The Hindu Business Line : Coffee's cup of woe spills over

THE colonial fervour in a commercial crop such as coffee is conspicuous. The Europeans, as part of their colonising strategy, began imposing crops of their interest on the Third World. Even today, about half of the Third World's agricultural export comes from mere a ten colonial crops and the economies of a few developing countries totally depend on the export of these crops. In that order, coffee comes first with 26 per cent share of the total world trade value from these ten commodities. Next is sugar (22 per cent) followed by natural rubber (10 per cent), cotton (9per cent) and cocoa (8 per cent).

The comparative advantages in terms of climate, soil, topography and the labour availability were the driving force in adhering to these crops by the Third World in the beginning. For instance, it was impossible to grow coffee in Europe and North America, which is why coffee drinkers of the North depended heavily on cultivation of coffee in the South. However, during the course of 20th century, the so-called comparative advantage was undermined by the rapid progress in technological revolution in agriculture.

The progress in science and industrial technology has not only hastened the further diminishing of dependence of agricultural production on nature but also North's dependence on the Third World for the tropical crops. For instance, production of synthetic rubber in the developed world had undermined the scope of natural rubber production in the South. Chemical dyes have already destroyed much of the Asia's indigo crop, which was forcibly introduced into a country like India during the colonial era.

In this backdrop, it is feared that the fast growing biotechnology will end the dependence of the countries of the North on the natural resources of the South for the supply of tropical `primary products'. The creation of new sweeteners through biotechnology, which is displacing sugarcane crops in the Third World, and similar attempts in cocoa, vanilla and oil palm, should be an eye opener in this respect.

And the all-encompassing WTO is widely believed to provide a commercial legitimacy and `structural framework' to hasten this process of diminishing the dependence of the North on nature and the South for the supply of agricultural commodities of their interests. As coffee is the single largest traded commodity, next to petroleum in the world, it is perfectly amenable for biotechnological research as well as for patent application.

Indian coffee is also known for its quality. Indian Robusta is considered the best for espresso coffee blend, and hence, recognised as the one of the finest varieties in the world. These quality attributes are much amenable to biotechnological research and installation of Intellectual Property Rights (IPRs), the outcome of which depends on who takes it up first.

There are four areas in which biotechnological research on coffee can be used: Diagnostic, tissue and cell culture, regeneration, and rapid propagation systems. However, rust disease and quality character are considered the real constraints, biotechnological solutions for which are generation of resistance in the host plant with a medium time frame and creation of new varieties in the long run. It is up to anybody's imagination in the case of a crop such as coffee with such global importance backed by high income elasticity, which will venture and take control of biotechnology and IPR first. Western agribusiness firms may pioneer into biotechnology in coffee. This will have great equity implications, as small and medium farmers producing coffee will be the worst hit.

In India, 86 per cent of the farmers who produce coffee are small, with an average size of holding less than two hectares. These farmers are already feeling the pinch of `unprotected' coffee market in terms of price fluctuations and the overplay of middlemen. For instance, though there is an increase in prices of Indian coffee, prices and exports are fluctuating more post-liberalisation.

The role of government interventions and the Coffee Board in providing the much-needed stability for coffee before 1991 was phenomenal. Gradual decrease in the interventions by the Coffee Board and the removal of quantitative restrictions from April 2001 by the government on the import of coffee have affected the scope of a stable and remunerative return for growers. Coffee is allowed for import under 23 different categories.

The cost of cultivation is around Rs 35,000 per acre which forms more than 50 per cent of the gross return in the case of both Arabica and Robusta. The share of three main marketed items — fertilisers (5 per cent), plant protection chemicals (6 per cent) and irrigation (8per cent) — together is around 20 per cent in the cost of cultivation. Possible increase in the cost of cultivation, due to phasing out of input subsidy, as prescribed in GATT disciplines, would further worsen the earning capacity of these small producers. The combined efforts of biotechnology and IPR would further worsen the situation.

