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The Political Economy/Ecology of Coffee and Flower sectors, Ethiopia

The Political Economy/Ecology of Coffee and Flower sectors, Ethiopia. Gutu Olana Wayessa ( gutu.wayessa@helsinki.fi ) Institute of Development Studies University of Helsinki Lecture notes for part of the course World Trade and Poor Countries 7 April 2008. Presentation Plan.

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The Political Economy/Ecology of Coffee and Flower sectors, Ethiopia

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  1. The Political Economy/Ecology of Coffee and Flower sectors, Ethiopia Gutu Olana Wayessa (gutu.wayessa@helsinki.fi) Institute of Development Studies University of Helsinki Lecture notes for part of the course World Trade and Poor Countries 7 April 2008

  2. Presentation Plan PART I: Coffee sector PART II: Flower sector Case: The Oromia Coffee Farmers Cooperative Union (OCFCU)

  3. PART I: COFFEE • Ethiopia has more than 1.2 million coffee growers. • Approximately 15 million households dependent on coffee for their livelihoods. • Coffee accounts for more than half of Ethiopia's export earnings. • Oromia Coffee Farmers Cooperative Union (OCFCU) is the largest Fair Trade coffee producer in Ethiopia.

  4. PART I: Coffee (cont…) “Give Fair Price to our coffee” The Oromia Coffee Farmers Cooperative Union (OCFCU) • 65% percent of the Ethiopia's coffee production is from Oromia Region. • In Oromia, 617,700 households are involved in coffee production. • Established on June 1, 1999 in order to help coffee farmers in Oromia to get through the difficult price crisis. • Oromia is the region where coffee first come from and it is by the Oromo people that the usage of coffee as a food started in the beginning of the 5th century.

  5. PART I: Coffee (cont…) • The coffee in the Oromia region is organic, shade-grown and is bird-friendly. • All the coffee in is Coffee Arabica. • OCFCU a union of cooperatives • Comprised of 34 cooperatives, when formed • Aims to help small-scale coffee farmers take advantage of international coffee market

  6. PART I: Coffee (cont…) • To date (2007) • 22,503 farmers • 129 cooperatives • 128,361 household • 800,000 families • A democratic members owned business operating under the principles of International Cooperative Alliance. • Members of the Oromia Coffee Farmers Cooperative Union are the growers, processors and suppliers of high quality, organic Arabica coffee to the Union for the direct export.

  7. PART I: Coffee (cont…) Objectives: • To improve the farmer’s income by exporting their coffee directly • To provide member farmers and clients with reliable service • To improve the social condition of farmers • To improve the quality and productivity of Ethiopian coffee

  8. PART I: Coffee (cont…) • Improving lives • 70% of the Union's profits from sales and export coffee are distributed back to the 129 cooperatives. • The cooperatives then distribute • 70% of the net profit as dividends back to the member farmers • 30% for capacity building, investment on fixed asset, social services and reserve.

  9. PART I: Coffee (cont…) • Community development programs accomplished from the Fair trade Premium and the Social fund http://www.oromiacoffeeunion.org/Improving_Lives.html

  10. PART I: Coffee (cont…) http://www.oromiacoffeeunion.org/Improving_Lives.html

  11. PART I: Coffee (cont…) http://www.oromiacoffeeunion.org/Improving_Lives.html

  12. PART I: Coffee (cont…) What is Fairtrade? • Fairtrade certification is a product certification system designed to allow people to identify that meet agreed environmental, labour and developmental standards. (http://en.wikipedia.org/wiki/Fairtrade) • Fairtrade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world. • By requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. • It enables them to improve their position and have more control over their lives. (http://www.fairtrade.org.uk/what_is_fairtrade/faqs.aspx)

  13. PART I: Coffee (cont…) Why world market price is important? • As of January 15, 2003, world’s coffee prices are at their lowest level in 30 years, having fallen by 50 percent in three years. • The global supply is estimated to be about 8 percent above demand and has accordingly depressed world prices. • The oversupply is often influenced by centralized political decisions. • Small coffee farmers are encouraged to grow more by governments eager to boost exports earnings. • These governments are sometimes encouraged by the IMF and the World Bank to produce more, without being made aware of the potential of catastrophic price falls.

