HOW TO PROMOTE SOCIAL AND ECONOMIC UPGRADING IN THE COFFEE VALUE CHAIN - Duke viu workshop 2009

1,770 views

Published on

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,770
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
65
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

HOW TO PROMOTE SOCIAL AND ECONOMIC UPGRADING IN THE COFFEE VALUE CHAIN - Duke viu workshop 2009

  1. 1. Coffee GVC MemoAlmeida, Christian, De Marchi, ManninoDuke-VIU Workshop, 2009Memo: Coffee GVCFrom: Mansueto Almeida, Michelle Christian, Valentina De Marchi and Ilda Mannino INDEXHOW TO PROMOTE SOCIAL AND ECONOMIC UPGRADING IN THE COFFEE VALUE CHAIN........................................................................................................................................ 2 1. Introduction ............................................................................................................. 2 2. Coffee Industry: an overview ................................................................................... 2 3. The Global Value Chain (GVC) of Coffee ................................................................... 5 3.1. Economic Upgrading .......................................................................................... 8 3.2. Social Upgrading ................................................................................................ 9 3.3. Environmental Upgrading ................................................................................ 10 3.4. Labels .............................................................................................................. 12 4. Methodology ......................................................................................................... 12 5. Bibliography ........................................................................................................... 14 1
  2. 2. Coffee GVC MemoAlmeida, Christian, De Marchi, Mannino HOW TO PROMOTE SOCIAL AND ECONOMIC UPGRADING IN THE COFFEE VALUE CHAIN1. INTRODUCTIONFitter and Kaplinsky aptly posit in their discussion regarding avenues for developing countries toadvance their economies in positive forms that “the key challenge thus confronting policy design andimplementation is not whether to participate in global processes, but how to do so in ways that providefor sustainable income growth” (2002: 70). Economic and income growth notwithstanding, social andenvironmental growth, are also hoped for consequences to participation in the global economy. AsFitter and Kaplinsky note, however, the way in which countries are incorporated into global processesmitigates their overall growth potential. Moreover, economic growth may not lead to social andenvironmental advancement.Following this notion, we briefly examine the global value chain of coffee to unpack the layereddynamics that represent the industry and how those dynamics complicate or make accessibledeveloping countries’ capability to economically, socially, and environmentally upgrade. The coffeeindustry provides an example of how an agricultural commodity can be seen as a means for developingcountries to participate in global value chains with varied results depending on their position in thevalue chain and the global, national, and local institutional environments which global and local coffeevalue chains are embedded. With our analysis we hope to create the groundwork for a research projectthat explores the complicated nexus between forms of upgrading and national contexts.Therefore, below we put forward a brief research memo where we highlight the background and globalcontext of the coffee industry, a rough sketch of its global value chain, and issues relating toupgrading. We end with a research design project analyzing the industry from the country cases ofBrazil, Ethiopia, Costa Rica, and Vietnam. These four cases allow us to address the themeswe highlight in the memo from varying national foundations.2. COFFEE INDUSTRY: AN OVERVIEWCoffee is a genuine world product. It is an important product cultivated in many African countries(such as Ethiopia and Uganda), Latin American countries (Brazil, Colombia and Costa Rica) andSoutheast Asian countries (Vietnam and Indonesia). In addition, it is also an important export“commodity” for many countries, including developed ones such as Germany. Coffee is such animportant product for developing countries’ exports that in many years it is second in value only to oilas a source of foreign exchange to these countries. Its cultivation, processing, trading, transportationand marketing provide employment for millions of people worldwide.Coffee is bought and sold by roasters, investors and price speculators as a tradable commodity and hasits price set in the New York Mercantile Exchange (NYMEX) and in the London InternationalFinancial Futures and Options Exchange (LIFFE); but this was not always the case. Up to the 1990s,the main producers of coffee participated in the International Coffee Organization (ICO), which wasestablished in 1962/63, and used to put in place a quota system through the International Coffee 2