Because of this reason, farmers' movements in the Third World countries have been pressing for excluding agriculture from the WTO or at least to keep away IPR from agriculture. In spite of this, the government is trying to find a way out and would like to negotiate with the WTO on this issue. The following points are worth considering:

Eco-friendliness of Indian coffee production must attract Green Box provisions:

Coffee production takes place in the Western Ghats in South India, considered as one of the `hotspots' of the biological diversity. In addition, for shade purposes, a large number of tree species is planted inside the plantations, which further enhances the supply of environmental services from the coffee plantation. It is found that on an average, 200 trees are planted in an acre of coffee plantation. More than 54 tree species are recorded in the plantation forestry out of which 78 per cent are the traditional varieties. This clearly reveals the preference of the coffee growers for future existence value of indigenous tree species rather than the direct present benefit of the mono species.

Tree farming inside the coffee plantation is recognised as a type of `agro-forestry'. Brazil has already initiated the debate on the `multifunctionality' role, such as positive externality and environmental functions from agriculture in the World Trade Committee on `Trade and Environment'. This is truer in the case of Indian coffee, as it is cultivated in the evergreen tropical forest region.

Organic coffee — an opportunity for Indian growers:

Demand for organically grown agricultural products is fast rising not only in the Western markets but also in the domestic urban metropolitan centres. Coffee and tea are two such potential organic products, which will make a dent in the world trade. That is why the International Federation of Organic Agricultural Movement, in its `Guidelines and Standards', has focussed on these two commodities.

It is also important to note that any incentives to promote eco-friendly organic farming in the case of coffee can easily be included under Green Box Provision as a shift towards organic farming is widely proved to reduce the yield and is not `trade distortionary'. Organic farming, which reduces the use of agro-chemicals, could also help restore the ecological balance of the fragile Western Ghats eco system as well as enhance the bio diversity of the region. This again may attract more focus through Green Box provisions under Agreement on Agriculture.

Issues for future negotiation

India, by looking into the livelihood security of the small coffee growers, must join hands with other countries to strengthen the efforts to create a "Development Box" under "Special and Differential Treatment " provisions of Agreement on Agriculture (AOA) and by the use of Special Safeguard clause imposing a higher import tariff so that the actual cost and a reasonable return to the domestic producers are guaranteed.

To prevent any adverse impact of TRIPS (Trade Related Intellectual Property Rights), it is better for the Coffee Board to take up the control over any biotechnological research and address the IPR issue.

The patent issue in this respect must also include the geographic references for a particular coffee variety, such as Coorg Coffee in Karnataka and quality attributes associated with them. The Coffee Board must assume the new role to conduct research, promotion, extension, and market intelligence with full control on trade issues, such as import, export and IPR.

Coffee earns around Rs1,000 crore from exports annually. Of this, a minimum of 10 per cent (around Rs100 crore) must go to coffee growers directly through: (a) A market-based approach of higher government support in the form of marketed inputs for small farmers through credit and creation of infrastructure facilities; (b) incentives to plant and maintain multipurpose or traditional tree species in coffee plantations; (c) incentives to farmers producing quality organic coffee of international standard and; (d) special incentives, such as insurance, training, and so on, to safeguard the interest of the coffee labourers.

Indian coffee production is the most decentralised and characterised by "production by the masses" rather than "mass production".

To protect and strengthen this feature in the backdrop of the possible assaults through the WTO, it is better to encourage `collective' efforts such as `co-operatives' in all areas related to coffee economy.

In this respect, attempts such as COMARK — a cooperative formed by coffee growers from Karnataka, Kerala and Tamil Nadu is worth strengthening. These co-operative arrangements must gradually spread to regional levels, such as the SAARC.

(The author is Associate Professor, Department of Agricultural Economics, University of Agricultural Sciences, Gandhi Krishi Vignana Kendra, Bangalore.)

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