Conclusion:
From this article, it is blatant that the world of coffee trade is an unfair one. In actuality, the whole trading system is unfair therefore economics is unfair thus making the world an unfair place! I already knew that! What had intrigued me from this article however is the interviewed person's plea for education. It reveals that the coffee trade system (or any trade system for that matter) in such third-world countries, whether it be Uganda, Ethiopia, Honduras, India, the unfairness of it ultimately affects peoples (whether it be children or adults) right to have an education. It doesn't matter where you are from, the right to have an education is a HUMAN RIGHT.
Inequalities of the International Coffee Trade
Danielle Millard - United Nations Intern - 2008
International Association of Schools of Social Work
University of Connecticut
"I'd like to tell people in your place that the drink they are enjoying is the cause of all our problems. We grow it with our sweat and sell it for nothing (Oxfam, 2007)."
-Lawrence Seguya, Uganda
We can find many places throughout the world where a country and its people are struggling to adjust to an increasingly global economy. International trade could provide the means for an increased quality of life; however, the current trading policies make it difficult for countries to compete and prosper in the global market. This is true of the world's coffee growing industry. In addition to the inequalities regarding access to information, access to credit, and the ability to build capital, the sudden change in the market caused by the collapse of the International Coffee Agreement in 1989 have left coffee growers with a devastating decrease in the value of their crops. The result is an economic disaster for the economies of those countries and a desperate situation for growers and their families.
History of Free Trade: Theory vs Reality
There are many cases where inequality leads to poverty. International trade is one such case. An inequitable trading system has led to an increase in global wealth inequality. To understand the problem with the current trading system it is important to understand the history of free trade. The idea dates back to Adam Smith in 1776. He believed that no one, countries included, should "attempt to make at home what it will cost him more to make than to buy" (Blinder, 2007). David Ricardo, who came up with the comparative advantage theory, later expanded on Smith’s views. This theory explains how everyone can gain from trade even if that person, or nation, is in a disadvantaged situation because having a comparative advantage does not require being the best at something. For example, a lawyer might be better than her assistant at PowerPoint presentations, but it would not be in the best interest of the lawyer to fire her assistant and make her own presentations. Even though the lawyer has an absolute advantage she does not have a comparative advantage. The lawyer is better off concentrating on her law practice and the assistant is able to secure a job creating PowerPoint presentations (Blinder, 2007). This same idea can be applied to countries. Even though one country might have advantages that allow them to succeed in numerous fields, it is not in the best interest of the country to do everything itself. This allows other countries to assess where they might have a comparative advantage and begin producing
that product for export. The idea behind free trade was supposed to be that both parties are better off and therefore international trade is a win-win situation; however, the unequal distribution of the profits from free trade tell a different story.
According to Nicholls (2004), one of the largest issues facing the unequal distribution of wealth is that the key conditions on which classical trade theory is based are absent in most developing societies. Conditions such as perfect market information, access to credit, perfect access to markets, and an ability to switch production techniques and outputs in response to market information, are not present in many developing countries. International free trade might truly be a win-win situation in theory, but that theory does not apply in most developing countries. Just one example of how these conditions do not apply to most developing countries can be seen by taking a look at the issue of perfect information.
In 1989 the International Coffee Agreement collapsed and brought with it a loss in balanced supply and demand. Coffee export quotas were no longer pre-determined and prices began to be set in New York and London. While multinational corporations in the coffee sector, such as Nestle, Sara Lee, Kraft and Proctor & Gamble, increased their profits, the income of coffee farmers declined (Oxfam, 2005). Looking at the coffee situation from a macro perspective shows how dependent developing countries are on the coffee trade. Coffee is the second-largest export earner for developing countries and is the main source of foreign exchange for several nations (Wasserman, 2002). In Uganda, roughly one-quarter of the population is in some way dependent on coffee sales. In Honduras, nearly ten percent of the population depends on coffee for its source of income, and in nearby Guatemala that figure is just slightly lower at over seven percent. In Ethiopia, coffee accounts for 54 percent of its export revenues and in Burundi it accounts for an astonishing 79 percent. Uganda is close behind at 43 percent and Rwanda's coffee exports total 31 percent.
A Micro Perspective
Looking at the situation at a micro level illustrates the human suffering that the inequalities in the coffee trade have caused. It is small-scale farmers who produce over 75 percent of the world's coffee. This means the drop in prices is negatively affecting the livelihoods of family farmers across the globe, not large multinational corporations. The coffee farmer has encountered numerous problems due to the heavy dependence on coffee and the consequential drop in price.
One of the problems facing those who depend on coffee for their livelihoods is hunger, a problem that has become massive. One contributing factor is the lack of money coming in from the sale of coffee. Another is that farmers are trying to mitigate the loss of income by increasing the amount of land used for coffee crops and therefore having less land to plant crops that can be used for consumption. Another major problem is that many families can no longer afford to pay school fees and children are not able to obtain an education. For example, in Uganda, both Bruno Selugo, 17, and his brother Michael, 15, have had to leave school because they cannot afford the fees. Michael expressed his feelings to Oxfam, "I can't be successful if I don't go to school... Everyone used to go back to school with the money from coffee, but now the money is not here. I wish the people who use our coffee could give us a better market. All I want is to go to school" (Gresser, 2002). Without an education the next generation will continue to face the same hardships. Providing an education gives the youth of developing countries the tools they need to break the cycle of poverty.
In order to sustain an income some farmers are turning to a different, often dangerous and illegal, market. Certain countries have found that the conditions they grow their coffee in are the same as those needed to produce coca, the raw material used to create cocaine (Gresser, 2002). While it may be illegal, it yields a higher profit than coffee and many farmers are deciding that growing the coca is the best way to provide for themselves and their families. People are getting desperate and the world will continue to see a multitude of problems coming out of the coffee trade unless the field of international trade undergoes major change.
In order to sustain an income some farmers are turning to a different, often dangerous and illegal, market. Certain countries have found that the conditions they grow their coffee in are the same as those needed to produce coca, the raw material used to create cocaine (Gresser, 2002). While it may be illegal, it yields a higher profit than coffee and many farmers are deciding that growing the coca is the best way to provide for themselves and their families. People are getting desperate and the world will continue to see a multitude of problems coming out of the coffee trade unless the field of international trade undergoes major change.
Twenty-five million coffee farming families in 60 coffee producing countries are suffering from the direct effects of unjust trade (Oxfam, 2006).