  3. 3. Coffee GVC MemoAlmeida, Christian, De Marchi, ManninoAgreement (ICA). This system set the amount of coffee that producers were allowed to produce andexport. Although the organization is still active today, since 1989 the ICO has not been able to imposeprice controls and quotas for producers and the market today is deregulated, following a dynamicdriven by the procurement policy of the roasters in what Gereffi (1994) calls a buyer-driven commoditychain1.The world demand and supply of coffee has followed a cyclical pattern driven by prices on the worldmarket. It seems that the industry of coffee suffers from what Talbot (2004) calls a “structuraloversupply” trend that will not be corrected by supply and demand. Whenever the price of green coffee(i.e., traded coffee form before roasting) goes up, the production increases in the next period bringingprices back again to its previous levels. The average monthly coffee price in international trade waswell above 100 US cent/lb during the 70s/80s under the ICA regime, but then declined during the late90s reaching less than 50 US cents/lb in 2001 (see Figure 1). Figure 1 – World Price of Coffee (1980-2009) – US Cents per lb. Source: The International coffee organizationFalling prices are explained by the increased production under a free market environment. Since 1990,the world production and consumption of coffee has increased steadily and in the last years, (2001-2008), world coffee exports went up from 108 million to 134.2 million of 60-KG bags – a 24% increasein seven years. Today, more than 50 developing countries, 25 of them in Africa, depend on coffee as anexport, with 17 countries earning 25 per cent of their foreign exchange from coffee.The main coffee exporters, according to the 2008 data from ICO, are Brazil (34.28% of the worldmarket); Vietnam (14.53%); Colombia (9.17%) and Germany (9%). Germany is a major exporter by1 Talbot (1997) states that the collapse of the ICA regime, and increased consolidation in the coffee industry, hasaffected the distribution of total income generated along the coffee chain. In the 1970s, an average of 20 per centof total income (the total amount of money spent by consumers to purchase coffee products for finalconsumption) was retained by producers, while between 1989/90 and 1994/95 the producers’ share decreased to13%. In the same period, the share of the total income retained in consuming countries went up from 53% to78%. 3
  4. 4. Coffee GVC MemoAlmeida, Christian, De Marchi, Manninore-exporting part of its imports. In 2007, Germany imported 19.5 million 60-kg bags and exported 10.7million bags; while Brazil exported 36 million bags in 2007 and 45.9 million in 2008. In Africa, thetwo most important produces are Ethiopia (3% of the world export market) and Uganda (2.5%-3%).How can developed countries such as Germany, Belgium and even the USA appear side by side withdeveloping countries as major exporters of a commodity such as coffee? The reason for this apparentparadox lies in the global value chain (GVC) – see Humphrey and Schmitz (2002) and Gereffi (1994).Usually, developing countries focused on producing and harvesting, the least profitable nodes in thevalue chain, while developed countries focus on roasting, branding and selling the packaged coffee tospecialty stores in domestic markets and abroad. About 8% of the price of coffee in a U.S. supermarketgoes to farm labor, and another 5% goes to the grower while 67% goes to the company that does theroasting, grinding, packaging and shipment, and 11% goes to the retail store. Thus, most of the value iscaptured in the roasting segment.The roasted coffee business is controlled by multinationals such as Kraft (owner of the famousMaxwell House brand), Nestlé, Proctor & Gamble (owner of Folgers and other brands) and Sara Lee.These four companies are responsible for over 40% of worldwide sales. In addition, contrary to thethird world countries that grow coffee beans, these companies are not affected by the falling prices. Infact, these multinational companies earn more not less when the price of the coffee beans goes downbecause much of the price charged to consumers is beyond the actual costs of growing the coffee. Thisis typical in a market where MNCs are oligopolistic on the seller side and oligopsonistic on the buyerside. In addition, MNCs use their financial power whenever necessary to hedge against pricefluctuations in the