1. The Realities of Fair Trade on Cocoa Production in Ghana
Elena Anemogiannis
Sarah Edlen
Elin Marcsdottir
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 Board COCOBOD
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-trade Cocoa 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 Kuapa Kokoo

8. 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
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. Is fair-trade really fair?
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 Labor Conditions Environment
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

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

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 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 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.

19. The Cocoa Plant Cocoa trees: Types of cocoa cultivation:
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