The Worlds Supply of Sustainable Cocoa Could Be Exhausted by 2014 - Coursework Example

The world’s supply of sustainable cocoa could be exhausted by 2014 Your name: Institution name: Introduction According to an article from Daily Mail, The world’s is facing a shortage of chocolate products. According to experts in the cocoa industry, they have seen cocoa supply will be less or exhausted by the year 2014. And this has been contributed by Political unrest that has been experienced in Ivory Coast over the years. Cocoa bean production in this country has been noted to be half of the world production, for many years, this has been a contributing factor to this crisis. Ivory Coast cocoa production is almost half of the world’s output. Political unrest in this country has reduced the number of cocoa farmers. Many cocoa farmers in Ivory Coast have left the country, while others are smuggling the cocoa beans to neighboring countries where the prices are higher. Also, this has depleted the number of certified fair trade cocoa farmers in Ivory Coast. At the moment, the country is considered as no-go area for cocoa traders due to political unrest, so training of new cocoa farmers is impossible. Only 10 per cent of the world’s 5.5 million cocoa farmers have been trained and certified as sustainable fair-trade producers. Therefore, the cocoa production sustainability is not sustainable, since the price of a commodity is seen to rise. Stakeholder Analysis International trade has raised a lot of questions particularly in developing nations. According to Oxfam, International trade has been at a disadvantage to poor farmers in developing countries, In addition, international trade has made most farmers in developing countries not to have a proper living, and also keep the farmers in poverty. This is because the rules and regulations that govern international trade largely favor developed countries. Powerful multinational organizations and some of industrialized countries are benefiting from wealth generated by international trade, leaving farmers or people in developing countries worse off. Therefore, fair trade system or movement is about creating a fair world in terms of trade where economy works for people, and not against them such as farmers. According to Oxfam, most of small-scale producers lack a voice to achieve good price for their output, therefore fair-trade aims at bringing relief to these small-scale farmers or producers. Fair-trade initiative has been designed by concerns organizations or people in countries that are already developed such as U.S. and E.U. countries, for organized small-scale farmers and wage workers in developing countries, who have been restrained in their social and/or economical development by the conditions that are found in trade. According to many body of impact research, they have clearly demonstrated on the long-term values to farmers in Africa through their involvement with fair-trade (Brown 1993). The fair-trade in the cocoa sector has minimum price which companies or buyers of cocoa beans has to pay to cocoa farmers for their produces. Although the price for cocoa produce is not fixed, the price of that produced should be seen as the lowest possible starting point for price negotiations between farmers and buyers or companies dealing on cocoa beans. Fair-trade prices are usually set in such a way it able to cover the cost of production for farmers. Also, it means prices that are set by fair-trade acts as a safety net for farmers in times when the world’s market for cocoa beans fall below sustainable levels. However, when the price for cocoa beans in the world’s market becomes higher than the Fair-trade minimum, buyers will pay for that commodity at the a market price. In addition, farmers can negotiate for higher price for their produces, for example, on the basis of organic crops, quality of the product, or for particular grades of the farm produce (Brown 1993). Premium is another benefit that farmers will reap from fair-trade. Premium is money that is paid on top of fair-trade price that is used to invest in environmental, social or economic developments project in farmer’s home countries. This premium is usually decided upon democratically by farmers. And the premium fixed even if the farmers are paid more than the fair-trade minimum price. In most countries in Africa particularly Ivory Coast, premium fund was typically invested in healthcare and education, farm improvements to increase crop quality and yield, or facilities that will be used to increase the income for farmers. Under fair-trade agreement farmers are able to request for partial pre-payment from buyers of their produce. This is an important step since it ensures small-scale farmers’ organizations have cash flow that is able to pay farmers once they deliver their produce to the organization. Also, these organizations are able to predict their income in the long-term and this will enable them to plan on the future of such organizations. Also, fair-trade has been found to bring sanity in the cocoa sector because every organization in the supply chain must be transparent, for example, in the past cocoa farmers have been cheated because exporters and millers have not been transparent in their dealings. Fair-trade protect farmers and workers basic rights as stipulated in the conventions of the ILO (International Labor Organization) relating to: freedom of association; freedom from discrimination; occupational health and safety; fair conditions of employment; and no child or forced labor. Reports of under aged or children workers working under abusive conditions on cocoa farms began to emerge in 2000. Following these allegations, human rights activists called for boycotts against the chocolate and cocoa industries. In