T EA David Su John Lo 茶

P RODUCTION OF T EA : I NTERNATIONAL M ARKET S HARE YearShare of World Exports (%) IndiaCeylonChina YearShare of World Exports (%) IndiaCeylonJava and Sumatra

G LOBAL T EA P RODUCTION (N OW )

W HO P RODUCES T EA ??? FARMLAND TEA LEAF PICKERS

T EA P ROCESSING

Goods Made From Tea Leaves

W HERE TEA IS TRADED Began in China since 2700 BC, spread to Japan around 800 AD Dutch East India Company carried Chinese tea to Europe in 1610, entered European market Reached England market in 1669 British introduced tea culture into India in 1836 and Ceylon (Sri Lanka) in 1867; these two countries soon became major producers + exporters of tea By 1900s, tea had spread all around the world

PRICE HISTORY AND CONDITIONS First world war, British gov bought an abundance of tea to avoid shortage. Incentive for suppliers, many countries switched land use to tea production Increased output until the 1920s By 1929 the prices began to fall with the coming of the Depression

PRICE HISTORY AND CONDITIONS (CONT.)

INDUSTRY GROUPS Main industry group: Tea Associations in India, Ceylon, and Dutch East Indies during the early 20 th century Tried to control market place through output restriction to increase the profits of producers Accomplished through trade agreements

TRADE AGREEMENTS International Tea Agreement in 1930 Voluntary; each company agreed to reduce output to prevent falling prices Price Quantity of tea S1 S2 D e2 e1 P2 P1 Supply and demand of tea

TRADE AGREEMENTS (CONT.) Although many firms in industry, each firm was managed by a small number of agents Effective firm size was larger Greater effect on market if an individual cheats Each producer has an incentive to cheat and may reap benefits in the short term However, cheating will result in price wars

TRADE AGREEMENTS (CONT.) Increased output = falling prices Falling prices indicates noncompliance to trade agreement Other firms will be lead to abandon agreements and increase output Further noncompliance and increased output = further fall in prices More likely to occur when there are fewer decision makers; bigger impact from individuals

TRADE AGREEMENTS (CONT.) International Tea Agreement was abandoned in 1931 Dutch East Indies had failed to keep their promise of output reduction

TRADE AGREEMENTS (CONT.) Second International Tea Agreement established in 1933 Reduction of supply by 15% of maximum attained in time period Was more successful than the first agreement mainly due to legislation; the agreement was legally binding Lasted until WWII broke out; war caused a rapid shift in conditions (less purchasing power for consumers, more focus on military goods, possible devastation to manufacturing locations)

S PECULATORS Buyers usually must buy tea in physical form as opposed to just on paper Detracts speculators from entering market with as much ease

BIBLIOGRAPHY Gupta, Bishnupriya. "The History of the International Tea Market, " Economic History Services. 3 Nov " tea." Encyclopædia Britannica Encyclopædia Britannica Online. 03 Nov "The Tea Market - a background study." Oxfam International.