future markets.How come developing countries do not start their own roasters to move up in the value chain? In fact,in July 2009, the Good African Coffee factory at Bugoloobi in Uganda started to operate the first coffeeroasting and packaging factory in the whole of Africa to export coffee to supermarkets in the UK2. Thiswas part of a US$ 1 million investment in a public-private partnership with the government. This,however, is not an easy path to pursue since this company will need to break into a highly competitivemarket controlled by a few MNCs and branded name roasters and sellers as illy from Italy andStarbucks from USA.The challenge for countries that grow coffee beans to develop and export their own brands is similar tothe challenge apparel and footwear producers in developing countries find to export their own brands.Usually, firms in these labor-intensive sectors from developing countries are successful in participatingin the global markets as suppliers for leading global firms, but they have a hard time when they try tomarket their own brands.Another problem is that there are time constraints involved in trading roasted coffee versus green beanscoffee. The former is a perishable product that last only for five days while the latter can be stored fromtwo to ten years. Therefore, producers need to control sophisticated packaging techniques in addition ofthe roasting process to move up the chain and become a roaster. For some low-income countries suchas Ethiopia, this means learning a manufacturing process far more complicated than planting andharvesting coffee beans.2 See http://www.newvision.co.ug/D/8/12/688235 4
  5. 5. Coffee GVC MemoAlmeida, Christian, De Marchi, ManninoThere is no easy solution on how to increase coffee growers’ share in the GVC. Some authors believethat because coffee is very easy to produce and the production will always follow price increases, theonly way of improving prices for low-income growers in developing countries is controllingproduction and world exports again through a new International Coffee Agreement for the XXI century(see Talbot 2004). However, before jumping again to control the world production of coffee it isimportant to see different alternatives that might help small producers in developing countries tobenefit more in participating in the coffee business; i.e. how producers in developing countries are ableor not to upgrade and improve labor and environmental standards. This is the key question we want toanswer in this research.BOX 1 – Two Examples of the Importance of Coffee for African Countries A) Uganda: Coffee accounts for 20%-30% of Uganda’s exports earnings and the country has anexplicit policy to attract foreign investors to increase coffee production and exports. Though large-scalecoffee producers are gradually emerging, the coffee sub-sector is almost entirely dependent on about500,000 smallholder farmers, 90 percent of the farms with a size ranging from less than 0.5 to 2.5hectares. The coffee industry employs over 3.5 million families through coffee related activities. B) Ethiopia: The trade of coffee is Ethiopias largest export, which generates 60% of its total exportearnings and 20% of the government revenue. Nearly all of Ethiopias coffee bean production is still byhand, from the planting of new trees to the final pickings, which are then sent to the big warehouse.The coffee business employs about one out of every four people in the country (around 15 millionpeople) and peasants on small farms of less than a hectare produce 98% of the coffee. State farmsproduce the remaining 2%. All the coffee processors and warehouse enterprises are modern, and state-owned. In spite of producing one of the best green coffee beans in the world, Ethiopia is the poorestcountry in Africa and one of the poorest in the world.3. THE GLOBAL VALUE CHAIN (GVC) OF COFFEEThe actual input-output stages of the coffee global value chain have changed relatively little over thelast one hundred years. In Figure 2, we highlight the five main stages of the chain. First are all theinputs which go into the growing and harvesting stage. Second, immediately following harvesting, thered cherries are processed in either a “dry method” or “wet method” to become parchment coffee seedswhere then the parchment coat is removed from the seeds yielding green coffee beans. At the greencoffee bean stage the beans are ready for export if they are heading for an international market. Thegreen coffee travels through a series of intermediaries who facilitate trade in producing and consumingcountries before reaching the roasting stage. At the roasting stage, green coffee goes through anotherround of processing depending on the final coffee product, i.e, instant coffee, blends, specialty drinks.From there the final coffee product is distributed to consumers at different retail ends. 5