response to these allegations cocoa and chocolate industries in conjunction with ILO, affected African governments and other non-governmental organizations developed a protocol- Harkin-Engel Protocol- that would end the use of child labor in cocoa plantations (Keijiro & Deqiang 1998). In fair-trade farmers have been empowered because they are being involved in decision making process within the fair-trade system. Through FLO’s committees, its board and consultation processes, small-scale farmers are able to influence standards, premiums, prices, and overall strategy (Keijiro & Deqiang 1998). For example, Fair-trade Africa has supported cocoa farmers and producers’ to fully participate in fair-trade decision making processes. At same time, it has encourage small-scale farmers to unify under one umbrella for increased voice, visibility and bargaining power within the fair-trade system or movement. Far-trade system has also helped governments that have been hardly hit by the effect of climate change. Through premiums which have been used for economic, environmental or social projects, farmers in cocoa sectors have been able to invest in environmental protections programs which have contribute to the solutions needed to tackle the effect of climate change (Keijiro & Deqiang 1998). Despite 2009 being a difficult year due to economic recession, sales on fair trade products in both New Zealand and Australia increased by 58 per cent. In 2010 fair-trade certified sales increased by almost 200 per cent to almost 150 million Australian dollars. This is a substantial growth that reflects the global Fair-trade trend. Even through the economic downturn, consumers and businesses are increasing choosing fair-trade products. And the number of fair-trade importers fair-trades licensed operators and companies that sale fair-trade products have continue to grow. Therefore, fair-trade is good for companies since many consumers around the world want to associate themselves with fair-trade companies. Weighing the Options Some economists argue that in the long run, fair-trade will contribute to the failure of producers. They also argue that the current system of fair-trade is not perfect, while other economist believe advocating for fair-trade is just replacing a problem with another. They argue price floor on products encourages new producers to enter into the market while already existing players to over-produce and this will eventually bring the prices of products down. The economist believes these effects will hurt producers in the market, but it will hurt non-certified fair-trade producers the most. However, organizations such as Transfair USA and FLO International argue that, from what they have seen, players in the market don’t increase production. This is because these players are still depending on the buyers to buy ethical and sustainable products. Regardless of the price which have been set on fair-trade products, these players knows how to manage their production. Also, the addition money or premium producers are getting from such deals, these producers are able to invest back into their communities, thus, giving their children good education that enables them to break the poverty cycle surrounding them. In 2008, there was a controversial report published by the Adam Smith Institute, a report called Un-fair Trade. According to Marc Sidwell, he argues that fair-trade distort local markets for many nations through fixation of high prices for small percentage of players or producers. Marc Sidwell further argued that this has hurt the majority of farmers or artisans who are not certified or “excluded” from fair-trade. Further, Marc Sidwell argued that this system has made farmers or artisans to do the same kind of work without learning new skills or diversifying, thus most of these farmers or artisans have not been able to solve their development problems, thus still remain in poverty. Finally, the report said that fair-trade has only helps “relatively prosperous countries” such as Brazil and Mexico, and ignoring developing countries in Africa. Another issue that is being associated with fair-trade is that the system will distort the prices and this will lead to inefficient in resources allocation (Hayes 2006). When there is inefficient resources there will be inefficient and unbalance economic growth. For example, much economic growth in Asian countries has been as a result of the non-agricultural sectors (Rogers & Sexton 1994). If there is artificial prices agricultural sector, artists or farmers will have more incentives that will enable them to stay in the agricultural sector. But both capital and labor costs will also rise elsewhere in the economy. Therefore, in the long-run fair-trade will slow down growth in developing countries (Hayes 2006). Guidance Fair-trade may be fair to producers or farmers in developing countries but this system will hurt consumers in both develop and developing countries who don’t buy fair-trade products because this system raises the prices of fair-trade products or goods (Hayes 2006). In short, fair-trade system may protect small-scale farmers in rural areas in developing countries but those poor urban workers will have to pay higher food prices due to fair-trade system (Sen 1973). This is not just for poor town workers. The limitation for this system is that it’s only focuses on protecting farmers in developing countries. Therefore, there is need to broaden the perspective of fairness to the other stakeholders (Barrientos, Conroy & Jones 2007). According to fair-trade activities, they believe this system is working for poor people; it works as sustainable development; it works as an idea; and it works to protect the environment (Bagwell & Robert 2005). But there are many