Ghana’s Cocoa Trade – Case Study

  • During colonial times, when it was ruled by Britain, Ghana was the world’s largest producer of coca. The British government set the price that Ghanaian farmers would receive.
  • Since independence in 1957, three factors now dictate global cocoa prices. Commodity traders. In financial centres, such as London, traders by coca in advance for TNCs on what is known as the futures market.
  • This guarantees the supply, price and delivery date of the product months ahead. However, other cocoa growers, such as in the Ivory Coast, also supply TNCs, which puts downward pressure on prices by giving the commodity traders alternative sources to negotiate with.
  • Overseas tariffs. Although WTO rules seek tariff-free international trade, the EU sets tariffs for processed cocoa, but none for raw cocoa beans. Ghana could gain extra income and employment by processing its cocoa beans into powder or chocolate before export.
  • The value added would be higher, but tariffs would then be applied on entry to the EU, driving up the price for anyone who buys the product. This forces Ghana to export raw cocoa beans instead.
  • Unequal power. Ghana joined the WTO in 1995. Until then, its government had subsidised Ghanaian farmers to encourage food production for its growing urban population.
  • However, the WTO imposed a joining condition that Ghanaian farmers shout be subsided, even though the USA and EU freely pay subsidies to their own farmers.
  • As a result, Ghanaian farmers cannot compete with imported and subsidised American or European foods. Some Ghanaian rice producers and tomato growers have given up altogether.