Monday, November 12, 2007
The "ACCRA AGENDA": The exploitation of cocoa farmers continues unabated...
THE “ACCRA AGENDA”: The exploitation of cocoa farmers continues unabated…
The “Accra Agenda” was developed through a Round Table Meeting organized by the International Cocoa Organization (ICCO) which was held at the International Conference Centre in Accra, Ghana from 3-6 October 2007 with the official objective of achieving a “sustainable world cocoa economy.”
However, beyond the empty & deceitful rhetoric preached during this useless and expensive “talkshop,” the “Accra Agenda” has (not surprisingly) purposely and brilliantly failed to identify, address and resolve the root economic cause leading to low, constantly declining and * unremunerative cocoa prices on the world market - (i.e. *prices which do not reflect or take into account real production cost of cocoa, taking into account production cost, inflation, currency fluctuations, global Terms of Trade, etc.) – namely, long, medium and short-term market imbalance between supply and demand leading to a structural over supply of cocoa on the world market, which in turn lead to low and constantly declining real prices of cocoa on the world market over the long-run.
World cocoa stocks 2005-2006:
1.5 million metric tons = 50% of annual demand = 6 months stock !
In fact, the cocoa & the chocolate industry in the US and in Europe has massively and uninterruptedly been exploiting millions of small-scale cocoa farmers in West Africa over the last century through a subtle and deceitful Machiavellian manipulation of the demand & supply market mechanism, with the hidden complicity and the active support of the ICCO.
Although the official mission of the ICCO is to “maintain an equilibrium between supply and demand” to secure remunerative prices for cocoa farmers, it has brilliantly and purposely failed to achieve its stated mission over the last half a century since its creation. On the contrary, the ICCO has since its creation deliberately recommended, implemented and pursued policies which have resulted in creating an excess supply of cocoa on the world market ( 2005-2006 world stocks: 1.5 million metric tons = 50% of annual demand = 6 months of stocks ) to enable the cocoa and chocolate industry in cocoa consuming countries to purchase cocoa at rock-bottom prices, thereby further impoverishing cocoa producing countries in West Africa and millions of small-scale cocoa farmers who are thrown deeper into poverty while cocoa and chocolate manufacturers in the the USA and the EU generate billions of dollars every year…!
Of course the governments of cocoa producing countries are not without blame in the exploitation and impoverishment of their own cocoa farmers. Over the last 50 years since so-called independence, they have been incapable to develop and implement intelligent and coherent economic development policies to process their own cocoa, which would have allowed them to significantly add-value to the cocoa, to create desperately-needed employment and to break free from the dictate of the world market. Instead, they were happy to take over the exploitative role of their colonial masters and perpetuated with more skills the exploitation of their own farmers. The colonial masters were smart enough to feed the cow that gave them the milk…The new “black colonial masters” milked their own farmers dry and systematically starved and killed the cows that gave them milk ...!
Furthermore, over the last century, cocoa producing countries have been incapable of developing and implementing coherent and intelligent economic policies and of putting in place regulatory market mechanisms to secure remunerative prices to their cocoa farmers. Add the abundant ingredients of corruption, massive exploitation, economic incompetence, intellectual mediocrity and moral bankruptcy of the successive governments in cocoa producing nations in West Africa since so-called “independence” and you have the result today: the economic bankruptcy of countries in West Africa heavily dependent on producing and exporting non-processed cocoa ( and other raw commodities such as coffee, cocoa, etc) and the massive impoverishment of millions of cocoa, coffee, cotton, etc. farmers across West Africa.
So on the one hand you have the cocoa and chocolate industry in the USA and in Western Europe massively and continuously exploiting millions of cocoa farmers in West Africa for over a century – with the hidden complicity and support of the ICCO ( contrary to its official mandate ) and on the other side of the equation you have a bunch of intellectually incompetent and mediocre so-called “leaders” in cocoa producing nations who have been incapable of developing and implementing intelligent and coherent economic development policies within the cocoa sector over the last 50 years since so-called independence to secure remunerative cocoa prices for millions of cocoa farmers across West Africa.
Thus,
MASSIVE AND CONTINUED ECONOMIC EXPLOITATION OF COCOA FARMERS IN WEST AFRICA OVER THE LAST CENTURY BY THE COCOA & CHOCOLATE INDUSTRY IN THE US & THE EU, WITH THE HIDDEN COMPLICITY AND ACTIVE SUPPORT OF THE ICCO
+
ECONOMIC INCOMPETENCE, INTELLECTUAL MEDICOCRITY, WIDESPREAD CORRUPTION, MISMANAGEMENT OF THE COCOA SECTOR, UNINTERRUPTED AND CONTINUED EXPLOITATION OF COCOA FARMERS BY SUCCESIVE GOVERNEMENTS IN COCOA PRODUCING NATIONS IN WEST AFRICA OVER THE LAST 50 YEARS SINCE SO-CALLED INDEPENDENCE,
=
ECONOMIC BANKRUPTCY OF COCOA PRODUCING NATIONS IN WEST AFRICA AND WIDESPREAD IMPOVERISHMENT OF COCOA FARMERS ACROSS WEST AFRICA!
May God have mercy on all of you, exploiters & exploited…
Thursday, October 25, 2007
SIPRI ANNUAL REPORT ON GLOBAL ARMS AND MILITARY EQUIPMENT PURCHASES...
SIPRI – STOCKHOLM INTERNATIONAL PEACE RESEARCH INSTITUTE
ANNUAL REPORT ON GLOBAL ARMS EXPENDITURE
SIPRI 2007 YEARBOOK – MILITARY EXPENDITURES AND ARMS PRODUCTION (Excerpts)
Source: www.sipri...
Who purchases arms and military equipment?
