Mild Arabica coffee trade at a time of market regulation

ABSTRACT

This paper explores the dynamics of mild coffee trade during the term of the International Coffee Agreement, focusing on Costa Rica as a case study. We aimed to verify the influence of the agreement on coffee exports and understand its impact on the exports of high-quality coffee. To compare the influence of the coffee agreement on the trade performance of high-quality coffee producers with that of producers specializing in coffee of similar – or lower – quality, we also included exports of Brazilian coffee (low quality) and Colombian coffee (high quality) in the sample. We focused on analysing commodity trade agreements in the second half of the twentieth century and, simultaneously, on the drivers of coffee exports based on a gravity equation consistent with international trade models. Our findings allowed us to conclude that the International Coffee Agreement gave rise to few benefits for ‘Other Milds’ countries such as Costa Rica and greater benefits for ‘Colombian Milds’ countries such as Colombia, at least in its early versions.

KEYWORDS:

• International Coffee Agreement (ICoA)
• commodities agreements
• coffee market
• coffee trade
• market regulation
• gravity equation

JEL CODES:

• F13
• 024
• Q 17
• Q18

Acknowledgements

Andrea Montero-Mora thanks the University of Costa Rica for the scholarship awarded between 2014 and 2018 to develop the doctoral. The authors thank the anonymous referees for their constructive contributions that significantly improved this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Following Lawless (1995) and Cardello (1995), we agree that quality is a multidimensional field of analysis that encompasses objective and subjective components and has a spatial and temporal framework. The concept refers to the degree of excellence of a specific product and the absence of defects covering sensory and other hidden aspects. The sensory characteristics (shape, texture, appearance, colour, and smell) are easily perceived by the senses, while the hidden ones (chemical composition) require measuring instruments and concern safety and nutrition (Shewfelt 1999). Quality can also be measured through other dimensions, such as the nutritional composition, the ease of preparation, the density of the product, or the reputation of the brands or origins, among other aspects (Lawless 1995). In addition, for each of the actors involved in the production and marketing of a product chain, quality can have different meanings or connotations. Producers usually define it in sensory and hidden information terms, while consumers provide their perception of their satisfaction, thus showing a less tangible and less quantifiable aspect (Shewfelt 1999; Samper 2002, 2003; Viales and Montero 2015).

2 In specification (2) we do not consider pair interactions allowing us to introduce distance and other control variables associated with geography in the regression results.