Working Paper: CEPR ID: DP3224
Authors: Christopher L. Gilbert; Eric Tollens
Abstract: A frequently encountered argument against the liberalization of markets for tropical crop commodities is that this may jeopardize export quality. We look at this argument in the specific case of Cameroonian cocoa exports. The Cameroonian experience is important because an alleged decline in cocoa quality has often been cited as illustrating the dangers of market liberalization. That claim is not supported by examination of the unit value of cocoa imports into the European Union which demonstrates constant relativities over time in the unit value of cocoa imports from major west African producers. We argue that, in a liberalized environment, export quality is determined by the preferences of market participants and the technology of quality production. In Cameroon, changes in transport technology resulted in a diminished demand for premium grade cocoa while increased competition from cocoa buyers resulted in a transfer of some processing functions from farmers to intermediaries. There is no evidence of any significant quality problems arising from market liberalization. We conclude that government does not need to regulate in order to ensure a normal commercial outcome. Concerns about export quality should not be an issue in the continuing African market liberalization debate.
Keywords: cocoa; liberalization; quality
JEL Codes: Q17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market liberalization (G18) | Quality of Cameroonian cocoa exports (L15) |
| Market participants’ preferences (G19) | Quality of Cameroonian cocoa exports (L15) |
| Technology available for quality production (L15) | Quality of Cameroonian cocoa exports (L15) |
| Improvements in transport technology (L92) | Demand for premium-grade cocoa (L66) |
| Increased competition among cocoa buyers (D41) | Processing functions transfer from farmers to intermediaries (F16) |
| Processing functions transfer from farmers to intermediaries (F16) | Quality of Cameroonian cocoa exports (L15) |