Annual global military spending (2006): $US 1200 billion ($US 1.2 trillion)
3.5% increase from 2005 ($US 184/per capita; i.e. each citizen in the world contributes $184 annually for arms purchases!)
2.5% of world GDP spent on arms and military equipment
37% increase over last ten years (1997-2006)
To put this amount in perspective, the G8 annually contribute $US 50 billion in so-called “aid” to officially “fight poverty” in the so-called Third World which comprises +80% of the world population ( 5 billion people ).
Largest military spender: the USA with $US 528 billion/year ($US 177/per capita) = 46% of global annual military spending with less than 5% of global population!
53% increase from 2001-2006 since attacks on world trade centre on sept.11, 2001 (from $US 343 billion to $US 528 billion)
15 countries = 83% of total global annual military spending ($US 964 billion) accounting for 56% of global population.
Patterns and actors of major armed conflict
Inter-States: War between States
Intra-States: War within States
Non-States actors: “rebels”, “terrorists”, etc.
Link between arms expenditure and inter-states and intra-states military conflict
2006-07: 20 intra-states conflicts
Africa annual military spending (2006):
$US 15.5 billion (1.3% increase since 2005)
51% increase over the last 10 years from 1997-2006 mainly from North Africa & Algeria (50%).
Largest military spenders in Africa
North Africa share: 50% ( $US 7 billion)
(Algeria: $US 3.5 billion)
South Africa: $US 3.6 billion (1.5% of GDP)
Thus, North Africa and South Africa together account for $US 10.6 billion = 70% of arms expenditure in Africa)
Algeria largest spender in North Africa (46% share) and 2nd largest in Africa after South Africa.
South Africa has the largest military budget in Africa ( $3.6 billion = 1.5% of GDP)
Note: Military sector accountable to civil authorities; key guidelines for control of the military have been created. (see Leroux, “South Africa: Budgeting for the military sector in S.A. The processes and mechanisms of control.)
Sub-Saharan Africa (SSA) share
46 States in SSA = $US 5 billion.
Areas competing for national resources:
Military and Social sector
Military spending made at the expense of social welfare services ( health, education, etc) and economic development.
Note: Angola & Burundi: 5.7% & 6.2% of GDP = annual arms expenditure, with lowest social welfare and economic development spending.
Latin America military spending (2006)
$ 32.7 billion
5% increase over 2005
18% increase from 1997-2006
Venezuela highest rate of military spending
35% increase since 2004, in response to perceived threath from US invasion.
Asia and Oceania military spending
$ 185 billion
5% increase since 2005 ( $ US 9 billion)
India & China = 40% ($ US 74 billion)
China: 12% increase in 2006
India: 7% increase in 2006
Japan 2nd largest military spender after China
South Korea: 7% increase
Autralia: 5% increase
Japan, Taiwan and Malaysia decreased spending.
Note: Japan constitution only allows the use of force for defensive purposes only in response to an attack on the country ( defense vs offense)
Japan capped military spending to 1% of GDP. Still the largest military spender in Asia/Oceania after China due to ts large GDP.
China: exceeded Japan in 2006. Biggest in the region and 4th in the world! Est. at 50-100 billion/year. 195% increase from 1997-2006!
Europe
Annual spending: $US 280-350 billion
10% increase from 1997-2006 ($28 billion)
Increase by 0,5% ($1.5 billion) since 2005
Reflects large increase in Russia, Spain, Turkey.
Decrease in Germany, Italy and UK.
Azerbaijan and Belarus (oil- rich ex-soviet republics in Eastern Europe) account for world’s highest increase (82% & 56%)
Croatia, Estonia. Latvia, Slovenia, Russia increase by 10% in 2006.
Hungary and Italy decreased military spending by 10% in 2006.
European Defense Agency
Consolidated military spending among EU countries to coordinate military procurements, research & development, to reduce costs and to profit from economies of scale.
Russia
$US 34.7 billion
4th largest spender in Europe
11% of total
12% increase in 2006
155% increase since 1998
2.5-3% of GDP
Eastern Europe
Highest increase of last 2 years
Georgia increased by 185% from 2005
Azeirbaijan increased by 82%
Armenia increased by 17%
Belarus increased by 56%
Middle East military expenditures (2006)
$ US 72.5 billion = 6% of total
2.8% increase over 2005
Saudi Arabia largest annual increase (14%); 57% increase from 1996-2007
Military expenditures in Sausi Arabia tend to follow oil prices
Region with highest GDP-military spending ratio; average 6% of GDP (1997-2005)
due to lack of transparency and accountability in military budget (i.e. 2007 BAE arms deal in UK > corruption involving “prince” badar, SA ambassador to the US)
Saudi Arabia increase due to threaths from Iran and other Shiite dominated countries in the region.
Biggest spender in the region ( 40% of total military spending in the middle east in 2006)
64% increase from 1996-2007
Israel
2nd largest military spender in middle east after Saudi Arabia
“democracy” but military budget secret.
Iran
3rd largest military spender in middle east after Israel.
23% increase`from 1996-2006
Largest increase in the region
Threaths perceived by US pressure in the region and tension over its nuclear program with the Int’community.
Conclusions
World military expenditure increased in 2006
US increase by 62%
US share in world total: 46%
(regional annual average increase offset by decreases in other countries)
SIPRI – STOCKHOLM INTERNATIONAL PEACE RESEARCH INSTITUTE
ANNUAL REPORT ON GLOBAL ARMS EXPENDITURE
SIPRI 2007 YEARBOOK – MILITARY EXPENDITURES AND ARMS PRODUCTION (Excerpts)
Source: www.sipri...
Who purchases arms and military equipment?
