Multilateral trade agreements on agriculture and commodities

Prior to discussing trade agreements and trends in agricultural trade from a gender perspective, here follows a brief outline of trade agreements relating to agriculture and commodities. Agricultural trade policies were subject to few multilateral disciplines prior to the Uruguay Round Agreement on Agriculture (AoA). The AoA began in 1994 and called for reduced agricultural export subsidies, reduced domestic support to farmers and lower tariffs on agricultural imports. For many developing countries, however, the AoA did not achieve the results necessary to ensure further development of their agricultural sectors.

Concerns were raised throughout the AoA negotiations about how the agreement would impact on food security and poverty in the least developed and the net food-importing countries. Three key arguments had emerged during the 1980s against implementing trade reform in developing countries: (i) it was improbable that export revenue would increase in commodity-dependent countries; (ii) protectionism in OECD countries would harm developing countries’ efforts to diversify into non-traditional crops; and (iii) trade deficits would widen because of the inability of relatively inefficient production systems to compete in the face of import liberalization.^[15]

After the Third Ministerial Meeting (Seattle) failed in 1999, the WTO agreed to address the continued imbalances in global agricultural trade at Doha. The Doha Ministerial Declaration addressed special and differential treatment for developing countries as well as non-trade concerns such as food security and rural development (WTO, 2001). Yet subsequent negotiations have largely failed to reflect the goals agreed to in the Doha Development Round. The failure of the Cancun WTO Ministerial in September 2003 demonstrated, in many ways, the unwillingness of developing countries to compromise in other areas until the goals agreed to in Doha were addressed. Many developing countries continue to insist that developed countries make deeper commitments to reducing subsidies and domestic supports.

Developing countries continue to push for improved access to the markets of developed countries, with efforts focusing on the following issues in particular: tariff peaks on export products of interest to developing countries, such as sugar or cotton; tariff escalation^[16] for products such as coffee; technical barriers to trade, such as increased use of sanitary and phytosanitary measures (SPS), and lengthy delays in the recognition of equivalence of developing country SPS measures; trade agreements that guarantee preferential market access, for example, preferences for sugar or banana; increased tariff import quota levels and elimination of export subsidies.

Recent drops in commodity prices, notably for coffee, have highlighted the ongoing concerns of developing countries about their vulnerabilities in agricultural production and trade. Precipitous declines in export revenues have adverse economic, political and social impacts at the national and household level. Depressed world prices caused by domestic supports to agriculture in developed countries, particularly for cotton and sugar production, have resulted in additional political concerns as farmers in developing countries continue to struggle with the adverse economic impacts. At the WTO Ministerial in Cancun, several West African cotton producers suggested that their countries receive compensation for the adverse consequences of developed country policies on their exports.

Agriculture is the mainstay of most developing countries’ economies, underpinning food security, export earnings and rural development. However, estimates of per capita agricultural production for domestic and export markets declined throughout the 1990s. LDCs in particular continue to be marginalized from world agricultural markets, accounting for only one percent of global agricultural exports in the late 1990s. The poor performance of agriculture in many developing countries is mainly related to, on the one hand, the historical unfavourable terms of trade for agricultural commodities, while on the other hand to internal structural problems such as low productivity; rigid production and trade structures; short life expectancy, low educational qualifications; and inadequate infrastructure, institutional and policy frameworks.

Many developing countries find themselves challenged to find ways of participating in an increasingly competitive external trade environment whilst simultaneously adjusting to the impact of small farm commercialization or rationalization, particularly as their increased food import bills demonstrate how often these food products simply out-compete domestic foods in many markets. FAO anticipates that "liberalization of agricultural trade could drive up prices for most agricultural commodities, potentially having a negative impact on food security in developing countries, as most are net importers of food. Prices are expected to rise more steeply for the food products that developing countries import than for the commodities they export."^[17]

The FAO standpoint is that there is scope for maintaining and expanding trade preferences in agriculture, depending on the rate of reduction in the current round of negotiations on agriculture and given that tariffs remain high for many agricultural products.^[18] Products receiving preferential treatment in many of the low-income, vulnerable developing countries (such as sugar, banana, fruit and vegetables) represent a major source of foreign exchange, employ a large proportion of the rural poor and contribute significantly to food security. While the aggregate value of preferences to developing countries is not considered to be that high (estimated between US$ 1-3 billion), these trade receipts are highly significant relative to the value of trade in preference-receiving countries. This is particularly true for many of the ACP countries dependent on the export of one or two key commodities, with contributions to GDP from agriculture ranging from 10 percent to as high as 30 or 40 percent in some countries.

