Pro-Poor Development and Power Asymmetries in Global Value Chains September 2015 Ajmal Abdulsamad Stacey Frederick Andrew Guinn Gary Gereffi This report was prepared on behalf of Oxfam America. The research draws primarily on the available global value chain literature. Other data sources include a number of proprietary database, academic journals, and reports on the respective industries for each case study. Errors of fact or interpretation remain the exclusive responsibility of the authors. The opinions expressed in this report are not endorsed by the sponsor. The corresponding author may be contacted at: [email protected] Duke University, Center on Globalization, Governance and Competitiveness (Duke CGGC) The Duke University Center on Globalization, Governance & Competitiveness (Duke CGGC) is affiliated with the Social Science Research Institute at Duke University. Duke CGGC is a center of excellence in the United States that uses a global value chains methodology to study the effects of globalization in terms of economic, social, and environmental upgrading, international competitiveness and innovation in the knowledge economy. Duke CGGC works with a network of researchers and scholars around the world in order to link the global with the local and to understand the effects of globalization on countries, companies and the full range of development stakeholders. www.cggc.duke.edu Center on Globalization, Governance & Competitiveness, Duke University © September 2015 Table of Contents Part I: Summary Findings ............................................................................................................... 1 1.1. Global Value Chains: Asymmetries in Power Relations ................................................. 1 1.2. The Rise of Private Governance and Its Limitations ....................................................... 3 1.3. Global Value Chains and Public Governance .................................................................. 5 Part II: Case Studies ........................................................................................................................ 7 Case One: Pro-Poor Development and Power Asymmetries in the Apparel GVC .................... 7 Summary ......................................................................................................................................... 7 1. The Apparel Global Value Chain: Lead Actors and Power Asymmetries ............................. 8 2. The Rise of Private Governance and Its Limitations ............................................................ 17 3. Global Value Chains and Public Governance ....................................................................... 20 4. Conclusion ............................................................................................................................ 20 Case Two: Pro-Poor Development and Power Asymmetries in the Cocoa-Chocolate GVC ... 23 Summary ....................................................................................................................................... 23 1. The Cocoa-Chocolate Global Value Chain: Lead Actors and Power Asymmetries............. 25 2. The Rise of Private Governance and Its Limitations ............................................................ 35 3. Global Value Chains and Public Governance ....................................................................... 39 4. Conclusion ............................................................................................................................ 41 Case Three: Pro-Poor Development and Power Asymmetries in the Sugar-Soft Drinks GVC 42 Summary ....................................................................................................................................... 42 1. The Sugar-Soft Drinks Global Value Chains: Lead Actors and Power Asymmetries .......... 43 2. The Rise of Private Governance and Its Limitations ............................................................ 62 3. Global Value Chains and Public Governance ....................................................................... 65 4. Conclusion ............................................................................................................................ 67 References ..................................................................................................................................... 68 Appendix ....................................................................................................................................... 75 Figures Figure 1: Key Actors and Relationships in Standard-Setting and Certification in GVCs .............. 3 Figure 2: Global Apparel Value Chain ........................................................................................... 9 Figure 3: The Cocoa-chocolate Value Chain ................................................................................ 25 Figure 4 The World's Top Three Cocoa Processors ..................................................................... 26 Figure 5: The Declining Trend and Volatility in Global Cocoa Prices ........................................ 33 Figure 6: Distribution of Value along the Cocoa-chocolate Value Chain .................................... 34 Figure 7: Trend in Cocoa Supply and Demand: Actual Figures for 1978-2011 ........................... 35 Figure 8: Certified Cocoa and Coffee Producers Compared to Uncertified Producers ................ 37 Figure 9: Price Structure of a Fairtrade Chocolate Bar ................................................................. 38 Figure 10: The sugar-soft drinks global value chain .................................................................... 43 Figure 11: Distribution of sugar demand, by industry (2011) ...................................................... 46 Figure 12: Sugar production by top producers, 2011 (million tonnes) ......................................... 48 Figure 13: Global sugar prices, 2000-2015................................................................................... 50 Figure 14: Sugar exports by top exporters, 2011 (million tonnes) ............................................... 51 Figure 15: Sugar imports by top importers, 2011 (million tonnes) .............................................. 52 Tables Table 1: Private Governance Issues ................................................................................................ 5 Table 2: Apparel: Responsibility for Value-Adding Activities by Firm Type ............................... 9 Table 3: Apparel Lead Firm Types and Examples ....................................................................... 10 Table 4: Concentration at Individual Country Markets ................................................................ 26 Table 5: Cocoa Sector’s Footprint in the National and Rural Household Economies of Major Producing Countries...................................................................................................................... 28 Table 6: Global Chocolate Confectionery Markets Controlled by a Handful of Brands.............. 30 Table 7: Volume of Certified Cocoa Produced and Sold by Certification Scheme, 2012............ 36 Table 8: Reinstatement of Public Governance in the Cocoa Sector in Cote d'Ivoire ................... 39 Table 9: Cote d'Ivoire's Cocoa Processing Industry ..................................................................... 40 Table 10: Global sugar production and exports ............................................................................ 48 Table 11: Top sugar producers in 2001 and 2011 ......................................................................... 49 Table 12: Importance of the sugar sector in major producing countries, 2011 ............................ 50 Table 13 Top sugar exporters in 2001 and 2011........................................................................... 52 Table 14: Top sugar importers in 2001 and 2011 ......................................................................... 53 Table 15: World soft drink market share (off-trade) 2004-2013, top 15 companies .................... 54 Table 16: Soft drink market shares of TCCC and PepsiCo Inc. across world regions, 2013 ....... 54 Table 17: Leading sugar milling companies, 2013 ....................................................................... 57 Table 18: Top sugar companies in Brazil, India and China, by market share .............................. 59 Table 19: Ratio of Sales to Production of Certified Sugar ........................................................... 63 Part I: Summary Findings 1.1. Global Value Chains: Asymmetries in Power Relations Over the last three decades, the rise of global value chains (GVCs) has marked significant shifts in the global organization of production, competition and trade. GVCs now account for an estimated 80% of global trade, and 30% of value added in developing country economies (UNCTAD, 2013). Domestic industries in both developed and developing countries no longer stand alone or compete mainly through arms-length trade. Instead, they have become deeply intertwined through complex, overlapping business networks created through recurrent waves of foreign direct investment (FDI) and global sourcing. These shifts in the global distribution of economic opportunity carry with them many challenges for government, business and society at large. As our case studies (in Section II) illustrate, GVCs represent organized industrial structures that are governed by large traders, retailers