International specialisation — practice question

There are worries that chocolate prices could climb sharply over the next few years. This is being driven by growing demand for chocolate, especially in emerging countries, together with supply difficulties in the countries that grow cocoa beans. Cocoa beans, which are the key ingredient in chocolate, are produced mainly on the west coast of Africa by small farms that rely on labour-intensive methods. In 2012 Côte d’Ivoire (Ivory Coast) supplied 37% of the world’s output of cocoa beans, with Indonesia next at 13%. Côte d’Ivoire is increasingly recognised for providing high quality cocoa beans. Focusing on the product that the country’s resources suit best has raised output there. Gross Domestic Product per head increased to US$1240 in 2013. However, some farmers and farm workers still live on less than US$2 a day. In Indonesia, the income of most cocoa farmers and farm workers rose as the country’s average income increased between 2013 and 2014. Their purchasing power was nevertheless reduced by the consumer prices index rising from 108.0 in 2013 to 115.2 in 2014. Although healthcare in Indonesia is improving, with more doctors per head, the government is trying to improve education standards. Problems facing cocoa bean producers include an ageing labour force, and the industry has difficulty attracting younger farmers and farm workers. The industry also repeatedly suffers from pests and diseases, including black pod disease. Meanwhile, people in Asia, particularly China, are eating more chocolate and drinking more chocolate drinks. People in the United States of America and the European Union are also consuming more chocolate, although growing concerns about the health effects of eating large amounts are starting to affect demand. For many people, though, chocolate is addictive. Chocolate producers aim to exploit this by widening the difference between revenue and costs. Most chocolate producers are from developed countries and most are public limited companies trying to satisfy their shareholders. These producers use their market power to keep the price paid for cocoa beans fairly low while the price charged to consumers who buy their chocolate is kept relatively high.