Multilateral liberalization on a most-favoured nation basis would nevertheless significantly erode margins received under preferential trade agreements and result, potentially, in loss of market share and income. FAO estimates that the aggregate preference margin - enjoyed by all ACP countries for all agricultural products under the Lomé Convention - declined by 16 percent between 1995 and 2000 because of tariff reductions during the Uruguay Round implementation period.^[19] Potential further reductions in bound tariffs resulting from the Doha Round would reduce preferential margins even more and would be likely to result in significant adjustment costs for preference-receiving developing countries, particularly those that are most commodity export-dependent with narrow resource bases. The general perception is that many of the preference-receiving developing countries have benefited substantially from market access for their exports of sugar, banana, fruit and vegetables into the United States and European Union in particular. However, preferential access may in some cases have constrained efforts to improve production costs or processing efficiencies; this may be particularly true of the global sugar market where preferences guaranteed export prices at the higher (nearly double) internal prices of United States and European Union domestic markets for sugar.

The Uruguay Round essentially subjected domestic agricultural supports and subsidies to international review, although the scrutiny did not necessarily result in reduced support, especially for the most sensitive agricultural products such as sugar, cotton, rice or dairy. The UR also, for the first time, negotiated an agreement to establish specific disciplines for the application of sanitary and phytosanitary (SPS) measures for multilateral trade in agricultural products. Of particular interest to developing countries were the changes made to the scope and significance of agricultural preferences and market access for ACP countries and generalized system of preferences (GSP) beneficiaries into the European Union. Tariff liberalization for major tropical products resulted in a gradual phasing-out of remaining preferences (ending in mid-2000) for raw coffee and cocoa, papaya, mango and several other tropical fruits. Tariffs were not reduced for processed forms of coffee and cocoa, though, and tariff escalation remains a barrier to increased in-country value-adding for producer countries.

A number of preferential trade agreements already in place within the European Union, United States, Canada and other developed countries changed significantly after the Uruguay Round. The Caribbean Basin Initiative, Andean trade preferences and the ACPEU Convention were adjusted to the new multilateral trading environment and the scope and depth of preferences was improved. The European Union and ACP countries agreed to convert their traditional market access and preferential arrangements into reciprocal free trade areas, with ACP preferences continuing until 2008. By July 2000, the UR results had been fully implemented by the European Union. At that time, 50 percent of the agricultural exports of ACP countries no longer enjoyed European Union market access preferences, while the other half still had some level of margin preference (10 percent on average, according to the European Commission).

The European Union further announced the Everything But Arms (EBA) initiative in May 2000, granting duty-free and quota-free entry for all products in favour of all LDCs. Duties were immediately suspended for most raw and processed agricultural products, with the exception of sugar, rice and bananas. Duty-free global quotas for sugar and rice were established and set to increase by 15 percent annually, with Most-favoured Nation (MFN) duties reduced over three years to zero by 2006. Tariffs on banana are to be gradually reduced to zero between 2002 and 2006.

Market integration through regional and bilateral trade agreements

There is a significant increase, concurrent with the development of the GATT/WTO multilateral trading system, in the number of bilateral and regional trade agreements being made. Nearly all WTO members are now party to at least one regional trade agreement. The issue of liberalization of agriculture has only in recent years figured large in regional trade negotiations. Although regional and bilateral agreements have used various approaches to reducing barriers to agricultural trade, nearly all maintain some degree of protection, especially for sensitive products such as sugar, cotton or rice. It appears that the increased number of regional trade agreements - and greater degree of product coverage in those agreements - negotiated after 1995 was stimulated by some countries wishing to speed up trade liberalization after multilateral trade talks (Uruguay Round) began to founder in the late 1980s.^[20]

Similarly, a number of developed countries have also granted comprehensive tariff and quota-free access to LDCs in response to the ongoing need to restructure special preferential schemes to provide these countries with trade and development opportunities. The most prominent of these arrangements is the European Union EBA initiative. Other developed countries, including New Zealand, Norway and Switzerland, have adopted similar schemes of duty and quota-free market access for LDCs. The Africa Growth and Opportunity Act (AGOA) offers similar access for selected African countries into the United States.

