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Stop discriminating against Africa. Call for more constructive use of U.S. resources.

Part 7 on why the U.S. should not ban cocoa imports from Ivory Coast

· Africa

A cursory review of existing research on the cocoa industry reveals that there are numerous voluntary, non-government, government, and business-focused initiatives trying to tackle the problem of children working in cocoa farming and to make cocoa production more sustainable.

  • There are published guides to trade practices.
  • There are numerous reports that identify and assess interventions with the highest return on investment (see the list of recommended resources at the end of this article).

However, most studies to date do not quantitatively measure the social and environmental externalities throughout the supply and value chains nor they make the comparison between conventional cocoa cultivation and alternative types of cocoa farming.

It is also increasingly acknowledged that while past and current initiatives have had some positive impacts, they have not succeeded, and are not likely to succeed, in tackling poverty, child labor, deforestation and illegality across the whole cocoa sector. Prices paid to farmers for their production are too low. This is coupled with limited access to finance and investment that would allow local processing of the commodity at scale and value-addition.

The problem is also that almost all of the efforts made by aid agencies, like USAID and Millenium Challenge Corporation (MCC) are technical (increased production, crop diversification, use of agrochemicals and new planting material, increased efforts to improve farming techniques). The challenges facing the cocoa and other commodity sectors, however, are more political than technical. They deal with power and political economy, such as price formation, the asymmetrical bargaining power of farmers, unbridled market concentration of multinationals, and a lack of transparency and accountability.

A criminal investigation of whom?

In their July 2, 2019 letter to Acting Secretary of Homeland Security, Honorable Kevin McAleenan, U.S. senators Sherrod Brown (D-Ohio) and Ron Wyden (D-Oregon) not only single out Ivory Coast to block cocoa imports into the U.S. They even ask that U.S. Customs and Border Protection to “determine whether a criminal investigation is warranted” and “where appropriate, pursue criminal investigations related to the use of forced labor to produce goods being imported into the United States.”

Who do the senators want to criminalize? The producers (poor, small farmers)? The buyers? The transporters? The exporters? The multinationals who produce chocolate but are making concerted efforts to invest in key areas, like nourishing children, empowering youth education and employment, building communities and preserving natural ecosystems? Those who lobby Congress to influence cocoa trade? It might make more sense to criminalize the smugglers motivated by higher prices in neighboring Ghana, Liberia and Guinea. It’s estimated that Ivory Coast lost 125,000 metric tons of cocoa beans due to smuggling between October 2017 and February 2018.

Or maybe there should be an investigative review of the 2012-2016 Africa Cocoa Initiative, a public-private partnership bringing together the World Cocoa Foundation (WCF), cocoa industry members, the Dutch Sustainable Trade Initiative (IDH) and USAID’s Feed the Future initiative, in concert with key government institutions in Cameroon, Côte d’Ivoire, Ghana and Nigeria. The initiative’s 5-year budget was $14,404,265, of which $5,647,207 was U.S. government investment. Its aim was to “double cocoa productivity for 100,000 farm households and in doing so raise per capita income by 150-200%”.

The Africa Cocoa Initiative was supposed to respond to the need for enhanced capacity in the cocoa sector within national institutions and address “specific gaps in cocoa productivity improvements, including the provision of better planting materials, pesticides/fertilizers, and credit to cocoa farmers”, improve farmer productivity constraints, foster market-driven farming input supply services, and provide training for extension agents emphasizing good agricultural practices and entrepreneurship for women’s empowerment. However, neither the project nor the final report on project implementation mention children.

If the chocolate industry has a century-long history of forced and child labor in the production of cocoa, and if it has been recognized internationally that the success of any pledge to create more sustainable cocoa production, including eradication of child labor, lies with improving cocoa farmers’ livelihoods, then why do so many aid initiatives, like the African Cocoa Initiative, use U.S. tax payers’ money without including specific attention to child labor and without guaranteeing the participation of cocoa farmers in the search for solutions to eradicate it?

