Less Coffee in the Cup

April 1, 1963

In the summer of last year, at the United Nations, the representatives of 71 countries attended a conference on coffee. They drew up an elaborate agreement to “stabilize” (i.e., to hold up) the price of coffee. This involved fixing export quotas for 36 producing nations. This International Coffee Agreement was signed on behalf of the U.S. Government on Sept. 28. By the end of November, 54 governments had signed. But the agreement must still be ratified by the U.S. Senate. On March 12, Under Secretary of State George C. McGhee argued before the Senate Committee on Foreign Relations in favor of such ratification.

The argument in favor of the agreement, as stated by Secretary of State Dean Rusk, is that it “offers the best prospect of arresting any further decline in world coffee prices, thus helping to assure stability in foreign- exchange earnings of coffee producers in some 35 developing countries in Africa, Asia, and Latin America.” It is chiefly intended to help Latin American producers, particularly in Brazil and Colombia, which respectively account for 39.2 percent and 13.1 percent of total world exports. It would be chiefly at the expense of U.S. consumers, who import 51.7 percent of total world imports. Of the other 70 importing nations, the most important are France, with 9 percent of the total, and West Germany, with 8 percent.

CROPS DESTROYED

Will the agreement in fact help to “stabilize” coffee production and prices without excessive cost? Neither theory nor experience gives any reason for supposing that it will. Listen to the judgment of Karl Brandt, director of Stanford University’s Food Research Institute, in Challenge magazine (February 1963):

“Such price-fixing . . . while it might mitigate the violence of short-term price fluctuations, inevitably caused profound and serious dislocations for production, processing, stockholding, and consumption. . . . The ‘stabilization’ of cotton prices in the U.S. has not only frozen production in high-price locations, but it has spurred and accelerated cotton production in other countries. And 60 years of efforts to stabilize coffee prices have led to such extreme methods as destroying within a period of twelve years a quantity equivalent to three years’ total world coffee consumption. This did not appreciably help Brazil or Colombia, but instead spurred competitive production in other parts of the world, primarily in Africa. . . . International commodity agreements, at best, do not offer more than a temporary sedative that may give the political sensation of relief.”

OUR DOUBLE STANDARD

Enormously complicated bureaucratic controls will have to be set up within each nation in order to carry out this international coffee agreement. It fixes export quotas for 36 countries. But in order to comply, each of these countries will have to fix production or acreage quotas for each of its thousands of individual producers. Thus the marginal producers, which a free market would eventually eliminate, will be frozen in. The inefficient producers will keep going. Costs as well as prices will be kept high. Such agreements not only eliminate competition between nations, but competition between individual producers within nations.

It is bad enough when the U.S. penalizes its own consumers in order to benefit its own marginal producers of wheat or cotton. It is more ironic when it proposes to penalize its own consumers in order to benefit the marginal coffee producers of other countries, and to do so by conspiring to forbid a free market. McGhee admits that the “international” coffee agreement “would collapse without our participation.”

But the most bitter irony of all is that the U.S. Government has signed a document proposing to resort, and to an enormously greater extent, to precisely the practices for which it puts American businessmen in jail. The double standard was never more flagrantly or cynically applied. Price-fixing in industrial products is condemned and punished as a crime. Price-fixing in labor, or in farm products, domestic or foreign, is lauded and enforced as desirable, benevolent, and imperative.