The United States has also improved its special preferential scheme for Caribbean and Central American countries under the Caribbean Basin Trade Partnership Act (CBTA), for clothing in particular. The United States also expanded GSP product coverage and offered duty-free access to agricultural exports from LDCs. The number of bilateral and regional trade agreements continues to expand in the Americas for all but the most sensitive of agricultural products, and includes the North American Free Trade Agreement and the recently negotiated Central American Free Trade Agreement. The Free Trade Area of the Americas (FTAA) is expected to expand free trade and investment reciprocally throughout the western hemisphere.

The AGOA is a new scheme for trade and investment cooperation in Africa, passed by the United States in 2000. This trade agreement offers duty-free preferential access to selected African countries, in particular for horticultural products, along with certain clothing assembly products and textiles. Regional trade integration in Africa is evident from increased support for the African Economic Union and South African Customs Union, and a recent announcement by 11 central African countries of their intention to establish a free trade area by the end of 2007. The plan spearheads a programme intended to revitalize the Economic Community of Central African States (CEEAC), in which Angola, Burundi, Cameroon, Central African Republic, Chad, DR Congo, Republic of Congo, Equatorial Guinea, Gabon, Rwanda, and Sao Tome and Principe are participants.

New free trade area agreements between the European Union and South Africa, Mexico, Chile and MERCOSUR have come into effect, potentially altering market access and ACP preferences for the European Union and its new accession members from the former Eastern Bloc. China has concluded a free trade agreement with Thailand and announced its intention to enter into bilateral free trade agreements with all ten country members of the ASEAN group. Again, significantly, many of these agreements substantially exclude the most sensitive and important of agricultural commodities such as sugar, rice and cotton.

With multilateral trade negotiations for agriculture faltering and continuing to be contentious, negotiators have not meet the various deadline set over the last few years for a new WTO agreement. Meanwhile bilateral and regional trade agreements are increasingly offering the scenario to create or divert trade between countries, promoting or restricting the potential for further market integration in food products. Agriculture is bound to be subject to further contentious and complex negotiation, particularly with regard to highly sensitive products such as sugar, cocoa, cotton, banana and coffee.

Important commodities in developing countries agricultural trade^[21]

Sugar

Sugar production and exports are crucial for many developing countries but trade and prices have been falling. Domestic supports and tariff levels are high in developed countries, creating huge trade distortions which the Uruguay Round has done little to reduce. Significant progress in the Doha Round is important for many countries, particularly as market growth is occurring primarily in developing countries.

Sugar cane or beet is produced in over 130 countries, with sugar cane accounting for 65-70 percent of global production. Developing countries will account for nearly all future production growth to the end of 2010, raising their share from 67 percent in the period 1998-2000 to 72 percent by 2010. There has been considerable consolidation in the industry, with the top ten producers accounting for 70 percent of world output in 2001, up from 56 percent in 1980.

World sugar consumption is expanding, reflecting rising incomes and shifts in food consumption patterns. Developing countries account for more than 60 percent of current global sugar consumption and are expected to be the primary source of future demand growth, particularly those in Asia.

International trade in sugar and sugar products has contracted because of increased sugar production by countries that heavily subsidize their domestic sector. This has been narrowing markets for traditional exporters, including those under preferential trade agreements. The proportion of production exported has declined. Sugar exports are fundamentally important to many developing countries, primarily because preferential access agreements entitle developing country exporters to receive the higher domestic prices of the European Union or the United States for their sugar, instead of facing the very low ‘dumped’ world sugar price. Despite these preferential access agreements, export values decreased from US$ 9.8 billion in 1980 to US$ 6.4 billion in 2001 because of lower prices and volumes. This is even more pronounced for the LIFDCs, whose share of world exports decreased from 42 percent in 1980 to 15 percent in 2001.

Protective supports in developed countries have encouraged the use of alternative sweeteners such as high fructose corn syrup, eroding the natural sugar market, especially in the United States where rapid substitution of cheaper corn sweeteners for sugar in the 1980s resulted in reduced import quota volumes for many developing countries and, hence, declining export earnings from sugar.

Brazil, with the lowest sugar production costs in the world, is the only developing country to have dramatically increased its sugar exports over the last five years, driven by record production, ethanol deregulation and currency devaluations.

There is significant government intervention, both domestically and internationally, in the world sugar economy. The United States and European Union create the greatest degree of distortion in world markets by maintaining high domestic prices in the face of depressed world prices. OECD expenditure on producer support amounts to well over half the total value of world sugar trade.

