The International Coffee Agreement: a Tax on Coffee Producers and Consumers?
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The International Coffee Agreement (ICA) used export quotas to restrict coffee trade in order to
increase and stabilize the international price. A model of domestic pricing policy is developed
which shows that the producer price should have fallen in response to ICA quotas. Econometric
analysis supports the hypothesis that use of quotas resulted in lower producer prices in most coffee
producing countries. The income lost by producers was largely captured by governments and/or
exporters to whom the governments assigned quota rights. Since coffee is produced by small
farmers in most exporting countries, income distribution within those countries probably worsened.