The Economic Discrepancy: Cocoa vs. Chocolate Industry

Embeddedness in Chocolate Manufacturing: Challenges, Taxation, and Missed Opportunities

The chocolate industry boasts a staggering worth of over $130 billion, while the cocoa sector lags far behind at a little over $9 billion. Understanding the embeddedness of chocolate manufacturing in the West and cocoa production in the global South sheds light on the bigger picture.

Chocolate manufacturing involves intricate research and development, generating numerous jobs, patenting processes, and claiming a substantial portion of the industry's revenue. This drives economic growth in the West, fosters GDP expansion, supports tertiary businesses, and bolsters national economies, all accompanied by tax payments to their respective governments.

An infographic of the various Cocoa-to-Chocolate value additions and processes

Shifting the Burden: Developing Countries and Taxation

When chocolatiers establish cocoa processing subsidiaries in producing countries like Ghana, they often present it as an opportunity. However, as outlined in previous articles, the real cost of their presence is the exemption from paying taxes, leaving farmers and citizens in producing countries to fund this tax-free environment and repatriation of profits. Consequently, developing countries indirectly finance these corporations' growth.

This paradoxical situation contributes to the underdevelopment of producing countries despite their increased industrialisation. Companies like Barry Callebaut are committed to embedding chocolate manufacturing in high-income developing nations, reinforcing the global division of labour while touting their sustainability initiatives.

Missed Opportunities for Knowledge Transfer

One glaring aspect of this embeddedness is the limited knowledge transfer from chocolatiers to producing countries. Establishing institutions like Barry Callebaut's Chocolate Academies worldwide could be an ideal opportunity for knowledge exchange. However, none of these academies is situated in Sub-Saharan Africa, not even in cocoa-producing giants like Ghana or Ivory Coast.

By establishing these academies in producing countries, local youths could receive training in producing chocolate for local consumption and in creating expertise that positions them as exportable resources to other nations or global chocolate manufacturers. This could lead to increased foreign exchange income, job creation, and the development of local expertise that can grow alongside the economy.

Defining Taste: The Challenge for Global South Producers

The embeddedness of chocolate manufacturing in the West, along with their influence over taste preferences, poses a significant hurdle for producers in the Global South. When Western chocolate has defined and refined the palate for so long, it's challenging for local manufacturers to cater to both local and Western markets. Consumers often associate the West with the "best chocolate," making it difficult for local producers to gain traction.

Tariffs and Protectionism: A Barrier to Developing Countries

Tariff-Free Chocolate Trade Among Member Nations: One key feature of these protectionist policies is the facilitation of tariff-free chocolate trade among member nations. For instance, member countries within the European Union can exchange chocolate products without imposing import duties.