Fair Trade: Overview, Impact, Challenges - Are you looking for one ...

Fair Trade:Overview, Impact, Challenges
Annex 3: Case Study - Coffee in Tanzania
publication entitled Nestle: A Partnership for Fair Trade, setting out its perspectives
on good trading practice. However, compared to other sectors there seems to have
been little serious effort by mainstream companies to assess the ethical issues
involved in their supply chain or to develop guidelines or codes of conduct on social
and environmental issues. According to the Coffee Trade Federation some of its
members are beginning to evaluate whether the Tea Sourcing Partnership holds
lessons for coffee sector 10 .
Disagreements between FT and non-FT organisations centre round a number of
issues:
The benefits of direct sourcing: FT aims to cut out intermediaries, so that farmers
receive a higher proportion of the market price and the supply chain becomes more
transparent. While companies such as Nestle do buy directly from farmers in some
instances, generally in countries where they undertake local processing, direct
sourcing makes up a very small proportion of their overall purchases. Most large
companies feel purchasing a greater proportion of coffee directly is impractical and
that intermediaries have a very useful role to play in the coffee chain.
The impacts of speculation. Coffee is one of the cash crops produced in developing
countries for which prices are most volatile and where speculators have been most
active, particularly since the collapse of the International Coffee Agreement in 1989.
The British Association of Fair Trade Shops argues that the activities of speculators
intensify the degree of price instability, and that coffee farmers 'hardly see any of the
benefits of speculation'. However, speculation can fulfil an important economic
function, providing liquidity to markets which, in principle if not always in practice,
allow those involved in the production, trading and processing of coffee to manage their
price risk.
Barriers to an expansion of coffee processing in producer countries: BAFTS quotes
the example of the European Union which implements an escalating tariff regime for
coffee. While escalating tariff regimes do hinder the establishment and expansion of
coffee processing activities in producer countries, processors cite many other reasons for
processing coffee in the developed world: the benefits of being closer to markets, the
blending of coffee which is hindered by import restrictions in many producer countries
and the better investment climate.
4. Coffee Production and Marketing in Tanzania
4.1 Production and Exports
Tanzania became a substantial producer of coffee between the First and Second
World Wars. The country produces both high-grade mild arabica coffee and robusta
coffee. The geographical focus of the mild arabica coffee industry has traditionally
been Arusha and Kilimanjaro regions 11 .
10
Interview, December 1999
11
It is notable that the coffee year in Tanzania runs from July to June and not from October to
September as in most of the coffee producing countries.
3-14