Annual global military spending (2006): $US 1200 billion ($US 1.2 trillion)
3.5% increase from 2005 ($US 184/per capita; i.e. each citizen in the world contributes $184 annually for arms purchases!)
2.5% of world GDP spent on arms and military equipment
37% increase over last ten years (1997-2006)
To put this amount in perspective, the G8 annually contribute $US 50 billion in so-called “aid” to officially “fight poverty” in the so-called Third World which comprises +80% of the world population ( 5 billion people ).
Largest military spender: the USA with $US 528 billion/year ($US 177/per capita) = 46% of global annual military spending with less than 5% of global population!
53% increase from 2001-2006 since attacks on world trade centre on sept.11, 2001 (from $US 343 billion to $US 528 billion)
15 countries = 83% of total global annual military spending ($US 964 billion) accounting for 56% of global population.
Patterns and actors of major armed conflict
Inter-States: War between States
Intra-States: War within States
Non-States actors: “rebels”, “terrorists”, etc.
Link between arms expenditure and inter-states and intra-states military conflict
2006-07: 20 intra-states conflicts
Africa annual military spending (2006):
$US 15.5 billion (1.3% increase since 2005)
51% increase over the last 10 years from 1997-2006 mainly from North Africa & Algeria (50%).
Largest military spenders in Africa
North Africa share: 50% ( $US 7 billion)
(Algeria: $US 3.5 billion)
South Africa: $US 3.6 billion (1.5% of GDP)
Thus, North Africa and South Africa together account for $US 10.6 billion = 70% of arms expenditure in Africa)
Algeria largest spender in North Africa (46% share) and 2nd largest in Africa after South Africa.
South Africa has the largest military budget in Africa ( $3.6 billion = 1.5% of GDP)
Note: Military sector accountable to civil authorities; key guidelines for control of the military have been created. (see Leroux, “South Africa: Budgeting for the military sector in S.A. The processes and mechanisms of control.)
Sub-Saharan Africa (SSA) share
46 States in SSA = $US 5 billion.
Areas competing for national resources:
Military and Social sector
Military spending made at the expense of social welfare services ( health, education, etc) and economic development.
Note: Angola & Burundi: 5.7% & 6.2% of GDP = annual arms expenditure, with lowest social welfare and economic development spending.
Latin America military spending (2006)
$ 32.7 billion
5% increase over 2005
18% increase from 1997-2006
Venezuela highest rate of military spending
35% increase since 2004, in response to perceived threath from US invasion.
Asia and Oceania military spending
$ 185 billion
5% increase since 2005 ( $ US 9 billion)
India & China = 40% ($ US 74 billion)
China: 12% increase in 2006
India: 7% increase in 2006
Japan 2nd largest military spender after China
South Korea: 7% increase
Autralia: 5% increase
Japan, Taiwan and Malaysia decreased spending.
Note: Japan constitution only allows the use of force for defensive purposes only in response to an attack on the country ( defense vs offense)
Japan capped military spending to 1% of GDP. Still the largest military spender in Asia/Oceania after China due to ts large GDP.
China: exceeded Japan in 2006. Biggest in the region and 4th in the world! Est. at 50-100 billion/year. 195% increase from 1997-2006!
Europe
Annual spending: $US 280-350 billion
10% increase from 1997-2006 ($28 billion)
Increase by 0,5% ($1.5 billion) since 2005
Reflects large increase in Russia, Spain, Turkey.
Decrease in Germany, Italy and UK.
Azerbaijan and Belarus (oil- rich ex-soviet republics in Eastern Europe) account for world’s highest increase (82% & 56%)
Croatia, Estonia. Latvia, Slovenia, Russia increase by 10% in 2006.
Hungary and Italy decreased military spending by 10% in 2006.
European Defense Agency
Consolidated military spending among EU countries to coordinate military procurements, research & development, to reduce costs and to profit from economies of scale.
Russia
$US 34.7 billion
4th largest spender in Europe
11% of total
12% increase in 2006
155% increase since 1998
2.5-3% of GDP
Eastern Europe
Highest increase of last 2 years
Georgia increased by 185% from 2005
Azeirbaijan increased by 82%
Armenia increased by 17%
Belarus increased by 56%
Middle East military expenditures (2006)
$ US 72.5 billion = 6% of total
2.8% increase over 2005
Saudi Arabia largest annual increase (14%); 57% increase from 1996-2007
Military expenditures in Sausi Arabia tend to follow oil prices
Region with highest GDP-military spending ratio; average 6% of GDP (1997-2005)
due to lack of transparency and accountability in military budget (i.e. 2007 BAE arms deal in UK > corruption involving “prince” badar, SA ambassador to the US)
Saudi Arabia increase due to threaths from Iran and other Shiite dominated countries in the region.
Biggest spender in the region ( 40% of total military spending in the middle east in 2006)
64% increase from 1996-2007
Israel
2nd largest military spender in middle east after Saudi Arabia
“democracy” but military budget secret.
Iran
3rd largest military spender in middle east after Israel.
23% increase`from 1996-2006
Largest increase in the region
Threaths perceived by US pressure in the region and tension over its nuclear program with the Int’community.
Conclusions
World military expenditure increased in 2006
US increase by 62%
US share in world total: 46%
(regional annual average increase offset by decreases in other countries)
SOLUTION TO THE COFFEE CRISIS...
THE COFFEE CRISIS…
The coffee sector in Tanzania and throughout sub-Saharan Africa has collapsed due to a structural over-supply of coffee on the world market which has resulted in dramatic decreases in the world prices of coffee. In fact, over the last seven years, coffee prices have decreased by over 70%, reaching their lowest 30-year low in 2002/2003. ( see graph 1 below)
Graph 1) World market coffee prices (1989-2003) ($US/Ib)
As a direct result, millions of coffee farmers in Tanzania and across sub-Saharan Africa have been thrown deeper into poverty as the low world price does not allow coffee farmers to profitably produce and market their coffee.
