Context: Agriculture: Millennium Development Goals: All 8 have direct and indirect relationships with agriculture. #1 Eradicate extreme poverty and hunger #2 Achieve Universal Primary Education #3 Promote Gender Equality and Empower Women #4 Reduce Child Mortality #5 Improve Maternal Health #6 Combat HIV/AIDS, Malaria, and Other Diseases #7 Ensure environmental sustainability #8 Develop a global partnership for development
Agriculture-led growth is a major model for country development used by all international organizations
World Bank Data on % of Total Employment in Agriculture
World Bank Data on % Rural Population in Poverty
Areas of the World in Poverty and Employed in Agriculture
CIA World Factbook % Population in Poverty
Areas of the World in Poverty and Employed in Agriculture
Human Poverty Index Equation
Findings: In regions of the world where poverty is the highest, an overwhelming majority of the population is employed in agriculture… Average % Pop in Agr. 2009: 71.39% …and has been since 1960. Average % Pop in Agr. 1960: 76.4375%
(World Bank: World Development Report 1980)
Country
% Employed in Agriculture ‘09
Poverty ‘09
% Employed in Agriculture ‘60
Country Status
Liberia
NA
80%
80%
MDC
Gaza Strip
16.1%
80%
-‐-‐-‐-‐-‐ (Israel)
Hai6
50.5%
80%
80%
LDC
Zimbabwe
60%
80%
69%
MDC
Chad
NA
80%
95%
LDC
Sierra Leone
68.5%
70.2%
78%
LDC
Suriname
NA
70%
-‐-‐ (Netherlands)
Mozambique
NA
70%
81%
LDC
Angola
NA
70%
69%
LDC
Nigeria
46.9%
70%
71%
MDC
Swaziland
NA
69%
-‐-‐-‐-‐ (U.K.)
Burundi
NA
68%
90%
Tajikistan
55.5%
60%
-‐-‐-‐-‐-‐ (USSR)
Bolivia
41.5%
60%
61%
MDC
Rwanda
NA
60%
51%
LDC
Comoros
NA
60%
-‐-‐ (France)
Guatemala
38.7%
56.2%
67%
MDC
Malawi
NA
55%
92%
LDC
Senegal
33.7%
54%
84%
LDC
Såo Tomé and Príncipe
NA
54%
-‐-‐-‐-‐ (Portugal)
Afghanistan
NA
53%
85%
LDC
Honduras
39.2%
50.7%
70%
MDC
LDC
(Agriculture Employment Data from the ILO, HPI Data from CIA World Factbook)
Why isn’t agriculture working as efficiently as it should in lowering international rural poverty rates?
CHALLENGES: -Uncertainty and volatility of markets. -Unfair trade regime. -Changing nature of demand and value chains. -High transaction costs.
CAUSES: -Lack of power of poor farmers. -Failure of national institutions and international donors. -Inability of the different actors in the value chain to work together. -Unequal access to services and infrastructure.
Before identifying global market trade of a product, it is essential to understand what goes into the creation of that product/good. In the past we have looked at supply chains as linear: ie
The past 50 years have spawned tremendous change in the way supply chains work:
Fair Trade attempts to eliminate complexity of market and unnecessary brokers in the middle so to ensure larger profit yields for producers.
-Set international Fairtrade standards -Organize support for producers around the world -Develop global Fairtrade strategy -Promote trade justice internationally
Certification body under ISO 65 regime.
FAIR TRADE STANDARDS SET BY FLO Generic Trade Standards Principles -Pay a price to producers that aims to cover the costs of sustainable production: The Fairtrade Minimum Price -Pay an additional sum that producers can invest in development: The Fairtrade Premium -Partially pay in advance, when producers ask for it. -Sign contracts that allow for long-term planning and sustainable production practices. Generic Producer Standards Principles for Small-Scale Producers -Members must be smallholders who don’t depend on hired workers all the time, but run their farm mainly by using their own and their family’s labour. -Democracy: Profits should be equally distributed amoung the producers. Principles for Hired Labour -Management of the Fairtrade Premium. -Freedom of association & collective bargianing. -Working conditions equitable, minimum wage, and safety measures.
