Coffee beans before and after roasting. <br>Photo by <a href="">cgfan</a> (<a href="">CC</a>).
Coffee beans before and after roasting.
Photo by cgfan (CC).

Policy Innovations Digital Magazine (2006-2016): Briefings: Black Gold Shows Bitter Trade Problems

Dec 22, 2007

As I have argued elsewhere in Policy Innovations, ethical trade policies would be based on the principles of freedom and fairness. Thanks to our friends at California Newsreel, I was able to view Black Gold, an extraordinary documentary on the coffee trade. The film tells us that something is wrong in the global trading system.

Consider these points from the film: Africa has become more dependent on aid than ever before. Over the past 20 years, Africa's share of world trade has fallen to 1 percent. If Africa's share of world trade increased by just 1 percentage point, it would generate a further 70 billion dollars a year or five times the amount Africa currently receives in aid.

Why can't Africa access trade as a tool to generate wealth? The film, produced by British filmmakers Marc Francis and Nick Francis, follows the heroic story of Tadesse Meskela, an administrator of the Oromio coffee cooperative in Ethiopia. Meskela has devoted his efforts to securing a fair wage for his coffee farmers since the global price of coffee plummeted after the International Coffee Agreement, which had stabilized prices, collapsed in 1989.

The big players in setting the global coffee price are companies like Kraft, Nestle, Proctor and Gamble, and Sara Lee. Nevertheless, Starbucks, which is also a minor coffee buyer in Ethiopia, is one of the main characters in the film. It is not clear why this is the case other than that Starbucks is so popular that it can possibly influence public opinion. The film also contrasts the situations at fancy cafes in Trieste and Seattle with the squalid health and living conditions in Ethiopia's coffee growing communities. Who is at fault?

Is it the New Yorker drinking coffee at Starbucks? Is it the problem of the Italian barista? Is it the U.S. Trade Representative's fault for not securing a trade deal in Cancun? Is it the responsibility of Illy Coffee's board? How about the New York City commodities trader? All of these characters appear in the film, but I wonder why the American, European, or Japanese politician responsible for farm subsidies never made a debut. In a Syriana-esque way, the film suggests that the system itself is broken but no single person is in charge. Something is wrong in the global trading system and judging by the sinister music that plays during certain scenes, everyone in the supply chain holds some responsibility.

As consumers, we certainly hold power and responsibility. I was perusing the excellent Black Gold website and found a link to a PBS page that tells you where your coffee came from. An interesting comment here from a page on Kraft's Maxwell House:

As with their Yuban brand, Kraft does not use fair trade coffee beans with their Maxwell House products. Pat Riso, a spokesperson for the company, was quoted in an article as saying that "the reason we don't offer it is because consumer demand for fair trade products is quite limited."

In other words, if consumers demanded more fair trade coffee, the company would follow their wishes. There is a lot to unpack there. Clearly, the level of moral responsibility a company has in society is a huge topic of debate. Many have argued that we shouldn't necessarily expect companies to behave ethically all on their own, especially as long as their fiduciary duty is to maximize profit. But I would also argue that companies are just tools to organize people, and people absolutely have an ethical duty to act responsibly.

From a policy perspective, the problem is inequity in subsidies and other resources. Rich countries can send huge teams of lawyers to WTO meetings, far outflanking any team a poor country can send. Meanwhile, rich countries are subsidizing their farmers in the hundreds of billions of dollars each year. Now the United States is under WTO scrutiny for possibly exceeding the legal limit of farm subsidies. From Reuters:

Monday's WTO probe of US agricultural support for wheat, maize, rice and other crops comes three days after the US Senate passed a $286bn farm bill, following a similar bill from the House of Representatives in July. The White House has threatened to veto the bills, saying they failed to overhaul crop subsidy rules.

The Canadian and Brazilian complaints to the WTO are about whether US support topped Washington's limit of $19,1bn a year since 1999, except 2003, for the most trade-distorting support. "Canada estimates during these years the US exceeded its WTO commitment levels by billions each year," the Canadian government told the WTO.

But there is some good news on the fair trade coffee front. From CNW:

Fairtrade Labelling Organizations International (FLO), the only certification model that guarantees a fair minimum price to farmers that meet strict social and environmental criteria, is announcing an increase of the guaranteed minimum washed Arabica coffee price to US$1.25 per pound, to take effect on 1 June 2008. This new minimum price will be valid through at least June 2010, when another price review will take place. The coffee price adjustment, consisting of an average increase of US$0.05/lbs, will benefit more than 250 producer organizations in countries throughout Asia, Africa and Latin America, representing almost 1 million small farmers and their families.

It is clearly a complex issue that the film just brushes. But Black Gold deserves a lot of credit for highlighting the disparities along the coffee supply chain. We should be mindful of these gaps when we make decisions at the supermarket, company boardroom, or voting booth.

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