The European Union sugar regime operates under the Sugar Protocol and Special Preferential Sugar (SPS) regimes with fixed quota levels. Increased market access for LDC sugar-producing nations will be granted as part of the European Union’s EBA initiative, but this increase is at the expense of existing ACP quota holders who face erosion of preferential access and prices over the next six years. Sugar production contributes 20 percent of GDP and employs 30 percent of the workforce in ACP sugar-producing countries.

Sugar programme supports in the United States depend on a tariff rate quota (TRQ) based on domestic output. Production increases have reduced import quota volumes to the WTO-mandated minimum. This decline and price erosion has redirected production from developing countries onto the world market. Low output capacity and high production costs have forced many Caribbean sugar-producing nations into crisis: Cuba, Jamaica and St. Kitts-Nevis have either closed their industries, diversified former sugar cane areas or are searching for ways to improve the efficiency of their sugar industries.

Market access will be of considerable concern during the Doha Round. Sugar tariffs are high relative to other agricultural products, and subject to trade policy tools including tariff rate quotas, export subsidies and reference pricing. Domestic supports are also high and include production quotas, producer price guarantees, processing loans, regulated consumer prices, limits on production of alternative sweeteners, and state protection or intervention through ownership or investment in domestic industries.

Uruguay Round negotiations resulted in minimal reductions in sugar trade distortions. Market access has not improved and production subsidies weight global markets against developing country exporters. Global adjustment to significant sugar policy reform could be considerable; production may gravitate toward the most efficient, low-cost cane-sugar producers, including Brazil, Guatemala, Colombia, and those of southern and eastern Africa.

Cotton

Many developing countries are increasing their production of and trade in cotton, with the help of new technologies, and the industry is an important rural employer. Major exporters such as the United States and European Union support cotton production and exports, driving down international prices and thereby limiting production growth in developing countries. Import tariff reductions, and import quota removal will bring major changes to the cotton and textile/apparel markets, intensifying competition among suppliers.

Cotton is an internationally traded commodity as well as a major employment generator. The International Cotton Advisory Committee (ICAC) estimates than more than 100 million farming units worldwide are directly engaged in cotton production, with many more in ancillary activities. Major players in cotton production and trade include China, India, the United States, the European Union and central Asian and African states. China’s cotton output has fluctuated considerably, but it is the world’s largest exporter of apparel and remains a potential market for raw cotton exporters. With biotech cotton and new, lowcost producers, and with the implementation of the Agreement of Textiles and Clothing (ATC), world cotton production is expected to grow by 1.5 percent annually. This will increase trade in cotton to 6.5 million tonnes by 2010, about nine percent higher than the current level.

Most of the growth in end-use cotton has been in developed countries, which increasingly import clothing and textiles from developing countries. Mill consumption and imports of raw cotton are increasing in developing countries, particularly in industrializing Asian countries. While the trade in raw cotton is predominantly from developed countries to developing countries, trade among developing countries is growing. Burkina Faso, Benin, Côte d’Ivoire and Mali in West Africa, along with Egypt, Sudan, Zimbabwe and Tanzania, are increasing their cotton exports. More than 20 percent of Africa’s raw cotton is now exported internationally. Developing countries in Asia absorb 55 percent of global imports, with Europe accounting for much of the remainder and Mexico also a significant importer.

Domestic subsidies in certain developed countries distort cotton production and trade. The United States and European Union, which together account for 25 percent of world output and 35 percent of global exports, support their cotton farmers, encouraging higher production and exports and depressing global prices. Producers in many developing countries, including many in Africa, face restricted export markets and lower returns. According to ICAC, farm subsidies to cotton farmers in 1999 amounted to US$ 4 billion in the United States and US$ 800 million in the European Union. A study by ICAC estimated that such subsidies and those of other developed countries have depressed the world cotton price by about 20 percent, a loss of US$ 300 million to African cotton-exporting countries.

Export earnings contribute significantly to food security in many African countries. Cotton production accounts for five to ten percent of GDP in Benin, Burkina Faso, Chad, Mali and Togo; this group of countries has proposed that cotton subsidies become a central issue in the WTO negotiations at Cancun, and that countries engaged in subsidizing production should compensate African cotton farmers. Brazil has announced to the WTO Dispute Settlement Body its intention to discuss cotton subsidies with the United States. If domestic support levels were reduced in developed countries, world prices would rise, encouraging higher production in cost-effective producing countries, including many developing countries.

