Tea is a desired commodity that, by its very nature, crosses international boundaries. Only grown viably in certain parts of the world, but almost universally desired, it illustrates some of the complications that come with worldwide trading networks.
Background
Looking at the beverage shelves in any American supermarket provides evidence that the US is not a major importer of tea from Sri Lanka. (Some Sri Lankans attribute this to their opinion that Americans don’t know good tea when they taste it!) According to a 2016 report, Middle Eastern countries are among the major importers of Sri Lankan teas, almost 55% of total exports, with Turkey as the largest single-country purchaser. This raises questions regarding the future impact that continued instability in this part of the world could have on future exports of Sri Lankan tea. Another 22% of Sri Lankan tea exports goes to Russia and former Soviet countries, another location with stability challenges.
Sri Lanka is one of the top four tea producers in the world, ranking with India, China and Kenya, all much larger countries. Sri Lanka’s tea production is not only about the tea itself. Income from tea exports helps fund necessary imports. According to the Food and Agriculture Organization of the United Nations in 2010, “Earnings from tea exports … constituted 50 percent of agricultural export revenue in…Sri Lanka, covering around 60 percent of food imports.” That is, without maintaining levels of tea production, Sri Lanka would not be able to afford its needed levels of food imports. Given that the country’s population has increased from 3.5 million people at the beginning of the nineteenth century to more than 21 million today, food security continues to be a vital national concern.
Agriculture dominated Sri Lankan exports during the country’s colonial period until independence in 1948. Since then, because of declines in the relative value of these primary exports (mostly tea and rubber), there has been growth in the manufacturing sector, particularly in clothing exports. Successive Sri Lankan governments have tried several approaches to directing investments and the balance of trade with varying degrees of success. Unfortunately, no clear policy path has emerged consistently.
When Sri Lanka’s civil war ended in 2009 the economy grew at a relatively rapid pace (6.2% between 2010 and 2016), reflecting renewed attention and fiscal support for development, rather than for security and military expenditures. Another factor in this spurt was post-conflict reconstruction which, by definition, might not be sustainable. However, much of this progress occurred in “non-export” sectors of the economy. (These growth sectors included construction, transportation, real estate, financial services, etc.) Some of this new pattern resulted from restrictive trade policies imposed by the government, which caused major declines in the portion of the country’s GDP (gross domestic product) attributable to exports. The cumulative result was a precipitous decline in Sri Lanka’s share of world markets, from 89% of GDP in 2000 trade (goods and services) to 54% in 2013.
Tea in transit to wharf, c. 1908
These effects are reflected in a recent report from the World Bank, which concluded that the country’s “total exports declined [between 2015 and 2016] with lackluster performance of agricultural exports amid drought conditions and weak demand for tea from the main buyers: Russia and the Middle East,” causing the country’s foreign trade deficit to increase. This situation for the tea industry was a “double whammy,” the result of decreased production and reduced markets.
Growth of the textile industry is one factor that has begun to diversify the traditional bundle of agriculturally-based exports. However, despite steadily increasing economic diversification, good and bad years in the tea industry can still have a major impact on overall economic conditions in Sri Lanka. Although the Sri Lankan economy has become more commercialized, there is still the ongoing specter of deficits because of imbalances in trade. Having a competitive tea industry remains an essential factor for the country’s success in the international marketplace.
The 2015 change in government leadership may provide a new focus on exports, which could benefit the tea industry. But there are still other challenges as well. Floods, landslides and droughts in 2016 and 2017 negatively impacted the country’s economy and caused declines in the production of tea. (See the environment module of this unit for more information on the relationship between physical conditions and the production of tea.) When the agricultural sector is affected by natural disasters, imports must increase to provide needed food, placing additional pressure on tea exports to provide balancing revenues. As extreme climate conditions escalate in frequency and severity, greater measures of economic resilience, particularly in the form of increased diversification, need to be taken, and may result in less attention being directed toward tea production. One question for the country’s leadership remains whether exports (including tea) should expand to increase Sri Lanka’s global integration, or whether the country should continue to develop non-export economic sectors. Given continued Sri Lankan governmental deficits, the future will bring some tough choices.
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Since national and international economic currents continue to pose challenges for the tea industry, certain marketing approaches have been undertaken to ensure that Sri Lankan tea remains a vital export. Recent years have produced many food and drink scandals, from mad cow disease to adulterated baby formula. As globalization has expanded, our food and drink increasingly come from various places in the world, sometimes all combined into single products. Scientific testing, branding and packaging are all meant to ensure consumables are safe. To address some of these issues, the Sri Lanka Tea Board has developed a lion logo, the same lion that appears on the Sri Lankan national flag, for companies that package Sri Lankan tea for consumers. It indicates that all the tea within the package bearing the logo does, indeed, come from Sri Lanka (not blended with tea from elsewhere), and that it meets certain standards of quality. Value-added measures are among the tools that are being employed to keep Sri Lankan tea brands competitive in world markets.