  14. PART I: Coffee (cont…) • Low export prices and significant terms-of-trade decline (e.g. from Ethiopia) • Lack of bargaining and negotiating strength in international trade (power dimension). The International Coffee Organisation (ICO) says world coffee prices have fallen by 70% since 1997. BBC News, 3 October 2002 “Farmers are pulling up their coffee plants” “Freshly picked beans are worth little to farmers” Expensive product, poor farmers

  15. PART II: FLOWER • In Ethiopia, floriculture is booming and could one day overtake coffee, its main export commodity. • Ethiopia ships out 70 tones of high-quality, pest-free and pesticide residue-free flowers every day • The flower sector in Ethiopia is growing at almost 200 percent annually. • EU is the most important export destination. • Currently, the majority sell their flowers at the auction in The Netherlands. Recent interview with the Chairman of the Ethiopian Horticulture Producers and Exporters Association (EHPEA) on Voice of America (VOA) April 3, 2008: • 77 companies engaged in flower production and export, more in preparation • The sector currently employs about 60,000-70,000 workers • Second to Kenya in flower export • Attractive investment policy? • Little negative environmental impacts? • Chemicals used are approved by the EU

  16. PART II: Flower (cont…) • But the sector has its drawbacks: • Serious environmental consequences are beginning to be known (The Toxic Truths of the  Flower Business) • The flower industry is chemically intensive and will ultimately have an effect on: • The environment • The workers • An increase in the type and amount of pesticide and agro-chemical products • The environmentalists consider their unregulated usage a nightmare. • Their concerns arise from the way the chemicals are used, to the manner of their usage, to their very of disposal.

  17. PART II: Flower (cont…) Sustainability concerns • The environment as: • A source (of natural resources) • A sink of byproducts (waste assimilation) • Population displacement • Farmers are being displaced from their lands • Development induced displacement and resettlement (DIDR) • Two views: • Reformist-managerial view • Radical-movementist view

  18. Some perspectives on population displacement Reformist-managerial view • Displacement as inevitable and unintended consequence of development • For development to take place, some people should necessarily be displaced • No development without displacement Radical-movementist view • Development, if it entails population displacement, is unacceptable and should be resisted • Zero-tolerance to population displacement • No development if displacement • Fundamental political issues, such as human rights and governance

  19. Putting it in a broader perspective International Trade Policy and Global Political Economy GLOBAL Trade Liberalization Skewed Power Relation between the North and the South Economic Impacts Environmental Impacts Socio-political Impacts NATIONAL LOCAL Prospects for Development Conceptual model for analyzing the impacts of international trade on local development in developing countries

  20. References • http://en.wikipedia.org/wiki/Fairtrade • http://esedaexport.com/flowers.html • http://news.bbc.co.uk/2/hi/africa/2293427.stm • http://www.brownscoffee.com/Profiles/Oromia-Ethiopia.pdf • http://www.fairtrade.org.uk/what_is_fairtrade/faqs.aspx • http://www.geocities.com/akababi/flower.htm • http://www.globalexchange.org/campaigns/fairtrade/coffee/cooperatives.html#1 • http://www.globalexchange.org/campaigns/fairtrade/coffee/EthiopiaFlyer.pdf • http://www.lei.wur.nl/NR/rdonlyres/1EBC6548-41C1-48EC-8F99-092582ED98F7/48953/factsheetCoP.pdf • http://www.oromiacoffeeunion.org/aboutus.html • http://www.oromiacoffeeunion.org/Improving_Lives.html • http://www.oromiacoffeeunion.org/index.html

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