Global and regional trading blocs of coffee and tea: Outlook, trading signals, and policies

• Published date: 01 November 2020
• Author: Dastagiri Madiga Bala,Naga Sindhuja Padigapati Venkata,Praneetha Yannam
• Date: 01 November 2020
• DOI: http://doi.org/10.1002/wfp2.12018

World Food Policy. 2020;6:119–156. wileyonlinelibrary.com/journal/wfp2

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© 2020 Policy Studies Organization

Received: 26 May 2020

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Revised: 22 August 2020

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Accepted: 22 August 2020

DOI: 10.1002/wfp2.12018

ORIGINAL ARTICLE

Global and regional trading blocs of coffee and tea:

Outlook, trading signals, and policies

DastagiriMadiga Bala

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Naga SindhujaPadigapati Venkata

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PraneethaYannam

ICAR-National Academy of Agricultural

Research Management, Hyderabad, India

Correspondence

Dastagiri MB, Principal Scientist,

ICAR-National Academy of Agricultural

Research Management, Rajendranagar,

Hyderabad-500030, India.

Email: dgiri_mb@yahoo.co.in

Abstract

In world, coffee and tea are the most enjoyable consumer

beverages. Drinking coffee and tea reduce the risk of sev-

eral diseases such as cardiovascular disease, cancer, stroke,

type 2 diabetes, and age-related neurological disorders. This

is based on the foreign trade research study, which examines

area, production, and exports and imports of coffee and tea

globally during the period from 1990–1991 to 2017–2018.

CAGR, price elasticity's, instability, and trends of exports

and import price analysis were employed for the analysis of

the study. The study found that MERCOSUR and SAFTA

are the major producers of coffee and tea, respectively, in

the world. All regional trading blocs have shown more or

less linear trends in the area and production of coffee and

tea during the period of 1990–1991 to 2017–2018. Among

the countries, Viet Nam and Peru have shown the highest

growth rate under the area and production of coffee over the

years. Area and production of tea have been increasing in

Viet Nam and India over the years. Globally, import prices

of coffee and tea were higher than export prices. All trading

blocs have shown the mixed trends in export and import

price of coffee and tea except the export price of tea in the

MERCOSUR, ASEAN, and SAFTA. Export prices of cof-

fee and tea were higher than import price in all trading blocs

except EFTA, MERCOSUR, and ASEAN. The terms of

trade of coffee and tea were favored in the European Union,

NAFTA, COMESA, SAFTA, and Pacific Alliance during

the period of 1990–1991 to 2017–2018. MERCOSUR would

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INTRODUCTION

Coffee and tea are the most enjoyable consumer beverages in the world. Globally, coffee has

the second highest volume in terms of trade after petrol. Arabica and Robusta are the highly

get benefited from other countries due to the higher export

prices of coffee. Similarly, EFTA, NAFTA, COMESA, and

Pacific Alliance trading blocs would be profited for tea.

Globally, Export price elasticity's of coffee in MERCOSUR

and COMESA were marginally higher than imports price

elasticity. Export price elasticity's of coffee were found to

be marginally higher than imports in the Germany, Italy, and

Netherlands (EU); Norway (EFTA); Canada and the United

States (NAFTA); Venezuela (MERCOSUR); Australia

(ASEAN); Egypt (COMESA); India (SAFTA); and Chile

and Peru (Pacific Alliance). Export price elasticity's of

tea were found to be marginally greater than the imports

in the Italy (EU), Norway and Switzerland (EFTA), the

United States (NAFTA), Australia, Indonesia and Thailand

(ASEAN), and Chile and Peru (Pacific Alliance). India has

the highest average bound duties and MFN applied duties

in the coffee and tea in the world. Maximum bound du-

ties and MFN applied duties of coffee and tea were higher

in Switzerland. The United States and EU have the high-

est share of coffee and tea imports. Globally, more num-

ber of Sanitary and Phyto-Sanitary measures and Special

Safeguards have been provided to coffee and tea. NTM

acts as a policy substitute for import tariffs in the global tea

trade. Adapting the climate change plans is very important

to enhance the quality and yield of coffee and tea. Training

and conferences help to strengthen the capacity building of

farmers. Proper price mechanism for coffee and tea land

holders must be necessary to receive the higher profits for

their produce. Global price fixing mechanism for tea and

coffee is essential. This foreign trade study is very helpful

for multi-stake holders, producers, traders, and consumers

of coffee and tea globally.