Or perhaps an investigative review of the 5-year $525 million Millenium Challenge Compact (MCC) with Ivory Coast should be implemented to determine why it did not factor in child labor, forced labor and trafficking. Signed and launched in November 2017, the Ivory Coast Compact aims to “spur economic growth and reduce poverty in Côte d’Ivoire, supporting regional stability and new business opportunities” with investments in the education and transportation sectors. But there is

  • no mention of anything related to child labor, forced labor or trafficking in either of the Compact’s two projects, one focused on Skills for Employability and Productivity Project for secondary level students and the other on improving efficiency, integration and safety in the transport of people and goods along the major transport arteries.
  • no mention of any efforts to ensure that those in a position to fund the country’s major farming sector are vigilant so that cocoa prosperity doesn’t result in more poverty, which is what fuels the industry’s child labor problem.
  • no mention of any specific support to address below-living earnings of cocoa farmers and the consequent lack of money to send their children to school. Bread will always come before books.

Why shouldn’t Ivory Coast get a bigger piece of the cocoa pie?

Cocoa production in Ivory Coast accounts for 40% of the country’s exports and 10% of its GDP and engages 68% of the labor force. Production in the 2016-2017 season soared to a record 2.15 million tons and exports increased by 23.3%, with a consequent 28.6% raise in the overall gross income of the country's producers.

But between 2017 and 2018, world prices of "brown gold" fell by more than a third. A race ensued to import West African cocoa into the United States. Cocoa dealers were snapping up cocoa beans as they sought “to profit from the steepest premium for the chocolate ingredient in over 40 years in the New York market.”

Meanwhile, farmers were at the losing end of the supply chain and bore the risks of a volatile price. Other market actors had the means to adapt and made a lot of money off the price collapse. But farmers became poorer. Their incomes dropped by as much as 37%. Yet not a peep was heard from any U.S. senator.

By 2018-2019, Ivory Coast had increased production to 2,150 thousand tons. In July 2019, the governments of Ivory Coast and Ghana were accused of establishing a cartel when they agreed to suspend “forward sales of cocoa beans for the 2020/21 season as buyers and sellers are set to discuss a minimum price proposal”. Two U.S. senators immediately called for a ban on cocoa imports from Ivory Coast.

Obviously, the Ivorian government wants a bigger piece of the cocoa profits pie. And it should get a bigger piece of the pie. How else is the government going to sustain its sector-wide efforts to improve the lives of farmers, communities and the environment? How else can it ensure it can provide alternative land or funding to cocoa farmers evicted from illegal cocoa plantations so they don’t return to illegal production? How else is the Ivorian government going to ensure a bigger share of the market happens at home through local processing and value addition? After all, no mention of improving cocoa value addition or processing capacity is to be found in either the USAID Africa Cocoa Initiative or the MCC Compact.

This, of course, involves the parts of the chain fiercely guarded by the big multinational players. Within the global cocoa value chain, most of the money is made after the beans have reached the Global North. Only the first three links of the cocoa value chain happen in the producing country: the hard labor that nurtures the cocoa trees, the harvesting of the cocoa and the sale of cocoa beans at fixed prices through traders into the global market.

The more lucrative links – processing, packaging, branding – are all in Europe, the U.S. and other rich countries. These links are cornered by half a dozen or so multinational corporations who benefit from a $100 billion industry. Meanwhile, cocoa farmers in the Global South receive around 6.6% of the value of a ton of cocoa sold and have to get by on less than $1.25 a day, which is below the threshold of absolute poverty.

Why punish African farmers?

Supply and value chain links where Ivorians can add value are the ones that would have the most impact on poverty reduction and market development and would ensure they harvest more benefits from trade. Yet no specific U.S. foreign aid investments are being made to ensure the cocoa supply chain Ivory Coast does not include child labor, let alone forced child labor or slavery. No investments through USAID or MCC are being made in the supply and value chain links that add the most value to the economy, especially processing.

Why aren’t senators Brown and Wyden calling for better investment of U.S. aid in Ivory Coast to address child labor more effectively?

Instead, they are practically criminalizing Ivory Coast, the main supplier of U.S. cocoa, and by direct inference, the country’s farmers. Is it because this independent African country dared to set its own price conditions and created a “cartel” with Ghana? In any case, a cartel is not a dirty word, except when involving drugs, arms, human trafficking or any other illicit kind of trade. The original, non-politicized meaning of cartel refers to a group of independent producers, companies, countries or other entities who come together to influence market prices to increase their collective profits by controlling the production and sale of a particular product, in this case cocoa.

