Global and regional trading blocs of coffee and tea: Outlook, trading signals, and policies

Abstract

AbstractIn world, coffee and tea are the most enjoyable consumer beverages. Drinking coffee and tea reduce the risk of several diseases such as cardiovascular disease, cancer, stroke, type 2 diabetes, and age‐related neurological disorders. This is based on the foreign trade research study, which examines area, production, and exports and imports of coffee and tea globally during the period from 1990–1991 to 2017–2018. CAGR, price elasticity's, instability, and trends of exports and import price analysis were employed for the analysis of the study. The study found that MERCOSUR and SAFTA are the major producers of coffee and tea, respectively, in the world. All regional trading blocs have shown more or less linear trends in the area and production of coffee and tea during the period of 1990–1991 to 2017–2018. Among the countries, Viet Nam and Peru have shown the highest growth rate under the area and production of coffee over the years. Area and production of tea have been increasing in Viet Nam and India over the years. Globally, import prices of coffee and tea were higher than export prices. All trading blocs have shown the mixed trends in export and import price of coffee and tea except the export price of tea in the MERCOSUR, ASEAN, and SAFTA. Export prices of coffee and tea were higher than import price in all trading blocs except EFTA, MERCOSUR, and ASEAN. The terms of trade of coffee and tea were favored in the European Union, NAFTA, COMESA, SAFTA, and Pacific Alliance during the period of 1990–1991 to 2017–2018. MERCOSUR would get benefited from other countries due to the higher export prices of coffee. Similarly, EFTA, NAFTA, COMESA, and Pacific Alliance trading blocs would be profited for tea. Globally, Export price elasticity's of coffee in MERCOSUR and COMESA were marginally higher than imports price elasticity. Export price elasticity's of coffee were found to be marginally higher than imports in the Germany, Italy, and Netherlands (EU); Norway (EFTA); Canada and the United States (NAFTA); Venezuela (MERCOSUR); Australia (ASEAN); Egypt (COMESA); India (SAFTA); and Chile and Peru (Pacific Alliance). Export price elasticity's of tea were found to be marginally greater than the imports in the Italy (EU), Norway and Switzerland (EFTA), the United States (NAFTA), Australia, Indonesia and Thailand (ASEAN), and Chile and Peru (Pacific Alliance). India has the highest average bound duties and MFN applied duties in the coffee and tea in the world. Maximum bound duties and MFN applied duties of coffee and tea were higher in Switzerland. The United States and EU have the highest share of coffee and tea imports. Globally, more number of Sanitary and Phyto‐Sanitary measures and Special Safeguards have been provided to coffee and tea. NTM acts as a policy substitute for import tariffs in the global tea trade. Adapting the climate change plans is very important to enhance the quality and yield of coffee and tea. Training and conferences help to strengthen the capacity building of farmers. Proper price mechanism for coffee and tea land holders must be necessary to receive the higher profits for their produce. Global price fixing mechanism for tea and coffee is essential. This foreign trade study is very helpful for multi‐stake holders, producers, traders, and consumers of coffee and tea globally.