concerns about the practice and theory of Fair-Trade system or movement. Fair-Trade system is being seen by many people as a revised form of free trade that is being controlled by the G8 countries which are responsible for injustices found in global trade. This system has been presented to the world as a fair way to help farmers in developing countries (Bagwell & Robert 2005). However, this system has been dominated by corporate companies such as Chiquita, Dole Del Monte, and so on. And this has left poor nations and farmers with a destroyed ecosystems and uncertain future. The dominance of these corporate companies is built on the exploitation of workers and lands in the developing countries. According to Schmeizer Matthias of Institute Fusoziale Dreigliederung, argue that fair-trade is being used by transnational corporations such as Nestles to spread their corporate interest. For example, Nestle has pride itself to launch a Fair Trade coffee brand in Britain, but back in Ethiopia were responsible for the coffee crisis which impoverished millions of farmers in Africa (Bagwell & Robert 2005). A report published by Adam smith Institute argues that Fair-Trade system encourages uncompetitive farming practices rather than the creations of industries or modern technologies in developing countries (Nicholls & Opal 2005). In addition, payment methods that have been put in place by this system only encourages farmers to hire workers only during harvest period. Seasonal cocoa laborers in Ivory Coast are the most exploited. They work under hard working conditions with low wages, housed in filthy and crowded living conditions and have no medical benefits (Nicholls & Opal 2005). As consumer demands in the world grow, food crops and ecological balance in developing countries are exhausted and replaced by the Fair-Trade products demanded by Europeans and Western consumers. For example, the environmental effect of planting a single crop such as cocoa, coffee, papaya, corn, sugarcane and banana on large pieces of land is environmentally and economically disastrous to small-scale farmers in developing countries. Any collapse to of this type of this “mono-crop” farming method due to weather disruptions, overproduction and pest infestations will bring misery to these small-scale farmers (Nicholls & Opal 2005). Conclusion Fair Trade has become one of the most important aspects of the international trade in today’s society. With the introduction of the system, consumers around the world now have a choice as to which product they can purchase (Cooper 2005). Fair trade only improves competition, but also give people many options of making ethical decisions in their purchases. A major issue with each product: coffee, cocoa, bananas, cotton and jewelry is that there are all goods of the developing countries being purchased in developed countries. Countries like Ivory Coast (Cote d’Ivoire) with indigenous and poor population are the one severely affected by the international market forces (Cooper 2005). Fair Trade System tends to give workers in such countries a living wage, give people in those countries a chance to develop themselves and eliminate the use of harmful chemicals. Through Fair Trade system, some product has been found to be making greater strides. Much focus has been made to products such as coffees, cocoa and cotton, and this has been partly due to support from large multinational corporations such as Starbucks and Nestles (Cooper 2005). Although Fair-Trade system in the world aims to help producers and farmers, in some cases, however, it acts as a barrier to developing countries from liberating themselves from the bondage of dependence, poverty, and underdevelopment. In additions, most of transnational companies operating under the pretext of Fair-Trade companies their aim are to exploit natural and human resources from developing countries. Development in poor countries sometimes largely determined by the developing countries themselves, and the developed nations can play limited role. So too is the fact that Fair-Trade is a tool with only limited ability to trigger growth in developing countries. What developing countries need is not Fair-Trade system but western countries to open up their countries market. For example, Mexico economy has continued to grow due to duty-free access to the U.S. domestic market. Therefore, developing countries having access to external resources and markets, it will enable these countries to make up for their internal problems. Reference List Bagwell, K and Robert W. S 2005, “Multilateral Trade Negotiations, Bilateral Opportunism and the Rules of GATT/WTO,” Journal of International Economics 67, 2, pp. 268-294. Barrientos, S., Conroy, M. E., & Jones, E 2007, Northern Social Movements and Fair Trade. In L. Raynolds, D. D. Murray, & J. Wilkinson, Fair Trade: The Challenges of Transforming Globalization (pp. 51–62). London and New York: Routledge. Brown, M.B 1993, Fair trade: reform and realities in the international trading system, Zed Books Publisher, New York. Cooper, A 2005, Fair Trade, Stargazer Books Publisher, London Hayes, M. G 2006, "On the efficiency of Fair Trade". Review of Social Economy 64 (4): 447– 68. Keijiro, O & Deqiang,L.N, 1998. Industrial Reform in China: Past Performance and Future Prospects, Clarendon Press Oxford, Oxford University. Nicholls, A & Opal, C 2005, Fair trade: market-driven ethical consumption, SAGE Publisher, London. Rogers, R. T. and R. J. Sexton 1994. "Assessing the Importance of Oligopsony Power in Agricultural Markets." American Journal of Agricultural Economics, 76, pp. 1143. Reed, D 2009, What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86:3-26, , p. 12) Sen, A. K 1973, On Economics Inequality, Clarendon Press, Oxford. Read More