The solution to help coffee farmers break-free from the vicious trap cycle of the world market is to help farmers process (roast & grind) and market their own coffee directly, thereby significantly adding-value to the coffee and significantly increasing their income in the process.
This pilot project is an initiative aimed at achieving this objective. The coffee is grown and processed by the farmer and marketed through this initiative. All sales proceeds – minus marketing costs - are then equitably redistributed directly to the respective farmer.
If the market in Tanzania responds favorably to this pilot project, then this initiative will be replicated on a larger scale in Tanzania, and can (hopefully) serve as a practical example and as a solution to revive the coffee sector in both Tanzania and in other coffee growing countries across sub-Saharan Africa.
Thank you for supporting the coffee farmers of West Usambara, Tanzania through this pilot project and to help contribute to the revival of the coffee sector in Tanzania.
For more information on this initiative, please contact:
Arya A. Tajdin
Executive Director
Yajna Centre
Dar es Salaam, Tanzania
Email: arya@yajnacentre.com
THE ROOT CAUSE OF THE COLLAPSE OF THE COFFEE SECTOR
THE COFFEE CRISIS…
The root (economic) causes behind the collapse of the coffee sector
The coffee sector in sub-Saharan Africa and throughout coffee producing nations has collapsed due mainly to a structural over-supply of coffee on the world market, which has resulted in dramatic, unprofitable and unsustainable decreases in the world prices of coffee. In fact, over the last seven years, coffee prices have decreased by over 70%, reaching their lowest 30-year low in 2002/2003 ($US 0,50 cents/kg) (see graph 1 below)
Graph 1) World market coffee prices (1989-2003) ($US/Ib)
As a direct result, millions of small-scale coffee farmers across the world have been thrown deeper into poverty as the low world price does not allow them to profitably produce and market their coffee. Meanwhile, however, coffee Multinationals generate billions of dollars annually from coffee sales…
Multinational monopoly power in the coffee sector
• 4 multinational corporations control over 70% of the coffee trade in the world.
• Through this concentration of monopoly power, they control the world supply of coffee and set prices on the world market.
• While millions of small coffee farmers are struggling to survive by growing coffee for their subsistence, these multinational corporations are generating profits in the billions each year.
The “4” coffee multi-national corporations: Revenue 2001-2002
1) Phillip Moris/USA. : $US175billion
2) Nestle/Switzerland.: $US65billion
3) Procter & Gamble/USA: $US40 billion.
4) Sara Lee/USA: $US 30billion.
Coffee trade statistics demonstrating results of unfair world trade practices in the coffee sector in favor of foreign multinational corporations
source: International coffee organization
• Coffee market value 1992: $US 30 billion
• Producers’ share 1992: $US 12 billion.
• Coffee market value 2002: $US 50 billion
• Producers’ share 2002: $US 8 billion.
FACT:
• While the global market value for coffee in the world has increased from $US 30 billion to $US 50 billion in the last ten years, the value share to producers has decreased from 40% to 16% respectively, as a direct result of unfair world trade practices biased in favor of foreign multinational corporations.
• Furthermore, since 1970, the value of commodities produced in the South has declined in relation to the cost of manufactured goods. In 1975, 8 tons of African coffee could buy 1 tractor; by 1990, it took 40 tons of the same coffee to buy one tractor*.
*source: Crowley Sarah, Teaching about Fair Trade, May 1998.
FACTORS LEADING TO FARMERS’ IMPOVERISHMENT
• Declining commodity prices on the world market resulting from structural over-supply and from biased and exploitative terms of global trade.
• Continuous increases in the price of (imported) farm inputs (seeds, fertilizers, etc.), resulting from IMF’s liberalization policies (infamous Structural Adjustement Programs) & from biased, unfair and exploitative terms of global trade ( illegal, unfair and trade-distorting agricultural subsidies paid to so-called “farmers” (multinational disguised as ‘farmers”) in the G8, market entry barriers ( escalating tariffs) applied to processed commodities originating from the so-called “Third World”, etc. keeping “poor developing” nations trapped in the “Colonial Pact”…
• Widespread corruption and mismanagement in so-called farmers’ organizations or cooperatives.
• Massive local and global exploitative trade practices and inefficiencies along the supply chain.
• Failure of farmers to organize themselves and failure of (illegitimate and criminal States) to develop and implement intelligent and coherent economic development policies in favor of farmers.)
• Low commodity prices, no access to credit, no technical assistance, no logistical support (transport, processing, storage) and no direct access to export markets.
Small-scale coffee farmers
• Over 50% of the world’s coffee is grown by small family farmers. Most small farmers who are not organized into marketing cooperatives are at the mercy of middlemen or processing plants to sell their coffee, earning a mere 1%-2% of the retail price of coffee on the export market.
• Low prices and lack of control over the storage, transport, processing, marketing and exporting of coffee beans trap both the farmers and the countries for whom cash crops such as coffee constitute a major export commodity, into a vicious circle of poverty, “aid”, and debt.
Processing mills
• Processing of coffee is generally carried out on large farms or in coffee mills.
• Most coffee mills are privately owned, though occasionally they may be owned by small farmer cooperatives.
Local middlemen
• Middlemen are intermediary traders who buy coffee beans from small farmers. They take advantage of the farmer’s lack of access to credit, marketing tools, and access to export markets.
• The farmers’ weaknesses are his strength!
• They often act as bankers to the desperate farmers and provide loans on condition that farmers sell them their coffee at the lowest price and repay their loans at the extremely high rates of interest.