Such issues are problems not only for the tea industry, but for the country as a whole, since tea exports continue to play a critical role in the direction and potential success of the country’s economy. It is important to consider the complex balancing act that governments must perform to promote economic progress, fiscal health and social benefits. The story of the tea industry in Sri Lanka continues to pose questions regarding dilemmas of world economic integration and national interests that beset all countries.
Curricular Themes and Student Activities
The activities in this module examine the worldwide impact of tea, and its effects on the economy of Sri Lanka. These include the approaches and impact of advertising (see also the history module for more on tea advertising), potential conflicts of using agricultural land for tea vs. food, potential effects of sustainability standards, and innovative approaches to the production of tea.
View on Ceylon tea estate, c. 1908
Tea and advertising
Look online at advertisements for tea. (Use Google Images to search for “tea advertisements.”) What are the characteristics of tea that are emphasized to appeal to consumers? What imagery is used to enhance tea’s appeal, e.g., beautiful women, celebrities, etc.? To which distinct audiences do the ads appeal (housewives, youth, people in specific countries)? What are the visual differences between the historic advertisements and the current ones? How are the brand/company names displayed? How do the companies distinguish themselves from each other? Why is this important? What variations do you see in the packaging of tea (loose, bags, iced, instant, bottled)? How do these appeal to specific types of consumers? Can you easily determine the country source of the tea? Why would this be important for Sri Lanka?
Colombo harbor, c. 1880
Reading tea leaves
The Future of Food and Agriculture: Trends and Challenges
A technical but alarming report on worldwide food insecurity. While not directly addressing Sri Lanka, it does state, “To meet demand, agriculture in 2050 will need to produce almost50 percent more food, feed and biofuel than it did in 2012… In sub-Saharan Africa and South Asia [including Sri Lanka], agricultural output wouldneed to more than double by 2050 to meet increased demand…”
http://www.fao.org/3/a-i6583e.pdf
World Tea Production and Trade: Current and Future Development
Comprehensive analysis of recent (2013) and projected future production of tea, worldwide.
Given the need for increased food production, in Sri Lanka and elsewhere, and statistics on tea production, what do you see as the future of tea plantations in Sri Lanka?
Tea innovations
In Sri Lanka’s Tea Paradise, A Social Enterprise Is Brewing
An organic tea estate in Sri Lanka that shares its revenues with its workers.
List some of the innovative measures the Amba tea plantation is undertaking to ensure that they remain competitive, including those concerning the plants, the workers, the machinery, ethnic relations and additional revenue streams. Could these be undertaken by other plantations? What kinds of start-up costs would be involved? How can small actions create large-scale change? What effects would such changes have on the environment and on workers? Do you foresee such changes being undertaken throughout the country?
Sustainability standards
ISEAL Alliance
The ISEAL Alliance is a group of organizations that voluntarily pursue standards having a positive impact on social conditions and the environment.
http://www.standardsimpacts.org/sites/default/files/Infographic_Business_Benefits_FINAL.pdf.
Examine these infographics, related to a 2017 meta-review by (A meta-review looks at other studies to assess the overall research on a subject, rather than conducting original research.) What do these graphics predict could happen to Sri Lanka’s tea industry by paying close attention to sustainability standards? Do you think this is an accurate assessment? Which of the “influential factors” are most relevant to the tea industry?
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Additional Information
Sri Lanka Tea Plantations: Crisis and Restructure
A newspaper article on the problems of productivity on Sri Lanka tea estates.
Productivity Declines in the Tea Plantations and a Possible Way Forward
A comprehensive assessment of productivity challenges and some proposed solutions (pages 261-275 of the PDF file, pages 260-274 of the original text).
http://www.ips.lk/wp-content/uploads/2017/01/Economic-Social-Development-Vol.II_.pdf
Sri Lanka, Short of Food, Faces an Economic Crisis (1974 article)
An examination of the some of the factors that contributed to an economic crisis in 1973. Could it happen again?
Targeted Policies for Production and Export Diversification: Sri Lankan Case Study
A 2018 PowerPoint that examines the conditions of the tea industry.
http://unctad.org/meetings/es/Presentation/MYEM2018_Gothami_Silva_26042018.pdf
Sri Lanka’s Growth Model: Progress and Vulnerabilities
A 2017 study that examines the insufficiency of the current diversification of exports.
https://www.afd.fr/sites/afd/files/2018-03-04-05-57/sri-lanka-growth-model.pdf
