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Globalization and the Coffee Industry

Globalization and the Coffee Industry
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    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 Ta zaia’s offee exporting market and the economic meaning of this phenomenon. Next the paper discusses the stat of “tauks’ spead ito Idia ad the assoiated tade ageeets. The, it gies 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, fo  eaple, is Afia’s fouth lagest offee podue afte Ethiopia, Uganda, and Ivory Coast ( Ng’aakilala, . Ad aodig to a tade 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’aakilala, . The liets of these epotes ust e ostl the deeloped outies 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. Aodig to the atile Coffee das , heap hai offee shops hae significantly changed the soial spae of ua Idia. Up to o, Idia’s heap hai offee 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    in Taj hotels, all of which are managed by the Tata group (Coffee days, 2011). According to Starbucks chairma , Hoad “hultz, the easo fo “tauks’ late etae 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 i all, MCook’s  pape idiates that ogai offee ultiatio is hee to sta. 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    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 ogaizatio. ICO’s epotig ees podue oe % of old’s offee, hile its ipotig membe s osue aout % of old’s offee Iteatioal Coffee Ageeet, . 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 iease old osuptio of offee. It pootes the ipoeet of offee’s ualit. 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.    References Coffee days. (2011, January 15). Retrieved from   International Coffee Agreement. (n. d.). Retrieved from 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 
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