  6. 6. Coffee GVC MemoAlmeida, Christian, De Marchi, Mannino Figure 2 – GVC Input Output stagesWhat has changed over the last twenty years, however, according to Ponte (2002) is the deregulatedglobal trading context that traditionally stabilized coffee prices; new consumption patters spearheadedby specialty blends, brands, and trends; and corporate strategies that have solidified new powerrelationships along the chain. These changes situate how economic, social and environmentalupgrading was possible or negligible for our four country cases. As mentioned, a wider global trend isthe power shift to consuming countries after the collapse of the international coffee agreement in 1989with consuming countries gaining up to eighty percent of total income (Ponte 2002).Actors in the downstream activities of the chain - mediators, roasters, and retailers - embarked on aseries of corporate strategies to ensure supply and demand by shaping availability and product options.Ponte (2002) argues that roasters are the current drivers of the chain, see Figure 3. Roasters are mostprominently the branded manufacturers, e.g., Nestle, Sara Lee, Kraft Foods, who are large transnationalcorporations with several brands within their portfolio, e.g. Maxwell House in Kraft. The top fiveroasters have over sixty percent of the market. The concentration of roasters has happened with theconcentration of international traders, as well. Roasters have placed larger demands on internationaltraders to ensure quality and supply of green coffee. International traders are beginning to rely more onfirst and second line suppliers. In order to guarantee supply international traders are also becomingmore integrated in some upstream activities. As experts in logistics and awash with capital they playimportant intermediary roles connecting producing and consuming countries. 6
  7. 7. Coffee GVC MemoAlmeida, Christian, De Marchi, ManninoRoasters and retailers have further strengthened their position by cultivating new consumption demand.Coffee has moved away from just being the morning “fix” people need to start their day. It has becomean "atmosphere," a "latte revolution." Specialty drinks and gourmet blends began to be mass marketedin the last twenty years and neighborhood coffee shops began expanding in the United States and otherdeveloped nations. Starbucks, as a branded manufacturer and retail outlet, has personified this growth.Starbucks Chairman Howard Schultz has called going to Starbucks an "experience." This form ofbranding has allowed a specialty coffee drink to market for $4 dollars because the "product they areoffering is not coffee, it is the ambiance, the image associated with costly coffee consumption" (Fitter& Kaplinsky 2001). In addition to specialty differentiated drinks, some manufacturers and retailershave also adjusted to the growing corporate social responsibility trend where consumers have begun todemand coffee beans, blends, and products that fall under the umbrella of "fair trade." Fair trade coffeecan include guarantees to consumers that the coffee was grown, packaged and transported withenvironmentally friendly practices or that farmers were guaranteed a higher price per bag. Figure 3 – Coffee GVC actors 7
  8. 8. Coffee GVC MemoAlmeida, Christian, De Marchi, Mannino3.1. Economic UpgradingFrom a research perspective, the structure of the chain with power relationships concentrated in theinternational trader, roaster, and retail end, elucidates several questions regarding upgrading. Possibleeconomic upgrading paths that developing countries’ firms may undertake are:  Product upgrading: specializing in specialty, high quality coffee and blending or specializing in “sustainable” coffee  Process upgrading: new processing techniques (e.g., wet vs. dry processing)  Functional upgrading: from harvesting to branding and roastingFor economic upgrading, there seems to be two key themes: 1) how can producing countries becomemanufacturers or brands? Or, 2) how can growers receive better prices and terms of trade from greencoffee? The former seems the better option since from the analysis of the global value chain it is clearthat the higher concentration of value is in the latter steps of the value chain. However, it is also themost challenging, involving the need for new skills, funds and knowledge of the final market in orderfor farmers to add this function. The following questions fall under both themes.  Under which circumstances are firms able to functionally upgrade? What set of skills are needed?  What are the barriers of entry for producing countries to create their own brands?  