Abstract
This paper analyzes the global value chains (GVC) of the coffee industry, particularly in the emerging economies of Vietnam, Colombia, and Brazil, which are the largest producers and exporters of unprocessed coffee in the world. However, valueadded or processed coffee exports are equally dominated by advanced countries, such as Switzerland, Germany, and Italy.
Thus, to upgrade the coffee sector and the GVC, the challenges for latecomers not only lie in strengthening their productive structures via technological upgrading but also in changing the governance structure, including the asymmetry in global value distribution and the tariffs and no-tariffs barriers, in international coffee trade. This paper discusses the structural and artificial barriers associated with monopoly in brand power and marketing channels as well as the protectionist tariff and non-tariff barriers in advanced country markets.
Overcoming such barriers requires targeted interventions in the form of industrial policies, including capability building and export taxes against unprocessed coffee in emerging countries, countermeasures against trade barriers, and even M&A of foreign brand incumbents. Another radical option is to form a coffee cartel, similar to the OPEC for crude oil, that unites the top three or five coffee-producing countries. A pre-condition to form such cartel is consolidating the coffee industries of emerging countries into several large procuring companies in order to gain certain market power.
Even without a cartel, imposing common and coordinated export taxes on unprocessed coffee would increase the amount of coffee beans remaining in the domestic market and processed by domestic firms in order to be exported as processed coffee. KCI Citation Count: 0