Coffee

by Gavin Fridell

  Climate change is also having major impacts specific to the coffee industry. Rising temperatures stress existing coffee trees, making them more vulnerable to pests and disease, and increased average temperatures pose a threat to the genetic diversity of Arabica beans. Recent research conducted by British and Ethiopian researchers has raised the prospect that all of the world’s wild Arabica beans (as opposed to the standard Arabica beans that are currently grown for consumption) could be wiped out by 2080, due to temperatures rising above the necessary bioclimatic range, destroying a key source of genetic biodiversity that could be beneficial for future industry and non-industry uses. Perhaps most significantly, climate change currently threatens to fundamentally alter the entire growing map for higher-quality Arabica beans, in a manner that is bound to have major social, economic, and political consequences, especially for the poorest and most vulnerable. Estimates suggest that in Central America, a major coffee region known for higher-quality mild Arabica beans coveted by specialty coffee roasters, higher temperatures will push the optimal elevation for coffee higher, ruining the viability of coffee growing in lower regions, while threatening the quality, distinctiveness, and consistency of beans in higher regions. The overall effect will be to significantly shrink the size of specialty coffee growing areas in Central America by 2050, leaving tens of thousands of relatively poor farmers and workers scrambling to find viable new sources of income in lower areas or to respond to the impact of higher temperatures and changes in precipitation patterns in higher ones.8 Currently, there is little evidence that coffee states and the international community more generally are prepared for or committed to providing the nec-essary social and economic supports required to significantly aid farmers in these adjustments.

  The rise of the South

  Perhaps one of the most significant changes in world trade and the global coffee economy in recent years has been the new geopolitics of South–South trade, investment, and cooperation ushered in by what many have termed the “rise of the South.” After centuries of uneven development and poorer economic and social advancements than Northern countries, a number of larger Southern countries have experienced decades of substantial economic growth and gradual improvement in most major social indicators. Brazil, Russia, India, and China (which together, combined with the smaller economy of South Africa, form the BRICS group of states) have been at the forefront of new South–South trade relations that are significantly altering world trade patterns. South–South exports now account for nearly half of all Southern exports; South–South foreign direct investment flows grew from $2 billion in 1985 to $60 billion by 2005; and the share of South–South trade of world merchandise trade increased from 8 percent in 1980 to 26 percent by 2011.9

  These changing economic patterns have been interwoven with new forms of international coordination, regional integration, and socio-political linkages among Southern partners. The results have been new, uneven “hub-and-spoke” relations between Southern countries; the emergence of new instances of Southern competition and cooperation; and the rise of powerful Southern TNCs with global reach and influence – all of which have had highly differentiated repercussions across the South, posing new challenges and opportunities for BRICS countries and smaller Southern states.

  In terms of the global coffee economy, the rise of the South has underpinned several of the most significant recent developments. In particular, substantial opportunities for the expansion of coffee exports have emerged out of the growth of major Southern consumer markets, which played significant roles (along with commodity speculation and poor harvests in Colombia) in the 2011 boom in coffee bean prices. According to some estimates, demand for coffee in emerging markets in developing countries could well account for 50 percent of global coffee consumption by 2020. One of these major Southern markets is Brazil, the sixth largest economy in the world. While the country still maintains its title as the world’s largest coffee exporter, coffee is much less important to the Brazilian economy than it once was, eclipsed by exports of iron ore, crude oil, soybeans, sugar, and poultry. On the consumption front, domestic coffee consumption in Brazil has been significant since the 1960s, but starting in the mid-1990s it shot up dramatically, especially that of higher-quality Arabica beans. By 2012, Brazil had become the second largest coffee consuming country in the world, after the United States, and could well become first over the next few years given its rate of growth (see figure 6.1). The steady expansion of the Brazilian middle class, leading to millions of consumers with greater disposal income, has underpinned this growth. Their decision to spend their income on coffee, however, as opposed to other products has to an important degree been driven by the strategic decisions of the coffee sector itself. Beginning in the late 1980s, Brazil’s private coffee roasters, organized into the Brazilian Coffee Roasters’ Association (Associação Brasileira da Indústria de Café, or ABIC), launched a multimillion-dollar marketing campaign to promote domestic coffee consumption through television advertisements, celebrity endorsements, and efforts to tighten quality standards for Brazilian beans. From 1989 to 1998, ABIC spent $26.7 million dollars on this campaign, during which time total coffee consumption in Brazil increased by nearly 65 per-cent.10

  The most novel coffee markets, however, have emerged in Asia, where countries generally have not had significant coffee consuming traditions. Several Asian economies have been particularly central to the rise of the South, experiencing rapid and sustained economic growth and accounting for the vast majority of global poverty reduction since the 1980s, measured by the UN and other official institutions. Chief among them has been China, whose economic success has involved a model far removed from free trade fantasies, entailing massive state involvement in the economy, regulations on foreign investment and capital, and gradual trade liberalization. From 1981 to 2005, the poverty rate in China declined from 85 percent to 15 percent, fuelling the fastest growing consumer market in the world, with China becoming the world’s largest purchaser of everything from cars to timber, gold to pork, and possibly soon coffee. While there are other Asian economies that have larger coffee markets, in particular South Korea, coffee sales in China have soared, increasing by around 15 to 20 percent annually from 2006 to 2012 (compared to the world average of 2 percent), and China is set to become one of the largest coffee markets in the world by 2020.11

  Source: ICO statistical database (http://www.ico.org), accessed July 30, 2013.