What is the role of cultural capital in facilitating brand identity and creation?  What are the barriers of entry for producing countries to become modular suppliers for branded manufacturers (i.e., make instant coffee for brands under their labels)?  Do growers have a better position in the value chain if they work in small hectares, cooperatives or as large plantation estates?  Do branded manufacturers ever buy directly from growers, bypassing mediators? If so, when and why?  Are there value added differences between the wet and dry forms of processing immediately following harvest?  Does the growth of "fair trade" equate to better income for growers?Talbot (2002) argues that forward integration, or economic upgrading, is most possible when statespursue aggressive industrial policy; there is a strong "capitalist class," and a large domestic market orlocal demand. The latter issue may point to a more viable outcome for original brand manufacturerupgrading for producing countries since they know local preferences, have local industrial knowledgeand MNC competition is less severe. In the case of Brazil, as Talbot (2002) acknowledges, localmanufacturers were able to become stronger modular suppliers of MNC instant coffee brands thanbreaking into developed countries’ markets, but Côte dIvoire found that pursuing a foreign directinvestment policy for coffee created limited backward linkages. Regardless of producing countriesability to become manufacturers they are limited due to the delicate storability and transportabilityissues ground coffee products have and because MNC manufacturers are more aggressively setting-uptheir own manufacturing subsidiaries in producing countries. Nevertheless, there are some "success"stories such as the Cafe Brit brand in Costa Rica. 8
  9. 9. Coffee GVC MemoAlmeida, Christian, De Marchi, ManninoIt is also important to add consideration on the consumers’ side with regards to economic upgrading.This has proven to be true especially for fair trade coffee, which will be discussed later (Raynolds2002). Change in coffee consumption activity like how recent innovations are fostering new ways andnew places where to consume (e.g., Starbucks) is impacting economic upgrading. Furthermore, theconsumer is becoming more and more sophisticated, appreciating different blends and global coffeeroasting mixes. However, country differentiation both in tastes and culture seems importantdifferentiation factors. A deeper analysis of secondary sources is needed in order to better understandthe size of such trends.3.2. Social UpgradingTo understand social concerns and upgrading possibilities it is useful to analyze the different steps ofthe entire global value chain. The higher number of social challenges is in the very first steps, regardingthe growing and processing of coffee. The differences in the countries seem interesting to understand,as well, in order to identify benchmarks and determinant variables. From a social upgrading standpointand a decent work agenda, however, it is still unclear how the structure of the chain impact workersalong the chain. For example,  Has the trend toward more vertical integration in the international traders’ node benefited or hampered growers ability to receive more income?  What are the benefits/drawbacks of grower cooperatives in negotiation with downstream actors?  Do the seasonal workers who pick the red coffee cherries receive fair wages, have enabling rights? Are there problematic gender, racial, ethnic divisions of labor?  What are the rights of the workers in different chain segments? Has the increased demand for "fair trade" coffee corresponded to better wages and conditions for growers and pickers? Currently, there is little knowledge to these questions so fieldwork is needed in order to understand these dynamics, and in particular to identify both:  Output standards on quantity, in terms of employment creation in poor countries, and quality of wages, hours, benefits, contracts, skills development and content of the job; and  Enabling rights: to investigate the freedom of association, discrimination among different workers and the presence of forced labor, traditionally employed in these production processes. 9
  10. 10. Coffee GVC MemoAlmeida, Christian, De Marchi, Mannino3.3. Environmental UpgradingIn order to identify the main environmental issues linked to coffee it is useful to consider its life cycle,see Figure 4. Figure 4 – LCA assessment for the coffee Value ChainAs well represented by Salomone (2003), the coffee life cycle goes through different stages, amongwhich are cultivation, first processing, roasting, packaging and distribution, and consumption. Inparticular, cultivation and the first processing stages (e.g. when the coffee beans are removed from thefruit and dried before they can be roasted) are carried out in the exporter countries which aredeveloping countries. The remaining phases are carried out in the importer (and re-exporter) countries.This means that also the environmental impacts linked to coffee as well as the possibilities ofupgrading vary a lot for exporter and importer countries. 10