• This strategy not only allows the middlemen to maximize profits at the expense of the farmer, but also plunges the farmer into the vicious circle of loan-debt-poverty.
Exporters
• Exporters are either independent companies or subsidiaries of multinational corporations that export coffee beans to importers in the export markets.
• The primary goal of the conventional exporter is to buy coffee beans at the lowest possible price and to resell it at the highest possible price so as to maximize profit.
Brokers
• Brokers buy and sell coffee on commission without ever owning the coffee that they trade. They act as intermediaries between the exporters and the importers.
• Multinational corporations have their own brokers and have enormous buying and selling power which allows them to speculate and to influence the supply of coffee on world markets ( New York and London Coffee Exchange).
Importers
• Importers purchase raw green coffee beans either from brokers or exporters, which they subsequently sell to roasters.
Roasters
· Most roasters buy their coffee from importers. After roasting and packaging the coffee, roasters then sell the processed coffee either to distributors or directly to retail and institutional accounts at phenomenal profits. Some roasters have their own retail outlet chains and sell coffee directly to the consumer.
Distributors
• Distributors are sometimes involved in channeling processed coffee to retail and institutional accounts (ie; schools, universities, hotels, airlines, etc…)
Retailers
• Retailers are supermarket chains, grocery stores, restaurants, cafes, etc… that sell coffee directly to the consumer.
Consumers
• Consumers are the final link in the coffee trade.
• They are usually unaware of the unfair conditions under which the coffee was produced and traded.
Ex: The crisis within the coffee sector
• In the last three years, coffee prices on the world market have drastically fallen by over 70%.
• This is a direct result of unfair world trade practices enforced by the WTO and supported by both the IMF and the World Bank in favor of the G8 countries and their multinational corporations.
World price of cash crops
• In more than fifty so-called “third world” countries, more than fifty percent of export earnings depend on three cash crops, among them coffee. Moreover, agriculture exports account for more than 50% of foreign exchange revenue in Kenya and more than 70% of the total population in Kenya depends on agriculture for their livelihood*. (*Exporting in East Africa, Francois Alland)
• Thus, a substantial decrease in the world price of any of these leads to severe economic crisis for both the farmers and for the countries producing these crops, and throws them into a vicious cycle of poverty, “aid” and debt.
“ Structural over-supply in the commodity market lies at the heart of global poverty and instability.” Brandt Report, 1980
Paradox of coffee trading : Highly Lucrative trade that creates mass poverty among coffee farmers around the world.
Let’s consider and reflect on the following figures:
Average world market price for coffee beans over the last 7 years: $US 1.2/kg
Average share of world market price paid to farmers: 30%-50% = $0,36-$0,60 depending on quality, type, stages of processing, region, etc.
Average price paid by consumers for regular (i.e. not organic or Fair Trade certified) processed (roasted) coffee: $US 10/kg
Average minimum price paid for a regular cup of coffee in a (i.e. not organic, (so-called) “Fair Trade” or cappuccino, espresso, etc…): $US 1 –Euro 1 per cup.
Note: 1kg of coffee makes on average 40 cups of coffee; thus, the market retail price paid by consumers for a cup of coffee ($US 1/cup) works out to $US 40 per kg!
However, the small-scale coffee farmers who grows the coffee only gets 1% to 1.5% of the minimum market retail price! Thus, these numbers clearly reveal that the coffee farmers are MASSIVELY exploited by the multinationals and all those working within the coffee supply chain and MASSIVELY profiting from the MASSIVE exploitation of coffee farmers from around the world.
The “voluntary” role and responsibility of consumers in the (massive) exploitation of coffee farmers…
Indirect participation in exploitation resulting from indifference is far worst than participation stemming from ignorance. In fact, coffee consumers are creating and sustaining – consciously through indifference or unconsciously by ignorance - the poverty of millions of coffee farmers around the world. The market responds to money, not to human needs; thus, if consumers are willing to buy and pay $US 10/kg for processed coffee beans or $US 1 or more for a cup of coffee without any concern or regard for the economic or social welfare of the coffee farmers and for the way in which the coffee was traded, then they are directly encouraging the exploitation of the coffee farmers and creating and sustaining their poverty – through indifference or ignorance.
So what can consumers of coffee do to put an end to the massive exploitation of coffee farmers resulting in their poverty…
Fair-Trade coffee: How “fair” is Fair Trade certified coffee…?
What is Fair Trade?
• Fair Trade is an alternative global trading network that ( officially claims to ) seeks to address structural inequalities resulting from unfair and exploitative world trading rules and practices under the current so-called “free market” global economy, by promoting grassroots development through “direct, equitable trade with farmers.”
• Furthermore, by educating consumers about the issues that affect global poverty, Fair Trade encourages them to use their purchasing power as a political and economic tool to change the prevailing current unfair and exploitative world trade practices which create and sustain poverty.
• To do so, Fair Trade:
1) Purchases coffee and other cash crops directly from farmers organized into cooperatives or other forms of democratic association representing the farmers.
This allows farmers to break free from dependence from the numerous exploitative middlemen along the classic supply chain…( to be replaced by exploitative economic actors working within the highly lucrative and profitable Fair Trade “business”)
2) Fair Trade purchases cash crops at a pre-determined (so-called) “fair” price, which is set as a percentage of the world market price. Furthermore, Fair Trade claims that member farmers are encouraged to invest in sustainable development projects within their respective communities using the income generated from Fair Trade prices… (ie; health, education, sustainable agriculture and environmental protection.)
3) Fair Trade further claims to provides access to export markets in the North (G8 countries) through its own vertically integrated infrastructure (ie; importers, processors, distributors, retailers: +10,000 fair trade retail outlets in Europe and USA; distribution network in over 50,000 supermarket chains; distribution network on the internet and through institutional, commercial and industrial accounts, etc.)
