The International Cocoa Agreement: Enhancing cooperation and dialogue along global value chains

06 June 2024

The agreement is an example of UN Trade and Development’s (UNCTAD) impact through fostering global consensus, proving that international policy dialogue is central to addressing global trade challenges.

An African farmer holding a cocoa pod

The global cocoa market, characterized by deep disparities and vulnerabilities common to several other traded raw materials, comprises a complex network of farmers, middlemen, traders, and multinational corporations.

The global value chain is marked by high price volatility and significant information asymmetry, which substantially affect smallholders’ revenues. Additionally, its impact on the environment is increasing, alongside growing vulnerabilities to climate change.

Cacao trees thrive near the equator, with Africa producing about 70% of the global supply. Yet the world’s 5 million to 6 million cocoa farmers, who work primarily on farms of less than one hectare in developing countries, receive only a fraction of the billions of dollars generated by the global cocoa processing market.

As UN Trade and Development (UNCTAD) marks its 60th anniversary, the International Cocoa Agreement of 2010 exemplifies the organization’s commitment to building global consensus on issues that enhance the prospects of developing nations and their communities.

Negotiated under the organization’s guidance, the agreement symbolizes the power of international policy dialogue to tackle global trade issues and build more equitable, sustainable commodity markets. It shows the importance of international cooperation among a wide range of stakeholders to successfully address common problems in the sector.

Enhancing cooperation between exporters and importers

By facilitating collaboration between cocoa-producing and consuming nations, as well as governments and private companies, the agreement helps strengthen policy discussions among stakeholders on key issues such as the long-term sustainability of the global cocoa value chain and fairness within the industry.

Given the global nature of the cocoa market, discrepancies in trade barriers, tariffs and quality standards across countries can significantly impact market efficiency and fairness.

The agreement, renegotiated in 2010, includes 23 exporting countries and 29 importing countries (27 European Union member states, the Russian Federation and Switzerland). Together, they accounted for roughly 97% of world cocoa production in 2022 and about 60% of world cocoa imports, according to statistics from the UN Food and Agriculture Organization.

The International Cocoa Organization (ICCO) administers and supervises the operation of the agreement, which outlines specific roles and responsibilities for exporting and importing members.

Through enhanced cooperation, these countries can establish harmonized standards and practices, facilitating smoother trade and easier market access. For example, mutually agreed standards for pesticide residues and other safety requirements can streamline the acceptance of cocoa in international markets, reducing the need for costly testing and certification.

Boosting smallholder farmer livelihoods

Cocoa farmers often face unstable incomes due to global price fluctuations, influenced by varying supply and demand conditions.

By promoting projects to enhance local cocoa economies, the agreement aims to help improve the livelihoods of cocoa farmers, most of whom have limited access to resources that could help improve their farming practices and boost their yields.

Extreme weather conditions and changing climate patterns have compounded these challenges, severely impacting crop harvests and diminishing the yields and revenues of thousands of smallholders.

For example, excessive rainfall in the fourth quarter of 2023 in Ghana and Côte d'Ivoire triggered outbreaks of swollen shoot virus and black pod disease, which cause significant damage to cocoa pods. Years of low returns have driven many West African cocoa growers out of business.

The agreement prioritizes sustainable development to foster practices that benefit both the environment and the social structure of cocoa-producing regions.

According to UN Environment, unsustainable cocoa production has contributed to severe environmental challenges, such as deforestation and soil depletion in countries like Côte d’Ivoire. However, cocoa production has the potential to help restore forest cover if farmers use agroforestry practices, integrating cocoa trees with other types of vegetation to enhance biodiversity and soil health.

Increasing market transparency

The International Cocoa Agreement emphasizes the importance of transparency in the cocoa market through the collection, analysis and dissemination of key statistics and studies. A lack of transparency can lead to inefficiencies and unequal value distribution along the supply chain.

By enhancing data practices, the agreement aims to increase market information transparency so that all stakeholders – from farmers to final consumers – have equal access to information. This widespread access supports more informed decision-making, contributing to improving the stability of cocoa markets and the long-term sustainability of the sector, especially in developing countries. Transparent reporting of statistics such as stocks, production, consumption, trade and prices is crucial for stabilizing the cocoa market and international prices.

Such transparency protects both consumers and producers by ensuring market conditions are accurately reflected, promoting fairness and efficiency across the board.

6 decades shaping global trade and development

The International Cocoa Agreement is just one example of UN Trade and Development’s enduring impact on international trade negotiations.

As we face ongoing global challenges, the principles laid out in such agreements will continue to guide efforts toward a more transparent and sustainable trading system.

Learn more about UN Trade and Development's pivotal role in shaping global trade and development over the past six decades.