  Figure 6.1 Brazilian coffee consumption vs. US coffee imports, 1991–2012.

  New opportunities for market growth, however, have also come with new and intensified competition among coffee producers and exporters. The “rise of the South” is highly uneven, with some countries and regions doing much better than others. Not all Southern countries have been magnets for trade and investment, or experienced rapid economic growth and substantial increases in their political weight. Nor have all people within the South been benefiting from increased trade and investment, due to major inequalities within and between Southern nations.

  In the coffee industry, unevenness between Southern countries is reflected in the rise of several Asian coffee exporters, matched by the decline in the African coffee exporters that had dominated Robusta cof-fee markets from the 1950s to the 1980s. Whereas most African coffee countries in the 1980s and 1990s, under intense international and domestic pressure, pursued neoliberal statecraft devoted to trade liberalization and privatization, Asian coffee exporters, to varying degrees and in different ways, pursued more gradual privatization along with more robust dirigiste roles for the state in direct investment in coffee through SOEs, publicly funding research, and the provision of various agriculture extension services and infrastructure. Today, three of the world’s top six coffee exporters are Asian countries – Vietnam, Indonesia, and India – and the region exports over three and a half times more coffee than Africa (see figure 6.2). Politicians and policy makers in Africa are not unaware of this displacement and its negative impacts
on the coffee sector and African economies in general. In a statement read on behalf of the Inter-African Coffee Organization (IACO) at the ICO meetings in March 2013, Aly Touré, representative of Côte d’Ivoire, declared:

  Source: ICO statistical database (http://www.ico.org), accessed November 14, 2013.

  Figure 6.2 Coffee exports by region, 2012.

  Ladies and Gentlemen, the story of African coffee is well known to all of us. Africa had generally declined, in its influence in the global coffee dynamics, following the liberalization of the sector in our respective countries, which came on the heels of the collapse of the ICO quota system. In many countries, owing to the pursuit of policies of structural adjustment, and the declining role of governments in the support to the coffee sector, farmers’ earnings plummeted as a result of poor prices, resulting in the abandonment of coffee farms. Subsequently, production declined and quality worsened.

  Thus, while in 1970 Africa contributed about 32% of global coffee production, today the continent only produces about 12%. The ramifications of these developments to us as producers, and as sovereign states, have been devastating, especially for countries that derived significant foreign earnings from coffee exports. In many instances, reduced foreign exchange negatively affected national development programmes.12

  To overcome “Africa’s bleak coffee history,” the statement declared the commitment of African states to work collectively toward a new “renaissance” in African coffee, with a renewed emphasis on promoting productivity, quality, and sustainability. The ways and means of achieving these goals were not directly addressed, although the representative of Tanzania proposed that a new “logic of intervention” would be required to do so.13 For those poorer and more vulnerable states on the margins of the rise of the South, while they are not attaining the lion’s share of the benefits, it seems that new policy space, ideological frames, and political confidence are emerging, allowing for a rethinking of coffee statecraft and a push toward new, alternative forms of coffee craft that are often subtle, but still significant.

  On the margins of the “rise of the South”

  Perhaps one of the most outstanding examples of coffee statecraft at the margins in recent years has been in Ethiopia, home to some of the world’s top-quality Arabica beans, as well as one of the poorest countries in the world. While Ethiopian coffee exports represent less than 3 percent of the world’s total, coffee accounts for over 31 percent of the value of all Ethiopian exports – making Ethiopia highly dependent on a global industry in which it has limited economic or political weight.

  Beginning in 2005, the Ethiopian government has sought to address its tenuous position in the global coffee economy through a new approach to managing its coffee statecraft. The first step involved a campaign to trademark its most renowned coffee beans, Sidamo, Harar, and Yirgacheffe. As Ethiopia was one of the birthplaces of coffee, the government claimed that the country and its farmers should have intellectual property rights over the use of the specialty coffee brands and applied for the trademark registrations in major coffee consuming nations. As mentioned in chapter 5, the trademarking campaign, with the support of Oxfam International, initially had to overcome resistance from the NCA and major coffee companies before successfully registering its trademarks in the US in 2007, followed by around 30 countries in the years that followed.

