Ethiopia Coffee and Trade
CASE NUMBER: 397
CASE MNEMONIC: COFFETH
CASE NAME: Ethiopia Coffee Trade
1. The Issue
Like many other nations in Africa and the Third World, Ethiopiarelies greatly on the trade of primary goods. This case looks atthe trade of coffee in Ethiopia. The trade of coffee is Ethiopia'slargest export, which generates 60% of its total export earnings.This case looks at the history of Ethiopian coffee, how it isproduced, and its effects on trade and the environment inEthiopian. The Ethiopian government must find ways to increase theproduct of the coffee and to make it a "safer" exportproduct, because not only does the country relives on the trade ofcoffee, its people's livelihood is at stake as well. Also, thecoffee trade is very important to the culture of Ethiopia. Kafa (anEthiopia name) may be where the word coffee came from. Coffee inEthiopia has strong traditions that stem back to the10th century. If the trade of coffee is hindered orstopped in Ethiopia, it will affect economy of Ethiopia greatly, itwill also, affect the way of life for about half its population.
With the independence of Eritrea on April 27, 1993, Ethiopia hascontinued to face difficult economic problems and is one of thepoorest and least developed countries in Africa. As other Africanand third world countries, Ethiopia's economy is mainly based onagriculture (primary goods), which accounts for about 45% of GDP,90% of exports, and 80% of total employment.1 Coffee isEthiopia's largest export and generates 60% of all its exportearnings. The coffee business employs about one out of every fourpeople in the country.
This case will focus on the trade and environmental issues for theEthiopian coffee trade, but, first, a brief history of the originsof Ethiopian coffee.
A brief History of Ethiopian Coffee
Many believed that Ethiopia is the birthplace of coffee (not SouthAmerica, which some believe). The indigenous coffee trees (whichsome experts say, are the only native coffee trees in the world)first grew in ancient "Abyssinia," which is now presentday Ethiopia. These trees blossomed in an area called"Kaffa" and the trees were called "Kafa," whichmay as well be the root word for coffee.2 In the tenthcentury, coffee was considered a food.
The Ethiopian nomadic mountain peoples of the Galla tribe, may havebeen the first to recognize coffee's sustaining effect (but not asa beverage). These people gathered the coffee beans from the treesthat grew in the region, ground them up and mixed them with animalfat, forming small balls that they carried as rations on trips.Other indigenous tribes of Ethiopia ate the beans as a porridge ordrank a wine created from the fermented crushed coffee beans. Bythe 13th century, coffee's restorative powers were wellknown in the Islamic world. Coffee was considered a potentmedicine, as well as a religious potion that helped keep peoplewake during prayers. Pilgrims of Islam spread the coffee throughoutthe Middle East and by the end of the 15th century,coffeehouses had replaced mosques as favored meeting places. Withthe spread of Ethiopian from Africa, to the Middle East, India,Europe, and the Americas, making it one of the most popular bendsof coffee in the world. Even great coffee business like MaxwellHouse and Folgers "lust" for this type of bend of coffee.
Modern day Ethiopia Coffee production
The production of coffee has not changed much since the10th century. Nearly all of Ethiopia's coffee beanproduction is still by hand, from the planting of new trees to thefinal pickings, which are then sent to the big warehouse in AddisAbab. 761 women work in these warehouses, earning about $20 amonth.3
In 1989, coffee accounted for 63% of the countriesexports.4 Coffee, contributes (domestic) to about 20% ofthe governments revenue.5 About 25% of the entirepopulation depends directly or indirectly on coffee for itslivelihood.
Some observers indicated that Ethiopia's annual production ofcoffee is between 140,000 and 180,000 tons annually.6About 44% of the coffee produced in Ethiopia is exported to othercountries (Italy, United Kingdom, Netherlands, Djibouti, Germany,Japan, Saudi Arabia, France, and the United States). The Ethiopiangovernment, eager to increase its currency reserves, suppresses thedomestic consumption of coffee by controlling the coffee saleswithin the country. Its also, restricts the transfer of coffee fromcoffee producing areas to other parts of the country. This practicehas made the price of coffee two or three times higher forEthiopians than the price of the exported coffee.
About 98% of the coffee in Ethiopia is produced by peasants onsmall farms that are less than a hectare, and the remain 2% isproduced by the state farms. In the 1980s the Ethiopian governmentcreated the Ministry of Coffee and Tea Development , help toincrease the production and to improve the cultivation andharvesting of coffee. This ten-year plan (like all other Africanplans) called for the increase in the size of the state farmsproducing coffee from 14,000 hectares to 50,000 hectares by 1994(this plan was very unrealistic). This goal was not met, because ofthe strains on the government's financial resources and theconsistently declining coffee prices in the world market.
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. SinceEthiopia is making money from the trade of coffee, should bedeveloping into a more advance nation, but this not the case.Ethiopia is the poorest country in Africa and it is among poorestin the world.
If there is a decline in the demand of primary goods, this mayhamper the Ethiopian government's ability to implement itspolitical, economic, and social programs. For example, in the late1987, a decline in world coffee prices did effect Ethiopia greatly,the Ethiopian government was not able to finance its wars againstvarious rebel groups in northern Ethiopia.
Since Ethiopia's economy relies heavily on the trade of coffee, thepeople of this country are effected extremely with the trade of theproduct. One out of every four Ethiopians, work on coffee beanfarms, that is about half the country's population. The impact ofthe coffee trade effects the Ethiopian people greatly, as with thetrade issue, there are many problems that can hurt the people ofEthiopia.
An average farmer of Ethiopian coffee is not rich, in fact theybarely get by. The money they earn from the coffee beans, buysclothes, food, schooling and pays government taxes. After, payingfor 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
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
8. Legal Standings: LAW
III. Geographic Filters
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
A. Coffee Exports: $129,177 (export in 1993)
B. Total Exports: $201,706
C. Employment: 21,605,317 (1993, before the secession ofEritrea)
D: Trade balance: 277.9 (1993, millions, exports ofservices)
E. GDP: 13,508.0 (1993)
17. Degree of Competitive Impact: LOW.
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 ofEthiopia. Many Ethiopians and historians believe that the wordcoffee came from the Ethiopian word "kafa". Coffee inEthiopia has strong traditions that stem back to the10th century, when coffee was discovered in Ethiopia.The farming of coffee has strong traditions with Ethiopianfamilies. Generations of people work on the farms. They believethat it is a great honor to farm coffee in their country. Half ofthe 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/
"Ethiopian Harrar Longberry." Los Gatos CoffeeRoasting Company The WEBworks, 1994. http:\\www.los-gatos.scruznet.com/los_gat...os_gatos_coffee/coffee_list/etharrar.html/
"Ethiopia." World Factbook Cental IntellgenceAgency, 1995. http://www.odci.gov/cia/publications/95fact/et.html/
"Ethiopi Page." African Studies (Univ. OfPenn)http://www.sas.upenn.edu/African_Studies/Country_Specific/Ethiopia.htm
1. "Ethiopia." Africa South of the Sahara.London: Europa, 1996 ed.
3. "Ethiopia Page." African Studies (Univ. OfPenn)http://www.sas.upenn.edu/African_Studies/Country_Specific/Ethiopia.htm
4 . Ethiopia." World Factbook Cental IntellgenceAgency, 1995. http://www.odci.gov/cia/publications/95fact/et.html/
|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 theSahara. London: Europa, 1996 ed.
Table 2. (Million Birr)
*Data collect from "Ethiopia." Africa South of theSahara. London: Europa, 1996 ed.