Institute for Development Studies, University of Nairobi

This paper presents a simple econometric model of the international trade in tea and describes the advantages and disadvantages to East African producers of various possible International Tea Agreements, as compared with a situation in which no agreement is reached and production continues unrestrained. As of 1976, East Africa accounted for a small but rapidly expanding sector of world tea production, and, although tea prices have been falling for more than a decade, total revenue earned by tea in East Africa has continued to rise because the volume of exports has risen more rapidly than the decline in prices. However, It appears that East Africa could earn even higher revenues from tea if an international agreement could be reached which would not limit the region's share of world production too severely. If increased tea production were limited In such a way that the three major Asian producers, India, Sri Lanka and Indonesia, maintained their present absolute levels of tea production, and the new producers shared all the natural expansion of demand for tea, this would still allow Kenya and East Africa an attractive rate of increase of exports and revenue. The employment consequences in Kenya of a limitation on the growth of production according to this formula are not necessarily negative, and could even be positive.