The Realities of Fair Trade on Cocoa Production in Ghana

1. The Realities of Fair Trade on Cocoa Production in Ghana Elena Anemogiannis Sarah Edlen ElinMarcsdottir Greg Smith

2. 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

3. 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

4. Largest producers of cocoa as % of world total Fairtrade Foundation

5. Cocoa Marketing BoardCOCOBOD • Determines fixed price • Akuafo Check System • Quality Control Division • Cocoa Marketing Company Ghana Ltd • Cocoa Research Institute of Ghana (CRIG) • Seed Production Unit

6. Issues with Cocoa Trade • Black market • Due to low farm gate prices, cocoa is smuggled to Cote d’Ivoire • Child Labor • More than one million children are employed in cocoa farming sector in West Africa • Unsustainable practices • Negative impact on the environment and long-term production • Quality • Lag time between being sealed by the QDC and exportation

7. Fair-tradeCocoa Production • 1990s: Emerged as a reaction to exploitative nature of the free-trade cocoa industry • 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) • Farmers realized that coming together in a larger unit would increase bargaining power and help protect their interests • 1993: foundation of KuapaKokoo

8. KuapaKokoo • 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

9. 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

10. Literature Review Historical Background • KuapaKokoo, 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

11. 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

12. 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

13. 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

14. Child Labor

15. 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

16. 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.

17. What has been done? • 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

18. What is being done • KuapaKokoohas 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.

19. The Cocoa Plant • Cocoa trees: • Start producing beans at 5 years old, peak at 10 years old, live for 30 years • Types of cocoa cultivation: • Rustic cacao, planted shade, technified cacao • Cocoa trees have a relatively benign effect on the environment if sustainably planted

20. 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

21. How global sales of Fairtrade cocoa have grown (tonnes) Fairtrade Foundation

22. 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

23. Price Instability

24. The Final Sale • 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”

25. 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

26. 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”

27. 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 fair-trade cocoa production