In The Financial Express | By Ashok B Sharma | Sept 15, 2003 The current nature of global trade has affected coffee exporters of developing countries. Global prices of unprocessed coffee have fallen by 70 per cent since 1997 causing a loss in foreign exchange earnings of developing countries by $ 8 billion, estimates a study conducted by the Oxfam International. The study says that while millions of coffee growers have suffered heavily due to low producer prices, the trans national companies (TNCs) like Nestle, Philip Morris, Neumann, Volcafe and others in comand over the global processing and marketing chain have reaped huge profit margins. Oxfam International is one of the global NGOs which is participating in the demonstration at the 5th WTO ministerial conference in Cancum demanding elimination of trade-distoring subsidies and support being given in developed counteries, market access for produces of the developing countries and fair terms of trade. The Oxfam study says that the fall in global coffee prices has resulted in losses far outweighing the benefits of aid and debt relief in developing and least developed countries. Particularly the poor households have suffered hardship. Farmers in Tanzania, southern Mexico and Haiti reduced their general consumption, took their children out of school and are facing extreme difficulties in meeting health costs. Family and community structures are coming under strain as women are forced to increase their off-farm labour and men migrating in search of jobs. The study says that the underlying causes of the crisis in commodity markets vary from product to product. However, the general problem is one of structural over-supply. Output across a wide range of products is consistently exceeding demand which is leading to excessive stocks and periodic price collapse. Any change in world market prices generates winners and losers and commodity markets are no exception, says the study. It further clarifies that while losers include millions of coffee growers, the winners are the trans national companies (TNCs). The study alleges that these TNCs like Nestle have been able to take advantage of ruinously low producer prices to enjoy high profit margins. The average farmgate price of coffee in Kilimanjaro region of Tanzania is about $ 0.28 per pound which is 9 per cent of the average retail price of roasted and grounded coffee in US and around 4 per cent of the retail price of Gourmet Kilmanjaro coffee. sold in developed countries. The governments in major producing countries have dismantled their marketing boards shich used to fix minimum floor prices and this has resulted in purchase of coffee from farmers at unregulated prices which are extremely low. Developing countries account for more than 90 per cent of cocoa-bean production, less than half of cocoa-butter production, one-third of cocoa powder and four per cent of chocolate. This shows that most commodities are exported from developing countries in unprocessed form while most of the value addition are done in developed countries. Two-third of cocoa-butter is produced in developed countries. Export sales from cocoa producing countries is abot $ two billion a year while chocolate sales is over $ 60 billion a year. The study says that similar is the case with coffee. Developing countries mostly export green coffee or beans while processing and value additions are done done by TNCs in developed countries. Trade barriers in developed countries have helped to reinforce this pattern and have denied market access to value added products from developing countries. In this situation, the study calls for a new institution to oversee global commodity markets and adoption of socially responsible purchasing operations by TNCs.In The Financial Express:
