Ethical+consumption+&+Cappuccino+Trail+Outline PDF

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Lecture of ethically correctness in purchased items and disscussion the film [Title: The Cappuccino Trail]....

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Ethical Consumption and The Cappuccino Trail (film), Links 8a-8e “global economy in a cup” I. comparing raw material production in the United States and Peru re: government support how are raw materials produced with no protection A. capital/labor intensive production B. role of government II. international trade options other than those engaged by Rivioli (free trade or protection): strategies oriented to production for ethical consumption; fair trade ≠ free trade A. the problem: consumers pay a lot for coffee; coffee pickers earn very little B. conditions prompting corporate strategies explicitly connected with ethics 1. precipitous decline in prices paid to small farmers; small versus large farmers – 2. consumers continue to pay about the same, and coffee farmers earn less and less -- nature of value chain and value capture 3. causes of drop in prices to small farmers a. pre 1990 - ICAs (International Coffee Agreements): export quota system: production and sale of coffee regulated by quota system to ensure price stability; problems b. 1990, removal of ICAs => removal of limitations on supply + new producers c. de-regulation in 1980s, 1990s: imperfect competition (helps explain value capture in importing countries like US) i. encouragement of mergers and acquisition *oligopoly of manufacturers controlling over 60% of coffee sales (Nestle, Philip Morris, Sara Lee, Proctor & Gamble) *oligopoly of trading partners acquiring increasing shares (~40%) of business importing coffee to consuming countries (Neumann, Volcafe, Cargill, Goldman Sachs) ii. de-regulation of banking  blurring of line between traders and banks [conditions leading to 2008 crisis] * “scalping the market” (film – Merrill Lynch commodity analyst): increasing investment in coffee futures based on market movement: movement of funds from one commodity to another in response to price changes (not based on future supply and demand of coffee beans)  traders/investors protected from price volatility  traders/investors can capitalize on profit opportunities d. uneven access to information C. strategies oriented toward production for ethical consumption – types of fair trade: direct trade (film), common fair trade strategy, café standards (for coffee) 1. direct trade; Cappuccino Trail a. direct negotiation between roasters and farmers for fair price + removal of ‘coyotes’ * transparency at all stages of the value chain (i.e. who gets paid what at each stage of the process) * direct negotiations eliminate abuse * direct trade roasters pay premium above the fair trade price for high-quality coffee * certification possible but not required b. strategies of Café Direct (Cappuccino Trail) beyond direct negotiations * visual strategy: show the growing area on the package - Machu Pichu * quote from a farmer, with his name indicated 2. common fair trade strategies a. qualification and certification requirements i. safe working conditions; transparency; living wage ii. prohibition of forced and/or child labor or discriminatory practices (over)

2 iii. invest in community development (health care, education, improve coffee quality, obtain organic certification) iv. preserve natural ecosystem & promote sustainable farming methods (no agrichemicals) v. certifies only small farmers b. criticisms from free trade vantage point; rebuttals i. ignores free market principles  but free trade argument doesn’t recognize subsidies in advanced economies + doesn’t recognize imperfect competition and information ii. negatively affects demand for traditional coffee  only affects particular niche (fair trade coffee); if demand increases significantly, then traditional coffee will convert to free trade; targets demand for ethical consumption, not political influence iii. if farmers can’t compete, they should diversify  impossible! c. other criticisms i. corruption problems with Fairtrade Inspection by independent organizations – little credibility ii. certification fees are too costly for small farmers * increasing frequency of inspections iii. doesn’t reward farmers with higher price if they produce higher quality coffee 3. C.A.F.E. (Coffee and Farmer Equity) standards and Starbucks a. the standards: 200 published indicators used to evaluate suppliers in a 3-tiered point system * economic accountability, transparency (goal: to have transparency at scale of farm, not cooperative, as in Fair Trade) * social responsibility: CAFE suppliers must protect workers rights (minimum wage, safe working conditions, no child labor or forced labor, access to health and education, right to join a union) *environmental responsibility b. contract w/ independent auditing & certification firms, although plantations hire their own companies c. requires high-quality coffee beans (similar to direct trade) d. problems, criticisms * accounts for only 10% of fair trade coffee * Starbucks buys most of its coffee from farms that are too large to qualify for CAFÉ standards * by 2008, only 6% of Starbucks coffee is from CAFÉ suppliers  many cooperatives qualifying for fair trade certification cannot qualify for CAFÉ standards * inadequate auditing and certification system *** by 2015, under pressure from consumers (millennials) – Starbuck’s committed to 100% ethically sources coffee beans III. “which bag of beans to buy?” - supermarkets as “ethical minefield” IV. why didn’t Rivoli include discussion about fair trade and direct trade?...