Ethiopia Coffee and Trade

CASE NUMBER: 397

CASE MNEMONIC: COFFETH

CASE NAME: Ethiopia Coffee Trade



I. Identification

1. The Issue


Like many other nations in Africa and the Third World, Ethiopia relies greatly on the trade of primary goods. This case looks at the trade of coffee in Ethiopia. The trade of coffee is Ethiopia's largest export, which generates 60% of its total export earnings. This case looks at the history of Ethiopian coffee, how it is produced, and its effects on trade and the environment in Ethiopian. The Ethiopian government must find ways to increase the product of the coffee and to make it a "safer" export product, because not only does the country relives on the trade of coffee, its people's livelihood is at stake as well. Also, the coffee trade is very important to the culture of Ethiopia. Kafa (an Ethiopia name) may be where the word coffee came from. Coffee in Ethiopia has strong traditions that stem back to the 10th century. If the trade of coffee is hindered or stopped in Ethiopia, it will affect economy of Ethiopia greatly, it will also, affect the way of life for about half its population.

2. Description

With the independence of Eritrea on April 27, 1993, Ethiopia has continued to face difficult economic problems and is one of the poorest and least developed countries in Africa. As other African and third world countries, Ethiopia's economy is mainly based on agriculture (primary goods), which accounts for about 45% of GDP, 90% of exports, and 80% of total employment.1 Coffee is Ethiopia's largest export and generates 60% of all its export earnings. The coffee business employs about one out of every four people in the country.

This case will focus on the trade and environmental issues for the Ethiopian coffee trade, but, first, a brief history of the origins of Ethiopian coffee.

A brief History of Ethiopian Coffee

Many believed that Ethiopia is the birthplace of coffee (not South America, which some believe). The indigenous coffee trees (which some experts say, are the only native coffee trees in the world) first grew in ancient "Abyssinia," which is now present day Ethiopia. These trees blossomed in an area called "Kaffa" and the trees were called "Kafa," which may as well be the root word for coffee.2 In the tenth century, coffee was considered a food.

The Ethiopian nomadic mountain peoples of the Galla tribe, may have been the first to recognize coffee's sustaining effect (but not as a beverage). These people gathered the coffee beans from the trees that grew in the region, ground them up and mixed them with animal fat, forming small balls that they carried as rations on trips. Other indigenous tribes of Ethiopia ate the beans as a porridge or drank a wine created from the fermented crushed coffee beans. By the 13th century, coffee's restorative powers were well known in the Islamic world. Coffee was considered a potent medicine, as well as a religious potion that helped keep people wake during prayers. Pilgrims of Islam spread the coffee throughout the Middle East and by the end of the 15th century, coffeehouses had replaced mosques as favored meeting places. With the spread of Ethiopian from Africa, to the Middle East, India, Europe, and the Americas, making it one of the most popular bends of coffee in the world. Even great coffee business like Maxwell House and Folgers "lust" for this type of bend of coffee.

Modern day Ethiopia Coffee production

The production of coffee has not changed much since the 10th century. Nearly all of Ethiopia's coffee bean production is still by hand, from the planting of new trees to the final pickings, which are then sent to the big warehouse in Addis Abab. 761 women work in these warehouses, earning about $20 a month.3

In 1989, coffee accounted for 63% of the countries exports.4 Coffee, contributes (domestic) to about 20% of the governments revenue.5 About 25% of the entire population depends directly or indirectly on coffee for its livelihood.

Some observers indicated that Ethiopia's annual production of coffee is between 140,000 and 180,000 tons annually.6 About 44% of the coffee produced in Ethiopia is exported to other countries (Italy, United Kingdom, Netherlands, Djibouti, Germany, Japan, Saudi Arabia, France, and the United States). The Ethiopian government, eager to increase its currency reserves, suppresses the domestic consumption of coffee by controlling the coffee sales within the country. Its also, restricts the transfer of coffee from coffee producing areas to other parts of the country. This practice has made the price of coffee two or three times higher for Ethiopians than the price of the exported coffee.

About 98% of the coffee in Ethiopia is produced by peasants on small farms that are less than a hectare, and the remain 2% is produced by the state farms. In the 1980s the Ethiopian government created the Ministry of Coffee and Tea Development , help to increase the production and to improve the cultivation and harvesting of coffee. This ten-year plan (like all other African plans) called for the increase in the size of the state farms producing coffee from 14,000 hectares to 50,000 hectares by 1994 (this plan was very unrealistic). This goal was not met, because of the strains on the government's financial resources and the consistently declining coffee prices in the world market.

Trade issues

The coffee trade is a very big business for Ethiopia's economy, since it generates over 60% of its total export earnings. In 1993, Ethiopia's total export earns of coffee were 129,395. Since Ethiopia is making money from the trade of coffee, should be developing into a more advance nation, but this not the case. Ethiopia is the poorest country in Africa and it is among poorest in the world.

If there is a decline in the demand of primary goods, this may hamper the Ethiopian government's ability to implement its political, economic, and social programs. For example, in the late 1987, a decline in world coffee prices did effect Ethiopia greatly, the Ethiopian government was not able to finance its wars against various rebel groups in northern Ethiopia.