  11. 11. Coffee GVC MemoAlmeida, Christian, De Marchi, ManninoThe life cycle analysis carried out by Salomone (2003) indicates that the cultivation and theconsumption stages produce the greatest impacts. In particular, when speaking about the cultivation thefirst aspect to consider is represented by the differences between the shadow versus full sun cultivation.The latter has a higher productivity, but passes trough deforestation and consequent depletion of soiland loss of biodiversity. The differences in productivity should be evaluated when consideringenvironmental upgrading without forgetting the economic and social aspects.Other important impacts are linked to the use of fertilizers and pesticides that can contribute to thepollution of rivers and ground waters. Possible environmental upgrading could derive from thesubstitution of chemical products with natural ones, but their different effectiveness have to beconsidered in order to avoid economic downgrading. Moreover, the consumption of water for irrigationrepresents another of the main environmental concerns linked to the coffee cultivation.Water consumption can also be one of the main impacts during the first processing of the coffee if thisis carried out through the wet method. This method requires a great quantity of water for cleaning thebeans, but seems necessary to arrive to a better quality product. Moreover, in some areas it is notpossible to perform a dry processing due to the air humidity. These are aspects that need to beconsidered when looking for the possibilities of environmental upgrading and avoiding the detriment ofeconomic gains. The environmental upgrading of the processing can probably produce more win-winsolutions if it passes through technological and procedural innovation of the techniques used.Technological innovation of the machines used for the processing can also bring about to a reduction ofthe energy consumption as well as of the air and water pollution.Environmental upgrading can derive also from organizational innovation. For instance the benefitsfrom the cooperatives of small farmers have to be evaluated and also what are the methodologies topromote it.Concerning the consumption of coffee, issues such as water use, waste production (e.g. throw awaycups), energy consumption and air pollution have to be considered, as well, focusing on themeasurement of how much water and energy are used, what technologies are available to reduce theuse of water and energy in the coffee machine and what possibilities there are to promote the reductionof waste. It has to be taken into account that upgrading opportunities and modalities can vary fromcountry to country due to the differences in the modalities of preparation and consumption (e.g., Italiancoffee vs. American coffee).Some broader research questions regarding environmental upgrading are:  Do new environmental standards and labeling make it harder for growers to become part of the value chain?  Have national industrial policies begun to push for “greener” forms of coffee cultivation and processing?  Is it possible for firms to economically, socially, and environmentally upgrade at the same time? 11
  12. 12. Coffee GVC MemoAlmeida, Christian, De Marchi, Mannino3.4. LabelsSocial and/or environmental certifications for coffee are labels that ensure that is has been grown andprocessed according to standards that ensure no violations of workers’ rights and/or the biodiversitypreservation and the lowering of the impact on the environment. There are many types of such labelson coffee, such as Bird Friendly® Coffee, the 4c Code of conduct for the coffee community, FairTrade, UTZ Certified, Rainforest Alliance, and Shade/Bird Friendly initiatives. Some are specific tocoffee, others may apply to a wider range of products; some are private, others are managed by NGOs;some are local while others have a global coverage; some guarantee the respect of social standards,others of environmental (even though the majority consider the two issues together). Labeled productsare usually a bit overpriced and focus on a better quality, assured by the respect of the environmental(and social) standards.Questions arise if the certifications really reach their goals? Are these products able to compete on themarkets without social, environmental or economic downgrading in the long term? The issue ischallenging (Taylor 2005). Existing studies (Raynolds, Murray, and