Restrictions on trade in textiles and apparel have severely impacted on global trade of these goods. Tariff reductions for all manufactured goods including textiles and clothing have been proposed under the Doha Development Agenda (DDA). If this happens the world cotton market could face some dramatic changes. Since most developing countries have higher tariffs on textiles (around 20 percent compared with around 10 percent in most developed countries) and consume, on a per capita basis, only 25 percent of world textiles, these reductions would increase demand for natural and manufactured fibres in developing countries. Given their population, developing country markets could be the major driving force in fibre demand.

On the other hand, implementing the ATC would remove all quotas on textiles and clothing by 2005 in addition to any tariff reductions agreed upon, and would intensify competition in world textiles and clothing. Many high-cost textile-producing countries in both developed and developing countries could be forced out of textiles and clothing to become textile importers, significantly changing cotton trading patterns. Several major textile-exporting countries such as China, India, Indonesia, and Pakistan may become major importers of raw cotton.

Banana, and other fruit and vegetables

Exports of banana and other fruit and vegetables are increasingly important for many developing economies. There are few subsidies for producers in developed countries and tariffs are low. However, tariff escalation does take place with processed produce such as fruit juice, and there are extra phytosanitary controls in many countries that affect imports of fruit and vegetables. There is a demand for harmonization of technical standards and treatments of exports, which have an impact on production processes and agrochemical practices.

Fruit and vegetables are important commodities for developing countries seeking to diversify exports. World trade in all categories has significantly increased, while the value of exports from developing countries increased by US$ 4.5 billion from 1992 to 2001, up 55 percent, from 31 to 37 percent of total world exports. The value of world fruit and vegetable exports was US$ 34.6 billion in 2001. Fruit accounted for almost 60 percent of this and vegetables for a little over 40 percent. The main fruits were citrus (21 percent), bananas (19 percent), grapes and apples. The value of trade in tropical fruits (mango, papaya, pineapple and others) is slightly under US$ 1 billion (5 percent). The most traded items are tomatoes and onions.

Developing countries account for virtually all exports of banana and tropical fruit, and about half the trade in citrus. The value of exports such as avocados, melons, pears, green beans, tomatoes, asparagus, aubergines and onions is higher in developing than in developed countries, with a concentration of exports from a few countries. However, the participation of LDCs in trade is very low: between 1997 and 2001 their share in fruit export was 0.5 percent, and in vegetable export, 0.8 percent. Developing countries are less successful at adding value to their fruit and vegetables, and have a lower share in the exports of processed products - 36 percent in 2001.

Government intervention in the fruit and vegetable trade tends to be lower than in other agricultural sectors. In general, industrialized countries do not directly subsidize horticultural producers, and there are no price support mechanisms. Indirect supports exist in the form of processing subsidies (for example, citrus in the European Union), provision of phytosanitary services, and support to generic advertisement and export promotion programmes in the United States and the European Union.

The main trade interventions are governments tariffs, tariff quotas and minimum entry prices, and market access issues are complex, particularly in the case of banana. The European Union, the United States and Japan each operate a complex system of seasonal duties, quotas and entry prices to regulate fruit and vegetable imports. The European Union has two TRQs in the case of banana - one of 750 000 tonnes reserved for ACP country suppliers with zero duties, and the other of 2 653 000 tonnes with the tariff of 75 euros per tonne for non-ACP countries. Additional imports attract a prohibitive tariff. In practice, this system has protected exports from ACP countries to the European Union while limiting exports from Latin American suppliers. The European Union has announced that this will be replaced by a tariff-only system in 2006. Depending on the tariff chosen, this may result in higher imports from Latin American countries, lower imports from ACP countries and a fall in prices in the European Union. As Ecuador, Costa Rica and Colombia account for 60 percent of the world export value for banana, tariff levels negotiated for 2006 will have significant implications for their banana sectors.

Tariff escalation is apparent in the fruit and vegetable sector, with tariffs on imported processed produce generally higher than on fresh produce. Fruit juice and fruit preparations are subject to higher tariffs than fresh produce in the European Union, Eastern Europe, North America and Southern Africa. Very recently, a number of developing countries and developed countries began to protect their domestic industries. Developing countries have raised tariffs, introduced tariff quotas and occasionally banned imports of selected fruit and vegetables.

Phytosanitary controls imposed by importers are critical for developing countries exporting fresh fruit and vegetables. These controls are particularly stringent in the United States, Australia and Japan. Between 1995 and 2000, nearly 270 SPS measures were introduced against imports of fresh fruit and vegetables worldwide. A major hindrance to fresh produce trade is the lack of harmonized technical standards and treatments for exports. Some countries apply the Codex Alimentarius for maximum pesticide residue limits (MRLs) while others apply their own, often stricter MRLs that may only partially conform to the Codex. Quarantine regulations are another serious impediment. Measures to prevent bioterrorism are likely to increase the administrative and regulatory burden on exporters of fresh fruit and vegetables.