Environmental issues

Since Ethiopia's economy relies heavily on the trade of coffee, the people of this country are effected extremely with the trade of the product. One out of every four Ethiopians, work on coffee bean farms, that is about half the country's population. The impact of the coffee trade effects the Ethiopian people greatly, as with the trade issue, there are many problems that can hurt the people of Ethiopia.

An average farmer of Ethiopian coffee is not rich, in fact they barely get by. The money they earn from the coffee beans, buys clothes, food, schooling and pays government taxes. After, paying for that they have little or no money for the rest of the month. Annually, the average pay of a Ethiopian coffee farmer is about $900 dollars year, which is very low.

3. Related Cases

Related Cases:

(2): COCOA: Cocoa and Environment in Ivory Coast

(3): TEA

(4): SAFRFOOD

(5) IVORYWD

(6) COFFEE

Key Words

Area: Africa

Country: Ethiopia

Product: Coffee

4. Draft Author: Tracey L. Cousin, May 2, 1997

II. Legal Cluster

5. Discourse and Status: Disagreement and Allegation

6. Form and Scope: Ethiopia and Unilateral

7. Decision Breadth: 1

8. Legal Standings: LAW

III. Geographic Filters

9. Geography

A. Continental Domain: Africa.

B. Geographic Site: East Africa (EAFR).

C. Geographic Impact: Ethiopia

10. Sub-National Factors: No.

11. Type of Habitat:
DRY

IV. Trade Filters

12. Type of Measure: Regulatory Standard

13. Direct vs. Indirect impacts: Indirect [IND]

14. Relation of Measure to impact

A. Directly Related to Product: YES Coffee

B. Indirectly Related to Product: NO

C: Not Related to Product: NO

D: Related to Process: YES Habitat Loss

15. Trade Product Identification: Coffee

16. Economic Data

A. Coffee Exports: $129,177 (export in 1993)

B. Total Exports: $201,706

C. Employment: 21,605,317 (1993, before the secession of Eritrea)

D: Trade balance: 277.9 (1993, millions, exports of services)

E. GDP: 13,508.0 (1993)

17. Degree of Competitive Impact: LOW.

18. Industry Sector: FOOD

19. Exporter and Importer

A. Exporter: Ethiopia

B. Importers: United States, Germany, United Kingdom, Japan, Netherlands, Italy, France, and Saudi Arabia

V. Environment Clusters

20. Environmental Problem Type: General [Habit]

21. Species Information: Ethiopia

22. Impact and Effect

A. IMPACT: HIGH

B. EFFECT: PROD(?)

23. Urgency and Lifetime: LOW and 100s of years

24. Substitutes: LIKE products

VI. Other Factors.

25. Culture: YES.

The Ethiopian coffee trade is very important to the culture of Ethiopia. Many Ethiopians and historians believe that the word coffee came from the Ethiopian word "kafa". Coffee in Ethiopia has strong traditions that stem back to the 10th century, when coffee was discovered in Ethiopia. The farming of coffee has strong traditions with Ethiopian families. Generations of people work on the farms. They believe that it is a great honor to farm coffee in their country. Half of the coffee produced in Ethiopia is consumed by Ethiopians.

26. Human Rights: NO



27. Trans-Boundary Issues: NO.

28. Relevant Literature

Donnelly, John. "World wakes up to Ethiopia's coffee" (Ethiopia) Ethio.com 1996. http://www.ethio.com/Articles/113011996.htm/

"Ethiopia." Africa South of the Sahara. London: Europa, 1996 ed.

"Ethiopian Harrar Longberry." Los Gatos Coffee Roasting Company The WEBworks, 1994. http:\\www.los- gatos.scruznet.com/los_gat...os_gatos_coffee/coffee_list/etharrar .html/

"Ethiopia." World Factbook Cental Intellgence Agency, 1995. http://www.odci.gov/cia/publications/95fact/et.html/

"Ethiopi Page." African Studies (Univ. Of Penn) http://www.sas.upenn.edu/African_Studies/Country_Specific/Ethiopi a.htm

Endnotes

1. "Ethiopia." Africa South of the Sahara. London: Europa, 1996 ed.

2. Ibid.

3. "Ethiopia Page." African Studies (Univ. Of Penn) http://www.sas.upenn.edu/African_Studies/Country_Specific/Ethiopi a.htm

4 . Ethiopia." World Factbook Cental Intellgence Agency, 1995. http://www.odci.gov/cia/publications/95fact/et.html/

5. Ibid.

6. Ibid.

Appendixes

Table 1.

1991 1992 1993
Coffee, tea, cocoa and spices 117,169 107,845 129,395
Coffee and coffee substitutes 116,233 107,310 129,177

*Data collect from "Ethiopia." Africa South of the Sahara. London: Europa, 1996 ed.





Table 2. (Million Birr)

Exports 1992 1993 1994
Belgium 6.6 30.1 37.8
Djibouti 35.8 121.7 153.0
France 25.1 37.0 102.0
Germany 48.9 198.4 654.3
Italy 32.5 76.4 166.8
Japan 108.4 191.7 300.0
Netherlands 7.2 21.1 44.1
Saudi Arabia 101.1 99.5 110.2
United Kingdom 82.0 46.4 71.8
USA 19.6 92.1 133.2
Total(incl. others) 504.0 1,007.5 2,062.6

*Data collect from "Ethiopia." Africa South of the Sahara. London: Europa, 1996 ed.

May, 1997