  As a result of the trademarking initiative, the Ethiopian Intellectual Property Office (EIPO) of the Ethiopian government has become the legal owner of Sidamo, Harar, and Yirgacheffe trademarks. In consultation with the Ethiopian Fine Coffee Stakeholder Committee – composed of Ethiopian exporters, cooperatives, and government agencies – EIPO manages the trademarks and the Ethiopian “brand,” which only licensed companies can use. In sharp contrast to most private trademarking and branding initiatives, however, being licensed to use Ethiopian coffee does not require a royalty fee – something that Ethiopian officials no doubt feared would chase companies away from buying Ethiopian beans. Instead, licensed companies agree to explicitly market and promote Ethiopian brands in various ways. The trademarking initiative was followed in 2008 by the creation of the Ethiopian Commodity Exchange (ECX), Africa’s first commodity exchange, as a jointly owned, public–private company, through which most of the country’s coffee, and many other commodities, must now be traded. The ECX has been designed to make exchanges between buyers and sellers more reliable and transparent by disseminating market information; coordinating delivery, payment, and various forms of “risk management” (such as future contracts); and overseeing and guaranteeing product quality and quantity.

  Taken together, the trademarking initiative and the creation of the ECX represent an attempt by the Ethiopian government to use market-friendly coffee statecraft to enhance the symbolic and quality value of Ethiopian coffee and gain a greater share of that value for Ethiopian farmers. Daviron and Ponte have argued that market power in the coffee industry comes not just from capturing the material value of the coffee beans, but also from the ability to define the coffee identity, norms, quality standards, and symbolic attributes. The trademarking initiative and the creation of the ECX represent a struggle to gain greater control over the non-material, subjective elements embedded in Ethiopian coffee beans – its quality, geographic, and symbolic attributes – and use that control to direct the extra value that these attributes can garner on Northern markets into the hands of Ethiopians.14

  It is too early to gauge the overall success of the trademarking and ECX initiatives, which are devoted to longer-term goals that take time to play out. One weakness that is already apparent, however, is that it is not clear how much extra value they are actually creating. Light Years IP, a non-profit organization that assisted Ethiopia with its trademarking efforts, claims that Ethiopian coffee farmers’ income doubled, with an additional $100 million in 2007–8, but it is not clear how much of this was driven by a jump in international coffee bean prices that year.15 The ECX provides greater transparency, reliability, and quality control for Ethiopian beans, but it is also not clear how much extra value is actually being created and how much is finding its way to poor coffee farmers and workers. Ethiopian coffee prices have continued to follow international prices in much the same way as beans from other exporters, and small coffee farmers and workers have continued to live off very low incomes. At the same time, whereas most African countries have experienced major declines in coffee production and export since the start of the millennium, Ethiopia has bucked this trend; its share of global coffee exports has modestly increased and Ethiopia is now Africa’s largest and the world’s tenth largest coffee exporter overall.

  In the end, Ethiopia’s particular form of coffee statecraft would appear to be having a moderate impact on the global distribution of value along the coffee chain. And yet, the limitations of Ethiopian statecraft must be taken into consideration, with its relatively vulnerable position in the coffee industry, the global economy, and the geopolitical map ruled by more powerful states. The trademarking and ECX initiative both reflect growing recognition in Ethiopia of the benefits of more consciously and directly applying coffee statecraft toward developmental ends, and the Ethiopian state had to wage fierce battles to win the right to carry them out. It is part of a subtle, but still significant, turn away from the dictates of the free trade package and toward a new “logic of intervention” among African coffee countries, one based on an emerging Southern consciousness and political confidence and inspired by the complex and contradictory success stories of new Asian coffee leaders.

  The rise of fair trade South

  An emerging Southern consciousness and political confidence are apparent not only in Southern statecraft, but also among social movements within the coffee sector organized by poor and marginalized farmers, rural workers, and rural landless. As discussed in chapter 2, states do not simply pursue their territorial and capital logics in a political and social vacuum, but rather are driven and limited by social pressures stemming from a pe
rpetual struggle between dominant and subordinate groups. The coffee fields have always been fertile grounds for revolution, rebellion, and revolt against powerful coffee elites and Northern imperialist states. In recent years, more subtle forms of Northern dominance have also become targets of resistance “from below” – including progressive-minded movements like fair trade coffee.

  Despite genuine concern for the needs of small farmers and rural workers, fair trade certification has long been critiqued for allowing Southern participants only a modest or even token role in developing, managing, and overseeing fair trade rules and regulations. FLO, the world’s top fair trade umbrella organization (discussed in chapter 5), was originally founded in 1997 composed of 17 Northern national fair trade initiatives (19 today), which dominated the General Assembly and Board of Directors, with only a single, non-voting producer representative on the Board. Over the years, under intense pressure from Southern producers, FLO has reformed its structure, allowing a more even distribution between producer and consumer representatives on the Board in 2005, and then reformulating the General Assembly in 2011 to constitute 50 percent producer representation, as opposed to the previous 14 percent.

  A key organization in pressing for these changes has been CLAC, founded in 2005 by fair trade farmers seeking a greater voice in the fair trade network.16 Headquartered in El Salvador, CLAC currently represents around 300,000 small producers from organizations in 21 countries. Its members grow a variety of agricultural products, of which coffee is the most significant. CLAC is an official representative of Latin American and Caribbean fair trade producers at the FLO General Assembly and since its founding has engaged in numerous activities within and outside the FLO system, including launching the Foundation of Organized Small Producers (Fundación de Pequeños Productores Organizados, or Fundeppo) in 2010 to manage CLAC’s own certification system based on the Small Producer’s Symbol (SPS).