Support efforts to bring more symmetry and fairness in the cocoa industry

Chocolate manufacturing is a thriving business. Global sales from chocolate exports totaled US$28.6 billion in 2018. Amid asymmetric power relations and unfair trade relations, big companies, like Mars, Hershey’s or Cargill, compete for ever higher market shares and higher profits while millions of cocoa farmers bear the costs by getting less and less share from the revenues.

Senators Brown and Wyden should, at least, recognize the increasing efforts made by the Ivorian government since 2011 to improve the situation of its farmers. It has reorganized the cocoa sector and carried out institutional reforms; it has raised the price per kilo, changing the auction and forward selling system and setting up a reserve fund at the Central Bank of West-African States as a protection against the possibility of a future major drop in world cocoa prices; it has made significant advancements with voluntary sustainability standards.

Now, Ivory Coast, together with Ghana, wants to exercise its right to increase cocoa prices and have greater participation in the industry’s value chain. Yet, U.S senators Brown and Wyden, both Democrats, want to block U.S. cocoa imports.

The bulk of Ivory Coast’s export earnings come from cocoa and related products. So a U.S. trade ban will directly reduce the income of African farmers and lead to more children working on the farm instead of going to school. The majority already live at or near a subsistence level, so earning less because they can’t sell their cocoa beans for export to the U.S. will increase the number of children working on cocoa farms and set back Ivory Coast’s progress towards eliminating child labor. With so many farmers bearing the brunt of a U.S trade ban, a geopolitical and economic crisis in the West African region could ensue, resulting in a concomitant increase in regional instability.

A ban on imports will yield a poor net welfare impact: few winners and many losers. Instead of punishing Ivory Coast farmers with a ban on cocoa imports, U.S. senators Brown and Wyden would do better by the American people they represent by doing more thorough and impartial research and calling for better U.S. foreign aid investment in the country. Their letter simply evidences limited curiosity, lackluster research and poor judgement, in addition to politicization of human well-being in Africa.

Either U.S. senators Brown and Wyden didn’t bother to do their research, because their call for a ban is politically motivated, or they are too blinded by preconceived notions of Africa to objectively assess the information gathered by their overworked and low-paid aides. In either case, they are calling for a criminal ban.

If senators Brown and Wyden really want to reduce the number of children toiling in cocoa farms farmer, they should start by rethinking what they think and how then think about an import ban on cocoa from Ivory Coast. Then they need to focus on how the U.S. can invest its resources better to improve farmer livelihoods and ensure they get a living income.

A few easily accessible resources to help spur a more active open-mindedness about the cocoa sector in West Africa

G.E.S, Combatting Child Labor in Cocoa. Investor Expectations and Corporate Good Practice, https://www.am.commerzbank.de/SiteContent/70/1/2/315/94/GES_Cocoa_investor_expectations_and_best_practice.pdf

ICI, a multi-stakeholder partnership between civil society, governments, farmer organizations, and industry, https://cocoainitiative.org

ILO, Ending child labour by 2025: a review of policies and programs, file:///C:/Users/Astrid/Downloads/2017_World_Report_on_Child_Labour_Executive_Summary_EN_Web.pdf

OECD, Emerging Good Practice in Combating the Worst Forms of Child Labour in West African cocoa growing communities, an initiative is coordinated by the Sahel and West Africa Club Secretariat/OECD (2011) https://www.oecd.org/swac/publications/49069653.pdf

True Price, a social enterprise that aims to contribute to a circular and inclusive economy

that creates value for all people by providing the information needed for such an economy; IDH, the Sustainable Trade Initiative, https://www.chocolatemakers.nl/wordpress/wp-content/uploads/2016/04/TP-Cocoa.pdf

UNICEF, alternative approaches to combating child labor, https://www.unicef-irc.org/publications/pdf/crs8.pdf; https://www.unicef.org/protection/files/Child_Labour_and_UNICEF_in_Action.pdf

Using economic incentives to compensate farmers with a welfare-neutral price premium, https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0217230

Winrock International, Community-based Innovations for the Reduction of Child Labor through Education, https://www.winrock.org/wp-content/uploads/2016/04/winrockenglish.pdf

This is the last of a series of 7 articles on the call for a ban on U.S. cocoa imports from Ivory Coast.

Astrid Ruiz Thierry, Principal, Upboost LLC

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