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Fair Trade and Ethiopian Coffee

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Every day in the early hours of the morning, the farmers of the Oromia region head out to the coffee plantations in the Ethiopian highlands for a day’s work. Often walking barefoot for miles to arrive, the farmers use their bare hands to pick the coffee beans off of steep mountains in high altitudes and a blazing sun. For these farmers and their families, coffee farming is the only means to earn a living in one of the poorest countries in the world. They earn less than a dollar a day.

Halfway across the world, sleepy office workers line up at the Starbucks on 14th St. in New York City, ready to pay three dollars for their first jolt of caffeine. Starbucks, with over 11,000 stores worldwide and annual earnings of over $7 billion, receives much of its coffees from countries like Ethiopia.

Since its founding in 1985, the company has promoted fair trade as part of its corporate image. Starbucks has courted its politically correct customers with “Fair Trade” Ethiopian coffee in lovely cut out packaging. But the relationship between the corporation and the farmers is more complicated than it appears. Recently, there has been a growing controversy over whether or not Ethiopian farmers and the Ethiopian economy are receiving fair treatment from the multinational corporation. This debate has sparked a fervent campaign by fair trade organizations, workers’ unions, and the Ethiopian government, who are publicly challenging the ethics of the company.

Conducting Business Responsibly

Starbucks maintains that it enjoys a positive relationship with coffee farmers. With their “commitment to social responsibility”, Starbucks developed an integrated approach to coffee sourcing with C.A.F.E. (Coffee and Farmer Equity Practices), a set of socially responsible coffee-buying guidelines. This sustainable strategy is said to improve working conditions for farmers, helping them earn more while protecting the environment.

Starbuck commits itself to paying premium prices for all of its coffee and attempts to purchase coffee that is certified as Fair Trade Coffee. “Starbucks global purchases of Fair Trade Certified coffee totaled 11.5 million pounds in fiscal 2005, making it the largest purchaser of Fair Trade Certified coffee in North America” the company stated in a brochure. “In addition to paying premium prices for all of our coffees, our investment in social development projects and providing access to affordable loans in coffee growing regions has been recognized for its leadership within the industry,” Starbucks said in a press release statement in October 2006.

Trademark Blocking

However, Ethiopian farmers believe they are receiving the short end of the stick in this relationship. While Starbucks continues to generate billions of dollars each year, Ethiopian farmers and their supporters believe that Starbucks does not wish to see them or their country, reap comparable profits.

Oxfam International, a British human rights organization, claims that Starbucks tried to block the Ethiopian governments’ attempt to trademark the names of coffees grown in its Harar, Yirgacheffe, and Sidamo regions, denying the impoverished country possible revenues of up to $80 million. The U.S. National Coffee Association (NCA) attempted to block trademark efforts, and Oxfam accused Starbucks of being behind these efforts. Although Starbucks denies this claim, Oxfam spokeswoman Jo Leadbetter says there is validity in their claim. “We have heard from a number of sources that actually Starbucks was involved in alerting the U.S. coffee association to block these applications and that it ‘stinks of corporate bullying,’” Leadbetter said.

According to Oxfam, for every cup of coffee sold at Starbucks, farmers in Ethiopia only early about $.03, receiving a very small portion of the profits that their coffee generates from consumers. “Ethiopian coffee farmers often collect about 10 percent of the profits from these coffees. The rest goes to the coffee industry players that can control the retail price, the international importers, distributors— and roasters like Starbucks,” Oxfam stated on its Make Trade Fair website. In response, OXFAM has launched a fair trade campaign to support farmers like the ones in the Ethiopian highlands. “Starbucks has engaged in some positive initial steps in helping coffee farmers living in poverty. I don’t understand why they won’t take the next step and come to the table to discuss Ethiopia’s proposal in good faith,” stated Seth Petchers, Oxfam America’s coffee program manager.

Ethiopia coffee industry

Ethiopia, known as the birthplace of Arabica coffee from its Kaffe region, depends on the production of coffee for its economy. Coffee production is so important to the agriculture-based Ethiopian economy that 50-60% of its export trade comes from coffee income. The industry employs one out of every four people. An estimated 15 million coffee farmers and their families depend on coffee for their survival.

Coffee is also a central element of Ethiopian culture, with traditions that date back to the 10th century, when the first tree was domesticated in the south-western highlands of the country. Coffee is so important to the daily routine of life in Ethiopia that “coffee ceremonies” happen daily throughout the country. A third of the national production is consumed domestically.

Starbucks’ potential impact on the Ethiopian market

Should Ethiopia be successful in trade marking its beans, it will enable the country to control the use of its beans in the market, giving its farmers a larger portion of the retail price. “Securing the trademark for its Sidamo, Harar and Yirgacheffe coffee beans could have allowed the country to increase its negotiation leverage through control of the names and ultimately (derive) a greater share of the retail price in the global market,” Ethiopia’s Foreign Ministry said in a statement.

