The International Coffee Agreement: economics of the nonmember market

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Abstract
This paper analyses the proposals for reform to the 1983 International-Coffee Agreement (ICA) which were designed to eliminate exports to nonmember countries at discounted prices. Disagreement over such proposals led to the breakdown in July 1989 of negotiations for a new ICA. A model of the world coffee market is developed to illustrate the welfare effects of sales to the nonmember market. Welfare calculations show that numerous exporters should oppose the allocation of quotas for the nonmember market unless they receive a large share of this market. Continuation of ICA export quotas probably depends on acceptance of price discounting.

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