4) Fair Trade provides pre-harvest interest-free financing ( up to 60% of the FOB export contract) to local farmers to help them organize their production and to break free from dependence from exploitative sources of financing and individuals.
5) Fair Trade provides technical assistance to farmers to help them achieve optimal efficiency and productivity within their sector so as to maximize the return on their labor and investment.
6) Fair Trade organizations promote Fair Trade in the export markets (G8 countries) and educate consumers on the issues affecting global poverty so as to incite them to buy and consume fairly traded products so as to help the developing nations break free from the vicious circle of poverty, “aid” and debt caused by unfair global trade practices under the actual “free trade” global world market economy.
Consumers are educated and encouraged to use their purchasing power to change the current unfair global trading system which exploits resources and labor in the so-called “third world” and which is at the root of human poverty and suffering in a large part of the globe.
Table 1. Fair Trade vs World market coffee prices
Graph 1. Fair Trade coffee prices
Graph 2. Fair Trade vs world market price of coffee
• Importers of Fair Trade certified coffee pay the above set & so-called “fair” prices for coffee directly to farmers’ cooperatives.
• If the coffee is certified organic, there is a premium of $US0,15 or $US 0,33/kg = $US 3,10/kg
• When the world price exceeds the Fair Trade floor price of $US 2,77/kg, the Fair Trade price will be $US 0,11/kg higher than the world price for non-organic coffee and $US 0,33/kg higher for certified organic coffee.
How “Fair” is Fair Trade…
Now, let us objectively analyze and look more deeply beyond the impressive official rhetoric preached in the Fair Trade literature.
As Table 1 & graph 1 & 2 above clearly indicate, the Fair Trade price is set at a pre-determined ceiling price above the world market price for each respective type of coffee and processing stage. However, the inherent weakness and ineffectiveness of Fair Trade to “fight poverty” lies in the fact that the coffee (and all other Fair Trade labeled commodities) are then exported raw and processed abroad; thus, all the wealth created from the value addition (processing) of the coffee/commodities is carried out outside the country of origin and thus does not economically benefit the producing country in terms of local employment, export earnings, etc. The coffee is then processed, marketed and sold at Fair Trade and/or organic premium prices abroad under the Fair Trade “label” often using misleading and deceitful claims of poverty eradication among small-scale (coffee) farmers in the so-called “Third World” from whom the coffee has been purchased, while in reality it is the foreign economic actors working within the Fair Trade “business” who are profiting and prospering the most from this business model. Consider the percentage share of the “fair” price paid to coffee farmers under Fair Trade ( $US 2.33 -$US2.77/kg) verses the average final retail price ( $US/Euro 20/kg -$US/Euro 25/kg) paid by consumers for Fair Trade and/or Organic coffee beans; the farmers’ “Fair” Trade price is thus only around 10% of the final retail price; the balance ( 90% of the retail price) is pocketed by the (non-farmer) foreign economic traders ( exporters, transporters, local & foreign importing countries’governments, processors, packagers, wholesalers/distributors, retailers, etc.) working within the Fair Trade highly lucrative “business” supply chain…Thus, in this context one cannot but wonder who is helping who under “Fair Trade”…and thus question the real effectiveness of Fair Trade in “fighting poverty”…
Suggested effective alternatives to revive the coffee sector and to improve the economic welfare of small-scale coffee farmers around the world…
1) Addressing and resolving the root economic causes leading to low and declining prices of coffee on the world market, namely, short, medium & long-term market imbalance between supply and demand leading to structural over-supply of coffee on the world market which results in decline in the real price of coffee over the long-run.
2) Local processing and local marketing of coffee by coffee farmers.
A more effective (and sincere) solution to help coffee farmers break-free from the dictate and the vicious trap cycle of the world market – and all those prospering from the massive exploitation of coffee farmers - is to help farmers set up the processing and marketing infrastructure to locally process (roast, grind & package) and market their own coffee directly, thereby significantly adding-value to the coffee and significantly increasing their income in the process. Under this scheme, the coffee is grown, processed & marketed directly - on the local market - by the organization set up and managed by the farmers themselves. All sales proceeds – minus marketing costs - are then equitably redistributed directly to the individual member-farmers.
Under the current system, coffee farmers sell their non-processed coffee beans to exporters at exploitatively low and often unprofitable world prices; the coffee beans are then exported and processed abroad and then re-exported and resold on the local markets at high prices: average retail price for processed coffee beans $US 20/kg (sounds familiar…i.e. essence of the colonial economy and of the logic of the Colonial Pact with all the profits generated from the trade enriching the coffee processors and coffee traders, while leaving the impoverished farmers poor… and desperately struggling for survival…
The coffee sector in sub-saharan Africa and throughout coffee producing countries has collapsed due to massive exploitation of small-scale coffee farmers by coffee traders, Multinationals and (illegitimate) States in numerous coffee producing nations. As a result, millions of small-scale coffee farmers throughout the world have been thrown into further poverty and economic misery.
We all have a moral responsibility to help the weaker members of our society.
Survival of the strongest is the law of the jungle. Uplifment of the weakest is the law of humanity.
As Mahatma Gandhi clearly said:
“ You cannot build a non-violent society based on exploitation. Exploitation is the essence of violence.The extension of the Law of non-violence in the domain of economics means nothing else than the introduction of Moral Laws in regulating international commerce.” Mahatma Gandhi
Truthfully,
Arya.
" In a world surrounded by deceit, telling the Truth is a revolutionary act." George Orwell
ACCRA DECLARATION: Declaration of economic incompetence & mediocrity....
