Starbucks-Ethiopia coffee deal hailed as model

A deal between Starbucks and Ethiopia that ends their trademark dispute and offers more benefits to Ethiopian coffee farmers has been hailed as a potential model for other poor nations seeking to better use the modern trading system, especially the often-controversial intellectual property rights provisions.

“This agreement represents a business approach in step with 21st-century standards in its concern for rights rather than charity and for greater equity in supply chains rather than short term profits,” said Raymond C Offenheiser, president of Oxfam America, the advocacy organisation that has been campaigning on behalf of Ethiopia since last October.

“Harnessing market forces and allowing poor countries to benefit from intellectual property rights are keys to creating fairer and more equitable trade. In a modern economy, companies must bring their business models in line with the demands of good corporate citizenship, which goes beyond traditional philanthropic approaches to dealing with poverty,” he added.

Activists say that developing countries can now tap intellectual property rights to increase export revenues and improve the security of that income.

The Ethiopians’ strategy on patenting their coffee could show the way to others mired in poverty when Western corporations are striking gold over their own products. One key aspect of the Ethiopian experience is that they worked from within the modern intellectual property system to help poor farmers.

“Ethiopia’s initiative shines a new light on such arrangements between powerful buyers and their developing-world suppliers and is trend setting,” said Ron Layton, founder of Light Years IP, a Washington-based not-for-profit organisation that says it is dedicated to the use of intellectual property rights to help the poorest countries.

Property rights

Traditionally, intellectual property rights have been used to benefit international corporations and have been blamed for keeping life-saving medicines out of the hands of needy people.

Light Years estimates that 90% to 95% of product value is taken by the distribution chain of products that come from poor nations. Only a few producers have any real control over their products.

But last year Ethiopia set out on a mission to challenge that. Its coffee sector launched a plan to take better advantage of its intellectual property rights.

The poor African nation first applied for the trademark registrations of its specialty coffee brands in the United States, Canada, Japan and other countries. It succeeded in registering several, including Harar, Sidamo and Yirgacheffe. It also began negotiating with coffee roasters to sign agreements acknowledging the right of Ethiopians to control these brands.

But the US coffee franchise Starbucks dragged its feet and declined to give Ethiopian coffee farmers the right to control their coffee trademarks, even though it had originally promised to do so. This prompted aggressive campaigns against the Seattle-based company.

Anti-poverty campaigners criticised the cash-laden Starbucks for repeatedly ignoring its social responsibility pledges, running newspaper ads, making phone calls and firing off mass emails. Thousands of activists worldwide took part in the crusade to pressure the coffee company, one of the world’s largest and most profitable.

Finally, Starbucks agreed last week to sign the deal, which now lets Starbucks use and promote Ethiopian coffee brands in markets both where trademarks exist for the brands as well as where they may not.

More income

The deal is expected to generate more income for Ethiopian farmers. Currently farmers get only a fraction of the export price when retail prices for specialty coffees can be anywhere from five to 15 times export prices. Under the new deal, farmers instead would be able to base their export prices more closely on the retail value of their coffees.

“This agreement provides cause to be very optimistic about the future of the Ethiopian coffee industry,” said Getachew Mengistie, Ethiopian Intellectual Property Office Director General.

Development agencies also greeted the deal as a major victory. “This should help improve the lives of millions of poor farmers, allowing them to send their children to school and access healthcare,” Offenheiser of Oxfam said.

There are 15-million people in Ethiopia who are dependent on the country’s coffee sector. Coffee is among the most valuable commodities in Ethiopia, one of the world’s poorest countries.

Africa is the birthplace of coffee and produces arguably the most exotic taste profile of any coffees in the world.

Starbucks purchases approximately 5% of its high-quality Arabica coffee from African countries of origin such as Ethiopia and Kenya.

One of the world’s wealthiest companies, Starbucks says it plans to open at least 2 400 new stores on a global basis in fiscal 2007 as well as 1 700 stores in the US.

Last year, the company saw a 22% increase in total net revenues to $7,8-billion, the equivalent of the entire gross domestic product of Ethiopia, a country of 71-million people, in 2000. Its GDP in 2005 stood at $11,8-billion. — IPS

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Emad Mekay
Guest Author

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