Heller 2007) underline furthermorethe need of public regulation to play along with private regulation in order to enhance social andenvironmental sustainability, and not only uphold current standards.Furthermore, are some regions or countries collectively upgrading in order to brand themselves and arethey entering in value chains thanks to their environmental and social friendly productions? Why areother countries not moving in the same direction?Certifications are also costly: are all the actors able to obtain these certifications that can ensure them toupgrade? Who capture the gains generated by the premium prices consumers are willing to pay forthese products? (Fitter and Kaplinksy 2001) Who are the excluded actors?Fieldwork is needed to understand the impact on governance structure, upgrading possibilities and localdevelopment linked with the participation to fair trade networks (Rice 2001). These movementsrepresent in fact a “type of economic and social restructuring from below” (Rice 2001), enabling localdevelopment and a new relational structure within the chains.For social and environmental upgrading we may see different possibilities depending on if the valuechain is global or local. For example, labor and environmental standards may be pushed from roastersand retailers in global value chains, but not in local. Furthermore, environmentally upgrading may leadto social downgrading if fewer growers are able to compete in this new niche market.4. METHODOLOGYIn this study we are interested in understanding under what circumstances producers in developingcountries can upgrade and reap higher benefits in the production and trade of coffee. Therefore, thisresearch is a small-N one and we will use a mix of methodologies traditionally employed to makewithin-case analysis3: pattern matching, process tracing and causal narrative.We will select comparable cases in four different developing countries (Brazil, Costa Rica, Ethiopiaand Vietnam). These four countries are important growers of coffee beans and in all of them coffee3 See Mahoney (2000), Mahoney and Rueschemeyer (2003) and George and Bennett (2005). 12
  13. 13. Coffee GVC MemoAlmeida, Christian, De Marchi, Manninogrowers face barriers to upgrade, especially in Ethiopia and Vietnam. On this stage, we will select andcompare successful cases of upgrading (economic and social) and through these comparisons set thehypotheses to investigate more deeply each case. This is the step where we will identify the majorindependent variables that might explain producers’ upgrading strategies.In the next stage, we will try to link the identified variables in the first stage with hypotheses linkingthese variables with the observed outcomes. This step will help us to eliminate what it is called in theliterature “spurious correlation” when two variables appear to be correlated but they are in fact theproduct of an antecedent variable. We can eliminate this problem looking carefully on the casual chainbetween the independent variables and the upgrading process that we want to understand and explain.For instance, we might find a strong presence of governmental officials in those places that coffee iscultivated and some kind of upgrading occurred. But the presence of governmental officials might belinked to tax collection or government auction and not necessarily to the processes that led toupgrading. Therefore, in accessing the causal relationship between independent variables and theupgrading process we would eliminate the presence of local government officials as an importantfactor, although it might be presented in all the selected cases.At last, we will go deep into each case to understand the causal mechanism behind successful cases ofupgrading, trying to disaggregate the actual sequence of events that led to different types of upgrading(causal narrative) in each case. Although small-N analysis have some methodological problems such asthe problem of identifying the necessary and sufficient conditions (see Lieberson 1992) and theproblem of spurious correlation, this methodology allows the research to deal with the problem knownas equifinality, when different paths leads to the same outcome which in our case is economic and/orsocial upgrading. Therefore, this method seems to be the most appropriate one to this kind of researchsince we are more interested in understanding the different causal mechanisms that leads to economicand social upgrading than in establishing a statistical relationship. Also, we are more interested inassessing how and whether a variable explains the observed upgrading than in measuring how much itmattered.One last point is important here. We could easily design a research methodology based on large-Ncases and identify the most