Lotusnotes The Vanuatu Cocoa Growers’ Associa- tion: Inclusive Trade in Rural Smallholder Agriculture Chris Geurtsen Trade and Investment Working Paper Series NO. 03/13| NOVEMBER 2013 ESCAP is the regional development arm of the United Nations and serves as the main economic and social development centre for the United Nations in Asia and the Pacific. Its mandate is to foster cooperation between its 53 members and 9 associate members. ESCAP provides the strategic link between global and country-level pro- grammes and issues. It supports Governments of the region in consolidating regional positions and advocates regional approaches to meeting the region’s unique and so- cio-economic challenges in a globalizing world. The ESCAP office is located in Bangkok, Thailand. Please visit our website at www.unescap.org for further infor- mation. Disclaimer: TID Working Papers should not be reported as representing the viewsof the United Nations. 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Mention of firm names and commercial products does not imply the endorsement of the United Nations. Trade and Investment WORKING PAPER SERIES NO. 03/13| NOVEMBER 2013 Vanuatu Cocoa Growers’ Association: Inclusive growth in rural smallholders agriculture * Chris Geurtsen Please cite this paper as: Geurtsen, Chris (2013). The Vanuatu Cocoa Growers’ As- sociation: Inclusive Trade in Rural Smallholder Agriculture, Background paper pre- pared for Asia-Pacific Trade and Investment Report 2013, ESCAP Trade and Invest- ment Division, TID Working Paper No. 03/13, November 2013. Bangkok. Available at www.unescap.org/tid/publication/ * Field Programme Officer, United States Agency for International Development,Afganistan, Email: [email protected] Abstract: The Cocoa Grower’s Association (CGA) in the Republic of Vanuatu is a funda- mental example of how the organization of local cooperatives can make a significant impact and create an environment for inclusive trade. This paper will review a case study of imple- menting a governing association that coordinates cocoa cooperatives in Vanuatu, and which is focused on organizing the production and trade in the region, as a method to highlight key lessons learned and potential for scalability in furthering inclusive trade goals. Though the CGA has many areas for improvement, which will be outlined in this case study alongside recommendations for additional progress, the concept can be used as a model for the ex- pansion of inclusive trade worldwide using conglomerates of cooperatives in developing countries with similar environmental factors. JEL Classification: L1, J5, N5 Key words: Local cooperatives, scalability, inclusive trade, cocoa, smallholder agriculture Contents Key Findings .................................................................................................................... 6 The CGA as an Inclusive Trade Model ............................................................................ 6 Background ..................................................................................................................... 9 Enter the CGA ............................................................................................................... 10 Challenges Faced By Farmers ...................................................................................... 11 How Inclusive Has the CGA Been? ............................................................................... 14 Lessons Learned ........................................................................................................... 15 Using the CGA as a Model ............................................................................................ 15 Conclusion ..................................................................................................................... 16 List of Tables Table 1: Inclusive Trade Principles 5 Key Findings Using the CGA as a model for furthering inclusive trade by implementing large associations of cooperatives should be done with an understanding of the key strengths and weaknesses of the program in mind. The creation of the CGA had several key strengths when measured against the objective of creating inclusive trade. Concentrating on smallholder farmers goes a long way towards en- suring inclusivity simply by “cutting out the middle man” and giving farmers access to a larger portion of the ultimate value of their produce. In addition, by harnessing what was formerly a secondary means of income and solidifying it as a more consistent market with a solid return on investment, the CGA expanded the suite of income options available to Ni-Vanuatu farm- ers and increased their resilience. Cocoa production is an existing activity that builds on local knowledge, and the CGA was able to improve upon this by providing a means for accessing education and sharing information between producers. Increased government deregulation also led to improved communications between growers, and the disbandment of the Vanuatu Commodities Marketing Board (VCMB), the local organization responsible for setting com- modity prices and issue export licenses in the cocoa and copra industries, led to a reduction in corruption that allowed fair trade to flourish. Additionally, the CGA has several key weak- nesses that could be addressed in future implementations of this structure. Foremost is the failure to promote gender equity. Though the CGA provided access to the market for cocoa growers, this access was limited, at least at the management levels, to males. Additionally, the lack of strategic planning that exists will be a central pain point for the CGA until re- solved, and opportunities to strengthen this skill set must be provided for other similar asso- ciations. Also, the pursuit of organic certification must be considered as future organizations are designed to ensure that the highest level of economic benefit is derived. Finally, produc- tion issues (e.g., the age of the cocoa trees, low yield levels, and others) will need to be im- proved as the CGA moves forward and in any future iterations of this type of organization The CGA as an Inclusive Trade Model The Vanuatu CGA furthered the principles of inclusive trade in the region, taking disparate growers and cooperatives and creating a repository for knowledge and an opportunity for ad- vancement. The organization of farmers and cooperatives leads to advancement in many different areas; in particular, the CGA’s role in centralizing buying and selling from the coop- eratives to distributors plays a key role in making trade more inclusive in the region. Offering people decent prices for their produce can help to support jobs, improving living conditions for producers, their families and the local businesses they buy from (Irving, 2010). The coop- erative approach doesn’t just mean increased leverage for agricultural producers in export price negotiations, either; collective bargaining can be an invaluable tool for workers to nego- tiate higher wages, benefits and better work conditions (Fairtrade International, 2012) 6 Table 1: Inclusive Trade Principles Inclusive Trade CGA Design Factor / Key Finding Recommendation for Principle Imrovement / Implementation Increased incomes . The association supported the growers in . Continued improvement in communications between for local farmers maximizing their return on already-existing ag- producers, the CGA, and regional/international organi- ricultural production by creating volume zations would assist with reducing price disparities and . The cooperative provided information on pric- strengthening the selling position of growers ing across the world market, and took on the . Increased coordination between the VOCGA and CGA role of centralizing negotiating with middle- to increase organic production could lead to an overall men – increasing the growers’ income by two increase in yields and income for farmers (McGregor, times Chanel Watas, Tora, 2009) . Access to cocoa seedlings allowed new pro- . Improvements in the cooperatives’ infrastructure and ducers the opportunity to start the venture tools would enhance the quality of the beans and result with reduced costs to entry in higher prices for farmers . CGA trains farmers how to improve the quali- ty of the seed for higher grade exports Job Creation and . The CGA provides training on management . Increased standardized and continuing education pro- Training Opportuni- and bookkeeping in the local language vided by the CGA could assist in creating higher yields ties . The association also trains growers on ways and better