Bananas
Total World (-China) Imports: 3,850,369,725 USD Fairtrade Sales: 423,996.16 USD
.09698% of the Market
Sugar
Total World (-China) Imports: 12,579,439 USD Fairtrade Sales: 122,001.63 USD
.000011% of the Market
Coffee
Total World (-China) Imports: 686,852,704 USD Fairtrade Sales: 100,430.70 USD
.00146% of the Market
Cocoa Powder
Total World (-China) Imports: 38,691,905 USD Fairtrade Sales: 17,556.76 USD
.0454% of the Market
Rice
Total World (-China) Imports: 404,604,832 USD Fairtrade Sales: 6876.78 USD
.0016996% of the Market
Critics Say: -Market share is much too small to have a major impact on general living standards in developing countries. -Producing more low-priced commodities for over-supplied markets postpones what is really needed for development: diversifying exports and adding value, rather than depending on commodities and crafts. Or finding new social solutions for upland communities whose economic viability remains in doubt. -Rich markets can do more for poor countries by allowing bigger quantities of normally priced products in their markets. Labelling organizations may cut out middle traders, but they may not return the full savings back to the farmers. -Fair trade is an expensive niche market to maintain, because it needs constant promotion and requires educated consumers. High marketing costs are one reason why all those fair trade premiums don’t make it back to the producers. -Retailers may take advantage of consumers’ social conscience. The Undercover Economist: “Charging an extra ten pence gave a misleading impression of how much it really cost to get hold of that fair trade coffee.” Doubling a producer’s family income should add less than one penny to the price of a cup in a UK coffee shop, he observes. The coffee shop later dropped the price differential.There are many different standards and criteria, and little discussion outside the organizations themselves. So consumers cannot decide whether the trade really is fair. Not all fairtraders are members of FLO, e.g., Rugmark and the Clean Clothes Campaign. The standards themselves can cover working conditions and environmental measures (or not) as well as stable pricing. ITC www.tadeforum.org/news/fullstory.php/aid/1031 2006 “Fair Trade” Peter Hulm
However… -Maslow’s hierarchy of needs. -Consumers and entrepreneurs mentality is beginning to change. -Largest consumers of FT goods are under 30. “The idea of social responsibility has been around since the beginning of civilization, but few gave notice as it carried little economic value. It did carry ethical value, but ethics meant squat when daily conversations covered pillaging and plundering. We have come a long way since then as a society. We are finally beginning to realize the potential economic value of social responsibility- at least, some of us have.” -Jerry Law, Entrepreneurship Program UC Berkley
In the Stock Market today, SRCs are performing BETTER than corporations on the S&P
The FTSE KLD 400 Social Index (KLD400) is a float-adjusted, market capitalization weighted, common stock index of US equities. Launched by KLD in May 1990, the KLD400 (formerly KLD’s Domini 400 Social Index) is the first benchmark index constructed using environmental, social and governance (ESG) factors. It is a widely recognized benchmark for measuring the impact of social and environmental screening on investment portfolios.
Entrepreneurship Programs at UC Berkley, Harvard, Brown, Cornell, and Princeton using a new formula to attempt to measure the value of social responsibility to investors/consumers:
X
(Total Disposable Income) (% Socially Responsible Population) (Social Responsibility Premium %) Value of CSR
OECD StatExtracts Net National Disposable Income U.S., U.K., E.U., Switzerland 2009
Total Disposable Income = 33418404.8 USD
% Socially Responsible Population Penn Schoen Berland Report “Corporate Social Responsibility Branding Survey” 2010: 55% of US Consumers “are more likely to choose a product that supports a certain cause when choosing between otherwise similar products”
Average: 59.2% of consumers willing to pay for CSR products.
Verdict “Corporate Social Responsibility in UK Retail” 2010: 63.4% of consumers “are willing to pay more for products that improve the [CSR] issues”
Then, I estimated the amount of times I actually chose the FT product in the supermarket and applied it to the study. 4/
5 Times for 59.2% of consumers = 47.36%
Social Responsibility Premium To find how much people are willing to spend on CSR goods I compared prices of normal goods to FT goods in supermarkets in the US and Switzerland.
In the U.S. FT goods are 30.8% more expensive, and in Switzerland they are 16.5% more expensive
Average % Difference = 23.67%
Value of CSR 33418404.8 X 47.36% X 23.67% = 3,746,240,517 USD
The potential market for FT goods expansion