The Oxford Journal of Economic Geography defines the Global Production Network (GPN) as the nexus of interconnected functions and operations through which goods and services are produced, distributed and consumed. The GPN aims to reveal the multi-actor and multi-scalar characteristics of transnational production systems through intersecting notions of power, value and embeddedness (Ibid).
The tea industry directly and indirectly supports the livelihoods of agricultural communities and even the national economy of Kenya, yet, tea-dependent livelihoods in Kenya are now facing four major challenges:
i) First, the newly signed Economic Partnership Agreement (EPA) between the European Union (EU) and the ACP, that ended preferential trade access to the EU market for ACP products including tea . A key element under EPA is the creation of regional markets through regional trade agreements (RTAs) such as the East African Community. The full impact of such RTAs on development is yet to be known. For example, in the East African Community (EAC), Ugandan businesses complain of domination by a competitive manufacturing sector in Kenya. Kenya is also taking over the banking, hotel and retail businesses in Uganda.
ii) Globalization has led to disparities in economic outcomes for upstream and downstream actors, that is; the increase of profits and power for retailers in the global-north at the expense of producers in the global-south. For instance, the researcher Omen demonstrated in 2009 that in the global tea industry, power is concentrated in the hands of just four Trans-National Corporations (TNCs); Unilever, Van Rees, James Finley and Tata Tetley/Standard. This quartet influences price setting at auctions in India, Sri-Lanka and Kenya where about 70% of global tea is trade. Earlier in 2002, Benoit Daviron & Peter Gibbon showed that these TNCs invest more in branding and marketing at the expense of transformation in production and labour processes and that the goal of such TNCs is no longer expansion of activity but maximization of profits even if this requires downsizing the workforce.
iii) Agritrade, a Kenyan agribusiness research organization, highlights the role of state regulatory power in the local-global political economy. For example, the EU uses its competition policy against “abuse of a dominant market position” to prosecute and punish EU companies that collude in setting prices. Kenyan farmers need know whether the EU will agree to a joint ACP-EU action against international companies, like the above quartet, that collude in fixing prices (Ibid). Scholars like Jeniffer Bair of Yale University and Peter Gibbon support this view by showing that regulatory mechanisms shape the geography and configuration of commodity chains as well as the regulatory context that affects the extent to which developing country exporters may benefit from their participation in global production networks.
iv) Lastly, Agritrade notes that the increasing impact of climate change is generating unpredictable harvests, leaving many small-scale tea growers struggling to plan for the future. Tea bushes yield the best-quality tea between 18 and 32 degrees Celsius. Should global warming cause temperatures to rise by 2 degrees Celsius, large areas of Kenya currently suited to growing tea would become unsuitable. Other ecological questions include whether to allocate more land for non-food crops when incidences of food shortages are on the rise.
In an attempt to answer the above four questions, in-depth studies are needed in the areas of:
a) The GPN. This can be used to explain the political-economic outcomes of the global tea industry by tracing the trajectory of the crop from the farm gate at Unilever tea Kenya to a high income country retail outlet like Tesco in the United Kingdom while taking note of the level of actorness (relative economic & political power) of the different actors in the chain. The acto-ness of non-state actors in the ACP states is limited for reasons such as the political environment that allows neither mass action nor divergent socio-political views.
b) Political economy: According to Prof. Stasavage of New York University, Comparative political-economy is the study of how political context determines economic policy choice and economic performance. New studies must attempt to unravel the complex political economy of interactions between Kenya’s policy response to globalization in general and to Transnational Corporations involved in the transhipment, processing and marketing of tea.
c) Gary Gereffi, Peter Gibbon & Benoit Daviron reached a consesus in the last decade that the actorness of actors in a chain changes over time. For instance, Kenyan farmers accounted for 55% of all fresh fruits exported from Kenya to the UK in 1993 but this value fell to under 20% in 1999. These changes are attributed to the entry of better financed and dedicated British importers with the necessary logistic capacity for production and shipment in Kenya plus distribution and ripening centres in the United Kingdom. These developments raise questions about the future of smallholder crop producers and whether this economic marginalization and exclusion of smallholders may not threaten international development.
d) Farm workers fear protesting against unfair practices because if they lost a job, there would be few other alternatives while the tea farmers lack a major negotiating tool; the ability to walk away from trade negotiations since there are just a few buyers. Institutional actors such as the Kenya government or the Kenya tea board make little or no input in the international rules governing their commodities yet they must enforce such laws.
In sum, the threats faced by the Kenya tea farmers arise out of the imbalances in international trade. Correcting these imbalances by reconstructing the GPN will involve a political struggle and renegotiation among states and firms in and across multiple jurisdictions. Giving the Kenya tea farmers more actorness in the GPN will also be to the advantage of the TNCs since no business can survive as an island of wealth in a sea of poverty.
By
Peter Bill Kisitu
Trade Consultant
Friday, May 20, 2011
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