Transcript The Realities of Fair Trade on Cocoa Production in Ghana

The Realities of Fair Trade on
Cocoa Production in Ghana
Elena Anemogiannis
Sarah Edlen
Elin Marcsdottir
Greg Smith
Ghana
• Population: 24 million (2011)
• Former British colony
– Independence in 1957
– Parliamentary democracy
• Continuous economic
development
– Main industries: agriculture
(cocoa, coffee), mining (gold,
diamonds), manufacturing,
lumbering, oil
History of Cocoa
Production in
Ghana
• Introduced from Americas in 1878
• Cash crop displaced indigenous industries
• Investment in infrastructure after
independence
• Collapse of the commodity market in the
1960s
LARGEST PRODUCERS OF COCOA AS % OF
WORLD TOTAL
Fairtrade Foundation
Cocoa Marketing Board
COCOBOD
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Determines fixed price
Akuafo Check System
Quality Control Division
Cocoa Marketing Company Ghana Ltd
Cocoa Research Institute of Ghana (CRIG)
Seed Production Unit
Issues with Cocoa
Trade
o Black market
– Due to low farm gate prices, cocoa is smuggled to
Cote d’Ivoire
o Child Labor
– More than one million children are employed in cocoa
farming sector in West Africa
o Unsustainable practices
– Negative impact on the environment and long-term
production
o Quality
– Lag time between being sealed by the QDC and
exportation
FAIR-TRADE
Cocoa Production
o 1990s: Emerged as a reaction to exploitative nature
of the free-trade cocoa industry
o 1993: Partial liberalization of the Ghanaian cocoa
market
– created opportunity for licensed private companies to enter the
market by allowing them to purchase cocoa beans from farmers and
sell them to the Cocoa Marketing Company (CMC)
o Farmers realized that coming together in a larger unit
would increase bargaining power and help protect
their interests
o 1993: foundation of Kuapa Kokoo
Kuapa Kokoo
• Cocoa-growing co-op run by farmers for the member
farmers’ own benefit
• Represents 50,000 farmers across 1,300 communities
• Fair-trade certified in 1995
- Most important actor in Ghanaian market for fair-trade cocoa
- 1995-2011 sales to the fair-trade market rose from 3% to 27
% of co-op’s total production
• “Good cocoa farming”
- Aims to improve social, economic and political wellbeing
MOTIVATION
Is fair-trade really fair?
OBJECTIVES:
 To gain a better understanding of the differences
between fair-trade and free trade cocoa
production
 To determine if fair-trade corrects the issues
associated with free trade cocoa production
 To gain insights into who benefits from fair-trade
cocoa production
LITERATURE REVIEW
Historical Background
– Kuapa Kokoo, COCOBOD, Fairtrade Foundation
Labor Conditions
– BBC, CNN, World Cocoa Foundation
Environment
– François Olivier Ruf, 2011
Economic Significance
– Tyler Cowen, 2005; Tom qiao, 2011
Acknowledgements:
Elizabeth Becker, Ten Thousand Villages, Ashville, NC
Fair-Trade
Standards
• Environmental standards promote sound
agricultural practices and environmental
stewardship focusing on minimized and safe
use of agrochemicals, proper and safe
management of waste, maintenance of soil
fertility and water resources, no use of
genetically modified organisms
• Forced labor and child labor are prohibited
Advantages
• Guaranteed minimum price which helps farmers plan
their farm and household budgets for the coming year
• Extra Income from premiums has helped build wells,
toilets, day-care, fund a health program, construction of
a school and set up training programs
• Women’s participation in Kuapa actively promoted,
women empowerment
• Farmers have an increase sense of control
http://www.youtube.com/watch?v=orDjyNBmkj4
Disadvantages
Unsafe Work Environments
• Even in fair-trade certified farms, working
conditions have often proven to be dangerous and
strenuous
• Problems for workers include:
- Using dangerous tools (often of undesirable quality), such as
machetes
- Handling pesticides
- Lack of protective gear/equipment
- Carrying heavy loads
- Long working days
CHILD LABOR
SCOPE OF THE PROBLEM
Child Labor
• An estimated 218 million children are involved in work
around the world
• Between 200,000 and 800,000 children under the age
of 18 are trafficked each year in West Africa alone
Slavery:
• Young boys tricked into slavery in Ivory Coast
• Ages 12-14, manual labor 80-100 hours a week
• Currently enslaved people are bought and sold in the
world’s most destitute nations for only $50 or $100
Action of Fair
Trade
At present, no one
person or system can
provide a 100%
guarantee that chocolate
is free of child labor.
What the Fair trade
system guarantees is that
if they find breaches of
their standards, they will
take immediate action.
What has been
done?
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Audit tools have been sharpened
Child labor task force has been started
Child protection policy has been devleoped
Local NGOs for partnerships on joint projects
have been engaged
• Extra visits to train and support producers are
being provided
• Training on child labor and child protection in FLO
and FLO-CERT has commenced
WHAT IS BEING DONE
• Kuapa Kokoo has set up Child Labour Programme.
• it includes a taskforce to carry out internal checks
on farms and train members to identify children
at risk, as well as organising Kids’ Camps to teach
children about their rights.
• In January 2011, the co-operative launched a
two-year joint programme with the International
Labour Organization (ILO) to monitor and combat
child labour.
The Cocoa Plant
o Cocoa trees:
– Start producing
beans at 5
years old, peak
at 10 years old,
live for 30
years
o Types of cocoa
cultivation:
– Rustic cacao,
planted shade,
technified
cacao
Cocoa trees have a relatively benign effect on the environment if
sustainably planted
PROBLEMS WITH MONOCULTURE
• Tearing down rainforests abruptly changes the
ecosystems and microclimate
– Air and ground temperature rise
– Water purification is disrupted
– Production comes to rely on fertilizers and
pesticides
• Cocoa production  food production
• Deflated cocoa bean prices  deforestation
HOW GLOBAL SALES OF FAIRTRADE COCOA
HAVE GROWN (TONNES)
Fairtrade Foundation
Cocoa Prices are
Volatile
• Changes in supply and demand
• Weather conditions (good crop, fall in
prices)
• Poor crop maintenance (cost and
availability/lack of pesticides and
fertilizers)
• Political instability in producing countries
PRICE INSTABILITY
• Offers opportunity for price discrimination
– Regular product at market equilibrium price
– Similar Fair trade product at price premium
• Who benefits the most from the price premium?
– The vendor
– “more than 90% of profits did not reach the farmer”
PROFIT MAXIMIZATION AND PRICE
DISCRIMINATION
• Split market:
– low cost, free traded coffee
– higher cost, fair traded coffee
• Consumer tradeoff
• coffee industry sees higher earnings while
institutionalizing poor treatment of workers
Article
• American branch of Fair-trade movement cut
ties
• Lowered threshold for what constitutes as
“fair-trade”
• Incorporation of products large plantations
• “Fair trade for all”
Conclusions
To gain a better understanding of the
differences between fair-trade and free trade
cocoa production
To determine if fair-trade corrects the issues
associated with free trade cocoa production
To gain insights into who benefits from fairtrade cocoa production