The potential benefits for the Ethiopian market are enormous, according to Hailu Fitsum, the Second Secretary of Trade Investment at the Ethiopian Embassy. “When producers can grow and prosper by not only improving production and quality but also by building up the value of their intellectual property portfolios, then everybody in the coffee industry – including partners in retail and distribution as well as consumers – reap benefits.” Fitsum adds that in a case like Ethiopia’s, “Stronger negotiating power would enable millions of coffee farmers and traders to prosper and invest in the future of these fine coffees.”

Ethiopia’s Position

Tadesse Meskela, the representative for the Oromia Coffee Farmers Cooperative Union in Ethiopia, agrees with Fitsum. According to Meskela, Starbucks sells the coffee for $14.00 per pound, but only pays $1.20 per pound, which does not even cover the cost of production.

However, Mr. Meskela explained that the coffee farmers’ issue is also with the World Trade Organization, not only with Starbucks. In a telephone interview, he said, “The WTO controls a huge amount of the profit trade and a change needs to be made in international trade laws. The price we [farmers] receive is very low and it’s lower because of unfair trade laws.”

Meskela is working hard to save his 74,000 impoverished coffee farmers, and he is on a mission to find buyers who are willing to pay a fair price for their coffee. Meskela is also the main character in Black Gold, a documentary that juxtaposes the experiences of the coffee farmers with that of the consumers who purchase the product on the other side of the world. “This film highlights the vulnerability of coffee farmers and the disconnect that exists between poor farmers and huge profits. Oxfam seeks to correct the imbalances of power at the root of unfair trade,” stated Petchers.

Starbucks’ Position

In response to Oxfam’s campaign, Starbucks has launched a counter-attack. “We have never filed an opposition to the Ethiopian government’s trademark application, nor claimed ownership to any regional names used to describe the origin of our coffees,” the company said. Dub Hay, Starbucks Senior Vice President of Coffee and Global Procurement told BBC radio, “We have not been involved in trying to block Ethiopia’s attempts. We did not get the NCA involved; in fact it was the other way around. They were the ones who contacted us on this.”

While Starbucks denies being behind the trademark-blocking process, the company doesn’t think that trade marking is in the best interest of the farmers and the Ethiopian economy. “Were trademarks to be implemented — roasters might shy away from buying the coffees for fear of becoming embroiled in complicated legal disputes. Or worse, they may buy the coffees and just market them without the trademarked names. Letting the high quality beans go to market without a geographic identification would completely undermine the value of the brand,” Starbucks said in a statement.

The Ethiopian government also asked Starbucks to sign an agreement that would enable Ethiopia to have ownership of its coffees. However, Starbucks refused to sign such an agreement, as the company believes that if Ethiopia were to trademark its products it would be excluding itself from the market. According to Hailu, this is grossly offensive. “The only way this statement could be accurate is if Ethiopia completely mismanages the trademarks once they have been acquired, and I would hope that Starbucks is not assuming that Ethiopia is not capable of managing the Intellectual Property assets related to one of its most important exports,” Hailu says.

As an alternative to trademarking products, Starbucks suggests the development of geographic certification programs. Through the certification programs, a country can be identified as the origin of a product. Starbucks says these systems are more effective than registering trademarks for geographically specific names, such as the regional names the Ethiopian government is trying to trademark. The trademark signifies the manufacturer of a good or product while certification identifies that the product meets quality product standards. Alain Poncelet, Starbucks’ head of Green Coffee Purchasing told Spiegel Online, the German online newspaper, that his company “is all for Ethiopia ‘protecting its regional names,’ just not through trademark.”

This position is not receiving much press, however. The company received over 70,000 phone calls and faxes from concerned consumers showing support for the farmers. But does such negative publicity have any affect on the house-hold name and billion dollar company? “Probably not,” says a Starbucks employee in New York City who spoke on condition of anonymity. “People are so hooked on coffee that they are not going to be affected by something that is happening so far away. The only people protesting Starbucks are a minority of activists. Everyone else just thinks about their own problems.” The employee also spoke highly of Starbucks treatment of its employees. “They treat their employees better than most corporate companies and they give a lot back to the community,” he said.

Power positioning

As Meskela pointed out, the struggle between the coffee farmers and Starbucks doesn’t just address the issue of trademark rights. It also highlights the way coffee farmers are almost entirely left out of the trading industry between governments and corporations. The issue addresses the reality that farmers in “developing” countries don’t have much bargaining power in the international trade sector.

Senait Assefa, a resident of New York from Ethiopia, believes that strengthening the position of coffee farmers in the international market should be the focus of the efforts, not Starbucks. “The coffee producers should band together to control the supply of coffee in the international market, thereby enabling themselves to dictate their own terms (similar to how oil producing countries manipulate the price of oil by reducing or increasing production & supply)”, said Assefa. However, Assefa admits that this might not work. “While oil is a resource only few countries are endowed with, almost anybody can grow coffee,” she added.

Although coffee is a crop that can grow in different regions, the high quality of Ethiopian coffee is what makes it so unique. As Ethiopian farmers continue to work hard to produce such fine quality coffee, their position in the international trade market is just beginning to receive worldwide attention, thanks to the tireless work of Meskela and others. While the battle to trademark their coffees continues, the coffee farmers are also left to struggle with trade laws that make them invisible in the chain of international players.

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