Coffee

In terms of value, coffee is one of the most important globally traded commodities and is critically important to millions of rural households throughout the world. It is the primary source of income for an estimated 25 million small coffee farmers in more than 50 countries.^[22] Coffee is emblematic of the problems faced by commodity exports from developing countries. Price falls for coffee have been particularly dramatic: after a brief recovery in the mid-1990s when buffer stocks were cleared, by 2001 real coffee prices had fallen to levels lower than ever recorded. In real terms, coffee prices today are less than one-third of their 1960 levels and, for many producers, less than the cost of production.^[23] Some have attributed this phenomenon to the market fundamentals of supply and demand, although there seem to be many differing conclusions as to the causes of the current coffee crisis.

Trade policy concerns in global markets tend to focus on the impact of tariff escalation on the coffee sectors of developing countries, as tariffs on processed coffee discourage the development of processing industries at source. The European Union, for instance, applies an average duty of 9 percent for processed coffees, while countries such as India and Ghana have duties on instant coffee of 35 and 20 percent respectively. Tariffs are generally low between developed countries.

Developing countries primarily export unprocessed coffee. The largest proportion of coffee is imported in its raw state, in the form of unroasted green coffee beans. In general, coffee-exporting countries have liberalized their coffee industries by dismantling national marketing boards and commodity agreements, leaving them vulnerable to fluctuations in the world market price and fundamental factors such as weather.

Most state trading enterprises have made room for private exporting entities. The state has taken on the role of a regulatory power, setting rules and regulations. In 2000, for instance, the Côte d’Ivoire government established the ARCC (Coffee and Cocoa Regulatory Authority) to regulate the activities of the coffee sector.

Food safety concerns are quite significant in the coffee sector as well as issues related to toxic residue levels (pesticides), export quality of coffee beans, use of molecular biology to improve coffee production, regulatory procedures at the processing level in developing countries, shipping, and storage of coffee beans.

Coffee is of critical strategic importance in terms of rural development and employment. Most rural producers are smallholders and the income derived from coffee production and export earnings is fundamental to their livelihood. For instance, in Uganda three-quarters of the population earn money from coffee production and export. Coffee also illustrates how changes in global market structures, with industry consolidation and shifts in purchasing patterns, affect the whole supply chain, and how the gains from liberalized agricultural trade are distributed.

Market structure and trade in agricultural products

Policy barriers to trade in processed agricultural products are significant, but when they are reduced other factors come to the forefront, largely because of the way in which supply chains are structured. As agricultural commodity chains become increasingly dominated by small numbers of TNCs and distribution companies, the gap between what the consumer pays for a product and what the producer gets paid, and between consumer prices in industrialized countries and world commodity prices, widens.^[24] In 1996, for example, 50 percent of roasted coffee was sold by just four companies, and the number of cocoa trading houses in London has decreased from 30 in 1980 to around 10 in 1999.^[25] Similarly, the six largest chocolate manufacturers account for half of world chocolate sales.

For traditional commodities, the growers’ price is a very low share of the final price, and can range from 4-8 percent for raw cotton and tobacco to 11-24 percent for jute and coffee.^[26] The International Coffee Organization (ICO) reported export earnings for coffee- producing countries at US$ 10-12 billion in the early 1990s, with the value of retail coffee sales, mostly in developed countries, at around US$ 30 billion. In coffee year 2000/2001, producing countries received just US$ 5.5 billion of the US$ 70 billion value of retail sales. Greater access to developed country markets would enable developing countries to gain from value-added exports.

This disparity, between retail values of coffee vis-à-vis the earnings of small coffee producers, illustrates how small farmers are often marginalized in heavily commercialized export marketing channels. Their situation now compares unfavourably with previous arrangements under which small producers may have benefited from the role played by the state in primary marketing channels. Governments ensured stable market outlets and price discovery for commodities, in this way providing a safety net. Increased privatization and liberalization of agriculture, not only in coffee supply chains, has eliminated state intervention that could have more readily signalled impending crises among small farmers who cultivate cash crops for export. Moreover, this privatisation has resulted in further exclusion from international markets, forced rationalization and worsening household food security for many of the world’s most vulnerable farming households.