important variables to explain economic and social upgrading. But thisalternative methodology for this specific research leads to three problems. First, since we areconducting these studies in developing countries, there is no reliable statistics available for the manycases we want to investigate of small and medium coffee growers in the countryside. Second, astatistical study we will not tell us how the independent variables translated into specifics outcomes.We are not interested in the process of upgrading per se but rather on how the different processes thatleads to upgrading can be transformed in conditional generalizations to guide public policies that leadsto upgrading. And last, the small-N analysis and the use of process tracing makes possible to work withdeviant cases and do “contingent generalizations,” when the theory identifies the conditions underwhich alternative outcomes occur (see George and Bennett 2005 ch. 12). In fact, contrary to thestatistical approach that does not look carefully at deviant cases, these cases in small-N analysis areimportant and even leads to the formulation of new hypotheses linked to economic and socialupgrading. Therefore, small-N research and within-case analysis seems to be the most appropriatemethodology for this research.In order to do this research, we will make use of the large literature on global value chains to develophypotheses, conduct interviews with business associations, small and medium coffee growers in the 13
  14. 14. Coffee GVC MemoAlmeida, Christian, De Marchi, Manninoselected countries, international traders and government representatives in each one of the fourcountries. In addition, we also intend to interview global buyers (branded manufactures) in somedeveloped countries and large retailers as well to see how their procurement policies and marketstrategies affect coffee growers in developing countries.5. BIBLIOGRAPHYFitter, R. and R. Kaplinksy. 2001. Who Gains from Product Rents as the Coffee Market Becomes More Differentiated? A Value-Chain Analysis. IDS Bulletin 32, no. 3: 69-82.George, A. L. and A. Bennett 2005. Case Studies and Theory Development in the Social Sciences. Cambridge, Mass.: MIT Press.Gereffi, G. 1994. “The Organization of Buyer-Driven Global Commodity Chains: How U.S. Retailers Shape Overseas Production Networks.” In Commodity Chains and Global Capitalism, edited by G. Gereffi and M. Korzeniewicz. Westport: Greenwood Press.Humphrey, J. and H. Schmitz 2002. "How Does Insertion in Global Value Chains Affect Upgrading in Industrial Clusters?" Regional Studies. 36(9): 1017-1027.Lieberson, S. 1992. “Small Ns and Big Conclusions: an Examination of the Reasoning in Comparative Studies Based on a Small Number of Cases.” Pp. 105-118 in What Is A Case: Exploring the Foundations of Social Inquiry, edited by C. C. Ragin and H. S. Becker. Cambridge: Cambridge University Press.Mahoney, J. 2000. "Strategies of Casual Inference in Small-N Analysis." Sociological Methods & Research 28(4): 387-424.Mahoney, J. and D. Rueschemeyer 2003. Comparative Historical Analysis in the Social Sciences. Cambridge, U.K. ; New York: Cambridge University Press.O’Brien, C. 2002 Report on Fair Trade trends in the US, Canada. Washington, DC: Fair Trade Federation. Available from http://www.fairtrade.com.Ponte, Stefano. 2002. “The Latte revolution? Regulation, Markets, and Cosumption in the Global Coffee Chain.” World Development. 30(7):1099-1122.Raynolds, Laura, Douglas Murray, and Andrew Heller. 2007. Regulating Sustainability in the Coffee Sector: A Comparative Analysis of Third-Party Environmental and Social Certification Initiatives. Agriculture and Human Values. 24, no. 2 (June 1): 147-163.Raynolds, Laura T. 2002. “Consumer/Producer Links in Fair Trade Coffee Networks.” Sociologia Ruralis. 42( 4): 404-424.Rice, Robert A. 2001. “Noble Goals and Challenging Terrain: Organic and Fair Trade Coffee Movements in the Global Marketplace.” Journal of Agricultural and Environmental Ethics 14(1) (March 1): 39-66.Talbot, J. M. 1997. "Where Does Your Coffee Dollar Go? The Division of Income and Surplus along the Coffee Commodity Chain." Studies in Comparative International Development. 32(1): 56-91.-----------. 2002. "Tropical Commodity Chains, Forward Integration Strategies and International Inequality: Coffee, Cocoa and Tea.” Review of International Political Economy. 9(4):701-734. 14
  15. 15. Coffee GVC MemoAlmeida, Christian, De Marchi, Mannino-----------. 2004. Grounds for Agreement: The Political Economy of the Coffee Commodity Chain. Rowman & Littlefield Publishers, Inc.Taylor, P. L. 2005. “In the Market but Not of it: Fair Trade Coffee and Forest Stewardship Council Certification as Market-based Social Change.” World Development. 33(1): 129–147. 15

×