ACCRA, GHANA
03-06 OCTOBRE 2007
ACCRA DECLARATION
Declaration of economic incompetence & intellectual mediocrity
Below is the Accra Declaration made by the African cocoa producing countries attending the 2nd All Africa Cocoa Summit in Accra, Ghana from 03-04 September, 2007.
The official mission and objective of the Summit is to find an effective solution to stabilize cocoa prices at remunerative levels for both cocoa producing countries and millions of cocoa farmers across Africa.
I have added my own observations and comments with reference to each one of the Statements contained in the Accra Declaration.
I welcome your comments & feedback. Thank you.
ACCRA DECLARATION
1) ELIMINATE TARIFFS TO IMPROVE MARKET ACCESS
Personal observations:
Eliminating (escalating) tariffs in consuming countries will no doubt favor local-value addition in producing countries. However, it will not resolve the root economic cause leading to low, declining and un-remunerative prices of cocoa on the world market, namely the structural over supply of cocoa on the world market resulting from market imbalance between supply & demand.
Since over 90% of the cocoa in West Africa is currently exported raw, it is crucial to FIRST stabilize cocoa prices at remunerative levels to generate sufficient financial resources from cocoa exports required to build the infrastructure and the capacity to locally process the cocoa, thereby creating local employment, significantly increasing income and gradually breaking-free from the dictate and the vicious trap cycle of the commodities world market.
Assuming that cocoa producers were successful in eliminating escalating tariffs in cocoa/chocolate consuming countries (which is wishful dreaming since the cocoa & chocolate industry will obviously not dig its own economic grave by removing escalating tariffs on cocoa…) without FIRST stabilizing cocoa prices at remunerative levels, it will still not enable cocoa producing countries to export processed cocoa in consuming countries since cocoa producing nations will not be in a position to generate sufficient financial resources from its non-processed cocoa beans exports ( +90% of total annual production) to set up the processing infrastructure and the capacity to economically process cocoa locally.
This is obvious! You cannot put the cart in front of the horse!
2) EXAMINE THE IMPLICATIONS OF THE USE OF SUPPLY MANAGEMENT & OTHER MARKET INSTRUMENTS WITH THE VIEW TO ACHIEVING MARKET EQUILIBRIUM AND REMUNERATIVE PRICES.
Past ( Copals’ Gold Coast cocoa’s farmers’ strike in the 1940’s) & more recent failed supply management attempts ( Copal’s 2006 Libreville Declaration on Production Management Program) have all failed because Copal’s policies’ to stabilize cocoa prices at remunerative levels have failed to effectively identify, address and resolve the root economic cause leading to low, volatile, continuously declining and resulting un-remunerative cocoa prices on the world market.
Copal: A toothless and ineffective dog…
Furthermore, Copal members producers have repeatedly – since the creation of Copal more than 40 years ago- failed to respect and to implement the policies developed and prescribed by Copal to stabilize cocoa prices at remunerative levels, which seems to clearly indicate that Copal members’ are not disciplined and seems to suggest that they have no faith in the effectiveness of Copal’s economic policies.
The 2006 Abuja Declaration of the 1st All Africa Cocoa Summit held in Nigeria in 2006 ,has also brilliantly failed to effectively address & resolve the root cause leading to volatile, low, declining and un-remunerative prices of cocoa on the world market (structural over supply). Instead of using supply management instruments to address and resolve the structural over supply of cocoa on the world market, the Abuja Declaration has wrongly recommended and adopted the use of demand management market instruments ( local value-addition & promotion of local consumption) as a means to address the structural over supply of cocoa on the world market.
Copal & cocoa producers in Africa need to consider & adopt the cocoa cartel strategy which I have proposed as an effective solution to achieve market equilibrium between supply & demand to stabilize cocoa prices at remunerative levels ( see copy of Cocoa Cartel proposal on this blog.)
However, it is surprisingly depressing and disappointing to observe that Copal has not even considered or proposed this solution to African cocoa producing countries during the 2nd All Africa Cocoa Summit held in Accra and has not even mentioned it in its Accra Declaration.
As the following proverb rightly says: “God has put a limit to human intelligence, but he has put no limit to human stupidity…”
3) CALLED ON MEMBERS OF COPAL TO ENCOURAGE HARMONIZATION OF INTERNATIONAL QUALITY STANDARDS & PROCEDURES USED TO MEASURE QUALITY AND PROVIDE FINANCIAL RESOURCES TO BUILD HUMAN CAPACITY & TECHNOLOGICAL CAPACITY FOR QUALITY INSURANCE.
Personal observations:
A perfect example of sterile “intellectual masturbation” which clearly reveals the intellectual paralysis and incapacity of Copal and its members to identify, address and resolve the root economic cause plaguing the cocoa sector: (i.e. Structural over supply of cocoa resulting from market imbalance between supply & demand and leading to low, volatile, constantly declining real prices of cocoa resulting in *un-remunerative cocoa prices on the world market (i.e. *prices unrelated to **real cost of production (i.e. ** not taking into account inflation, currency depreciation, terms of trade, etc) , which naturally affects quality…!)
“Rectify one angle of the square and the other angles automatically rectify themselves…” Mahatma Gandhi.
4) PROMOTE DOMESTIC CONSUMPTION OF COCOA
Personal observations/comments
See above comments relating to 1) Removing tariffs to improve market access.
To promote domestic consumption – which both Copal & its members have brilliantly failed to do over the last 40 years – you need to develop and implement intelligent and coherent development policies to locally process the cocoa and other commodities; and to locally process cocoa, you need to generate sufficient financial resources to invest in the processing infrastructure and to build the capacity to locally process the cocoa and to promote and to develop local consumption of cocoa products. However, to generate the financial investment resources, you need to FIRST stabilize cocoa prices at remunerative levels since currently over 90% of the cocoa produced in West Africa is exported raw at un-remunerative prices and at a loss for cocoa farmers…!
