming. To this end Martinez-Torres compares the yields of organic
and intensified Mexican coffee farms of various sizes, and comes to a conclusion that the
productivity of intensified farms is only slightly lower than that of organic coffee farms
(McCook, 2008). In the same study, Martinez-Torres finds that among Mexican coffee farmers,
the use of organic cultivation is most prevalent on the smallest farms (McCook, 2008).
All in all, McCook’s (2008) paper indicates that organic coffee cultivation is here to stay.
It is no less productive than intensified cultivation, but unlike intensified cultivation, it is
beneficial rather than harmful to the natural environment. The ever increasing demand, by the
developed world, for organic produce, guarantees that the organic cultivation of coffee will
only continue to grow and perhaps one day will completely replace non-sustainable intensified
cultivation. Also, the fact that the price of organic coffee, on the global market, is higher than
that of inorganic coffee, will continue to guarantee that organic coffee cultivators (most of
whom are in the developing world) will greatly benefit from our consumption of organic coffee.
And considering that the owners of small farms, who are necessarily the poorest farmers, are
the ones most likely to engage in organic coffee cultivation, the continued consumption of

3. organic coffee by the developed world will be especially beneficial to some of the poorest
people in the developing world.
The International Coffee Organization (ICO) is a major intergovernmental coffee
organization. ICO’s exporting members produce over 97% of world’s coffee, while its importing
members consume about 80% of world’s coffee (International Coffee Agreement, n. d.). The
ICO makes a strong, positive influence on the world coffee economy and on the living standards
in the developing world, through various initiatives. It contributes to the development of
international coffee policies through intergovernmental coordination. It helps to make the
world coffee economy sustainable. It adds value to coffee and improves its marketing by
initiating coffee development projects. It uses innovative market development activities to
increase world consumption of coffee. It promotes the improvement of coffee’s quality. It uses
statistics and market studies to collect objective and comprehensive information about the
world coffee market, and uses this information for creating transparency in the world coffee
sector (International Coffee Agreement, n. d.).
Thus, it is clear from all of the above that the global coffee trade is beneficial to the
global economy especially to the economy of the developing nations. It is especially beneficial
to some of the poorest citizens of the developing nations. Also, a large proportion of coffee
cultivation is beneficial rather than harmful to the environment. And finally, the global coffee
trade is characterized by mutually beneficial trade agreements between market giants which
are monitored by at least one intergovernmental coffee trade organization to ensure that the
agreements in question do not harm the environment or the coffee farmers of the developing
nations.

4. References
Coffee days. (2011, January 15). Retrieved from http://www.indianexpress.com/news/Coffee-
days/737676.
International Coffee Agreement. (n. d.). Retrieved from http://www.ustr.gov/trade-
topics/environment/commodity-agreements.
McCook, S. (2008). Coffee and flowers: Recent research on commodity chains, neoliberalism,
and alternative trade in Latin America. Latin American Research Review, 43(3), 268-277.
doi: 10.1353/lar.0.0043.
Ng'wanakilala, F. (2011, January 15). Tanzania coffee prices fall on poor quality. Retrieved from
http://af.reuters.com/article/investingNews/idAFJOE70E0AT20110115?pageNumber=1
&virtualBrandChannel=0&sp=true.