KEYWORDS

coffee, foreign trade, growth, policies, tea, trading blocks

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MB etal.

commercial cultivated varieties of coffee (Yilmaz, Tek, & Sozlu,2017). Tea is being highly con-

sumed and marketed based on its contributions to health. Black tea accounted 78% of production

and consumption of global tea. Black tea, green tea, oolong tea, and instant tea are the four

types of teas existing in the world based on the manufacturing process (Baruah,2015). Coffee

dominates in the Americas and European continent, whereas tea is favorite in most of Asian con-

tinent. Each nation has different preferences for tea and coffee. Especially, in the United States,

people prefer to drink coffee three times than tea. It was reversed in Russia (Desilver,2013).

Coffee and tea have poly-phenols, caffeine, vitamins, and minerals that provide major health

benefits to humans. Finland, Norway, Iceland, and Denmark are the major consumers of coffee

in the world. Similarly, China, Turkey, Ireland, and the United Kingdom are the major tea lovers

in the world (Ferdman,2014). Drinking coffee and tea reduce the risk of cardiovascular disease,

cancer, stroke, type 2 diabetes, and age-related neurological disorders (Zive, 2018). Coffee pre-

vents the gallstones formation in the humans. Tea helps to enhance the mineral density of bones

and to reduce the risk of osteoporosis (Bjarnadottir, 2019). Every day, 62% of Americans drink

coffee (National Coffee Association, 2017).

Coffee consists of the 25 biodiversity hotspots in the world (Coffee Board of India 2019).

Globally, coffee covered an area of 10.58MHa in the world and produced 10.30MT, whereas tea

covered an area of 4.19MHa and produced 6.34MT during 2017–2018 (FAOSTAT). China is the

largest producer of tea in the world (American Specialty Tea Alliance 2018). India is the second

largest producer (1.34MT), the fifth largest coffee exporter (70% of coffee exported), and the

sixth largest coffee producer in the world (Coffee Industry and Exports, 2020). India consumed

70% of the coffee domestically. In Asian continent, India is the third largest coffee producer

(319,500 MT) and exporter (836.85 MUS$) during 2018–2019. Italy (21.63%), Germany (9%),

Russian Federation (6.30%), Belgium (5.24%), and Turkey (41.70%) are the major five coffee

importers from India. Kenya, China, Sri Lanka, and India are the top tea exporters in the world

(Tea Industry and Exports, 2020). Iran (131.77 MUS$), CIS (90.29 MUS$), the United States

(37.35 MUS$), UK (30.97 MUS$), UAE (25.30MUS$), and China (21.70MUS$) are the largest

tea importers from India (Food and Agricultural Organization, 2019).

Limited ability to value coffee, price fluctuation, unreliable incomes, labor shortage, climate change,

unpredictable rains, pests, and diseases are the problems faced by the coffee growers in the world. Out

the top coffee-producing nations, Brazil, Vietnam, Indonesia, Ethiopia, and Colombia offer good vision

for enhanced sustainable coffee production (Voora, Bermudez, & Larrea, 2019). Tea industries are

facing the problems such as price does not meet the cost of production and price fluctuations of the tea

in marketing. Pricing mechanisms must be improved for tea to reflect the performance of quality and

sustainability. Brazil is absolute leader in the global coffee market. Moreover, coffee production has of

highly importance, since approximately 86% of the more than 3 lakh producers are small growers. Brazil

exported 50% coffee to the European Union. Initially, the representatives explained the current tariff

context for roasted and ground and instant coffee and then the tariff removal from the current 9% for

instant coffee and 7.5% for roasted and ground in 4years. Brazilian coffee has shown the sustainability

with environmental protection (MERCOSUR & EU Trade Agreement, 2019). Facilitating international

trade through increased transparency, access to relevant information, and promote a sustainable coffee

economy for the benefit of all stakeholders and particularly of small-scale farmers in coffee-producing

countries (seventh International Coffee Agreement, the 2007 Agreement).

In global level, economic precision of coffee and tea is of highly importance. But, there is very less

number of studies on the coffee and tea trade. Hence, the present study conducted on the coffee and

tea area, production, exports and imports growth rate, instability, and elasticity in the regional trading

blocs across the world.