Again, this is (or should be) self-evident!
5) PROVIDE FUNDING FOR RESEARCH
No further comment!!! Cannot respond repeatedly to unintelligent statements! Refer to above observations/comments.
6) RESOLVE TO ENHANCE DOWNSTREAM RESEARCH & DEVELOPMENT FOR VALUE ADDITION
How do you “enhance downstream research & development” for local value addition if your sector is bankrupt due to un-remunerative cocoa prices because you (Copal & its members) have been incapable to develop & to implement intelligent and coherent economic policies to (let alone even implement local value addition ) obtain and secure remunerative prices for their cocoa farmers…???
7) STRENGHTEN INTERNATIONAL COOPERATION AMONG AFRICAN COCOA PRODUCERS TO ENCOURAGE OTHER AFRICAN PRODUCERS TO JOIN COPAL.
COPAL is a toothless dog…as its +40 years history clearly testifies...In fact, Copal has brilliantly failed to identify, address and resolve the root economic cause leading to low, volatile, constantly declining and un-remunerative real prices of cocoa over the last +40 years since its creation…So do not waste declining, scarce and fast depleting cocoa financial resources…to pay incompetent bureaucrats…with the cocoa farmers’ hard earned (but not paid) income…!
8) “TOUCHED” ON CHILD LABOR… RESOLVED TO TAKE MEASURES TO ELIMINATE THE WORST FORMS OF CHILD LABOR ON COCOA FARMS.
Beyond the obvious commercial hypocrisy and lack of concern for the real issue of slave children working on cocoa plantations, the only effective “measure” to effectively eliminate child forced labor on cocoa plantations is to pay the cocoa farmers fair and remunerative prices so as to give them the financial means to hire labor on their cocoa farms. And to do so, market imbalance leading to structural over supply must be addressed and resolved. That is the only and most effective solution to resolve and eliminate the use of forced child labor on cocoa plantations.
The other currently widely and totally ineffective approach adopted by the cocoa industry is the use of deceitful propaganda preached by cocoa/chocolate industry-funded organizations such as the Cocoa Foundation, Cargill, etc…denying the existence and use of forced child labor and trying to cover the issue through deceitful propaganda and ineffective “cosmetic” social projects in cocoa growing countries…
9) IMPROVE PRODUCTIVITY THROUGH PLANTING OF DISEASE RESISTENT & HIGH YIELDING PLANTING MATERIAL…DELEGATES RESOLVED TO PROMOTE INTENSIFICATION OF PRODUCTION TO IMPROVE INCOME FOR FARMERS…AND TAKE MEASURES TO MAKE COCOA FARMING MORE ATTRACTIVE FOR YOUTHS.
Summum of stupidity…!!! Annual production surpluses over the last + 40 years have led to a structural over supply of cocoa on the world market ( 2006 world stocks levels= 1.5 million metric tons = 50% of annual demand = 6 months stocks!) leading to low, volatile, constantly decling and unremunerative cocoa prices on the world market. As a result, millions of cocoa farmers in Africa have been thrown deeper into poverty. Thus, by resolving to improve productivity and to promote intensification of production cocoa producers are actually digging their own economic graves and those of millions of cocoa farmers instead of “improving income for farmers…” The summum of stupidity has been reached through this Statement…!
9) DELEGATES NOTED THE ECONOMIC IMPORTANCE OF COCOA IN COCOA PRODUCING COUNTRIES IN AFRICA AND IN THE LIVEHOODS OF A LARGE PERCENTAGE OF ITS POPULATION AND NOTED THE DECLINE OF REAL PRICES OVER THE LAST TEN YEARS AND THE INEQUITABLE DISTRIBUTION OF INCOME AMONG STAKEHOLDERS.
Bravo!!! At least cocoa producing countries have realized the importance of cocoa in their economies and among a large portion of the farmers and the local inhabitants!!! They have also realized the decline in real prices…and the massive exploitation to which they are subjected!!! So the billion dollar question is: WHAT ARE YOU GOING TO DO ABOUT IT…?
Final reflections…
Beyond the unbelievably & limitless level of economic & intellectual mediocrity that the Accra Declaration reveals, what is crystal clear is that both Copal, its members and other cocoa producing nations in Africa have BRILLIANTLY failed to identify, address and resolve the root economic cause leading to low, volatile, constanly declining and un-remunerative cocoa prices on the world market for over half a century since so-called “independence”.
What is even more depressing and discouraging for me is that even after having written and explained in detail to both Copal’s General Secretary – Mr. Sona Hope Ebai – and to the Producers’ Representative/spokesperson at the ICCO - Mr. St-Cyr Djikou - the root economic cause leading to volatile, low, contantly declining and un-remunerative cocoa prices and proposed an effective policy and solution to stabilize cocoa prices at remunerative levels ( setting up a cocoa cartel), neither has acted upon it ( see copy of email exchanged between myself and Mr. Hope Ebai on this blog) In fact, to this day (+3 months since I wrote to him), Mr. St-Cyr Djikou has not even acknowledged nor responded to my letter…
With GREAT disappointment and despair for the fate of millions of exploited (cocoa) farmers accross Africa…
Truthfully,
Arya
« In a world surrounded by deceit, telling the Truth is a revolutionary act. » George Orwelll
ASHOKA FELLOWSHIP APPLICATION PROCESS : INEFFECTIVE AND INEFFICIENT
Please find below a copy of emails exchanged between myself and the Ashoka regional office for East Africa with reference to my Ashoka Fellowship application...
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