Addressing the Coffee Crisis? Fair Trade and Voluntary Initiatives

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Copyright Category: Publications and Books
Type of Work: Literary
Copyright Holder: Anna Maria Leida N. Pacaño
Year Published / Made Public in: 2005
Date Added to Copyright Register: 27-Sep-2005 09:30
Last updated: 27-Sep-2005 09:30

Literary Copyright Work Details:

Gripping the world commodity market is a crisis which has pushed the coffee farmers to an almost brink of survival. Coffee farmers have been among the hardest hit by the long stretched-out crisis in the international markets. The magnitude of the crisis is not only exacerbated by how far the prices of coffee slumped in the last 10 years, but also the number of lives and economies of countries devastated. And all the while the big four main roasters, the multinational companies (MNCs) – Kraft General Foods, Nestlé, Procter and Gamble, and Sara Lee, are all raking in profit.

This has all the more raised the urgency to address the situation at the midst of the ongoing debate. This paper will discuss the coffee crisis in the light of existing trade arrangements - fair trade and corporate voluntary initiatives. However, let it be said that fair trade has more or less been a time-tested alternative because of its being producer-focused which has addressed concerns such as declining commodity prices, falling coffee incomes, and even severe employment conditions. Particularly the concern on price and income, these have been especially important for marginalized producers such as coffee farmers, who for a few cent price difference in their coffee greens could determine the course of their livelihood. Reconciling this then with the coffee crisis, it has been most difficult for MNCs to defend their position despite their voluntary initiatives because of their sheer might and power to direct and drive the course of international trade (Clarke, 2001:71 and Korten, 2001:40) which has more often adversely affected small producers like the coffee growers.

One of such multinational companies embarking on a voluntary initiative is the Dutch multinational company, Royal Ahold, one of the biggest food retailer in the world and the mother company of the Albert Heijn chain of stores. The Royal Ahold, through its coffee line, the Ahold Coffee Company (formerly called Marvelo) has established what it has called the ‘utz kapeh’ code of conduct. The central question then of this paper will be, ‘Will this voluntary initiative of Ahold bring any beneficial consequences to the coffee producers’.

More than half a century ago, Keynes was proven right by history. Keynes then, had all the reason to believe that the Great Depression of the 1920’s was partly caused by the instability and eventual collapse of commodity prices, that propelled him to propose as early as the convening of the Bretton Woods Conference in 1944, for the creation of an institution that would be responsible for commodity markets. However, the conference, which established the International Monetary Fund (IMF) and the World Bank (WB), failed to establish a comparable institution for trade, although the need for one was recorded (Coote, 1992:45). In later negotiations, a constitution for the supposed International Trade Organisation was drawn up, known as the Havana Charter of 1948. Unfortunately, the trade organisation never materialised.

Almost fifty years later, at the end of the 1990’s, international prices slumped to levels that were comparable in real terms to those prevailing during the years of Great Depression. Between 1988 and 2001, prices fell by two-thirds according to the 2001 report of the World Bank. Inevitably, the livelihoods of millions of small farmers have suffered. The crisis in the international coffee economy has been converted through the mechanisms of international trade into a deep social and economic crisis that has driven millions into poverty.

While globalisation may be transforming international trade, many countries – and many millions of producers – remain heavily dependent on the export of commodities. Trading patterns established after the discovery of the New World, and developed through slavery and colonialism, remain intact. So too, do the problems that dogged commodity traders in the 1920’s. Market instability and ruinously low prices are consigning whole swathes of the developing world to mass poverty and a marginal role in world trade. Cut off from the rising tide of global prosperity, there is a growing danger that countries dependent on primary commodities will become increasingly enclaves of despair.

Equally important in the on-going coffee crisis are the available solutions and alternatives for the coffee producers. In recent years, fair trade has become one of the available options for commodity producers. This is especially true to coffee growers since coffee has become one of the first fairly traded product. To quote Pablo Dubois, ‘In coffee the fair trade movement has clearly shown that producers can be paid double of today’s disastrously low prices without affecting the consumer’s willingness to buy a good quality product’.

The fair trade movement has been one of the most powerful responses to the problems facing commodity producers. It has given consumers an opportunity to use their purchasing power to tilt the balance, however slightly, in favour of the poor and disadvantaged producers. In the current climate, fair trade has become the lifeline for many producers. Fair trade has given to many commercial businesses which operate at a profit but which retain the explicit development objectives of upgrading the lives of the farmers from whom they buy. At the heart of the fair trade is a central principle: a commitment to pay farmers a fair price – one that covers production cost and is stable. However, despite the successes of fair trade there are obvious confines it could address. One of such is that, the fair trade markets has remained limited and small enclaves.

This is where it becomes relevant to understand and unravel other forms of trading arrangements, especially ones that target the mainstream market, such as voluntary initiatives which could probably form part in resolving the on-going coffee crisis. Of course, the very nature of these voluntary initiatives, which are almost always corporate-led, have exposed them to critical remarks and heavy tirades from progressive blocks especially from what DeMartino calls as internationalist egalitarians.

Literary Keywords/Search Tags:
commodity market, coffee crisis, fair trade, trade

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Submission Details: Literary Work submitted by Anna Maria Leida N. Pacaño from Philippines on 27-Sep-2005 09:30 (Last edited on 27-Sep-2005 09:30).
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Anna Maria Leida N. Pacaño Contact Details: Email: apacano@yahoo.com

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