10 Reasons Fair-Trade Coffee Doesn't Work. Fairtrade кофе
Fair trade coffee - WikipediaFair trade produce display.
Fair Trade coffee is coffee that is certified as having been produced to fair trade standards.
Fair trade organizations create trading partnerships that are based on dialogue, transparency and respect, that seeks greater equity in international trade. These partnerships contribute to sustainable development by offering better trading conditions to coffee bean farmers.
Fair trade organizations are engaged actively in supporting producers and sustainable environmental farming practices. Fair trade practices prohibit child or forced labor.
Prior to fair trade, prices were regulated by the International Coffee Organization according to the regulations set forth by the International Coffee Agreement of 1962. The agreement, which was negotiated at the United Nations by the Coffee Study Group, set limits on the amount of coffee traded between countries so there would be no excess supply and consequent drop in price. The ICA existed for five years, and then was renewed in 1968.
The agreement was renegotiated in 1976 due to increasing coffee prices, largely a result of a severe frost in Brazil. The new agreement allowed for the suspension of price quotas if the supply of coffee could not meet the demand, and enabling them if prices dropped too low.
In 1984, the agreement was again redrawn, this time creating a database on coffee trade, and implementing stricter import and export regulations.
Fair trade certification was then introduced in 1988 following a coffee crisis in which the supply of coffee was greater than the demand; since no price quotas had been reimplemented by the International Coffee Act, the market was flooded. Launched in the Netherlands, fair trade certification aimed to artificially raise coffee prices in order to ensure growers sufficient wages to turn a profit. The original name of the organization was "Max Havelaar", after a fictional Dutch character who opposed the exploitation of coffee farmers by Dutch colonialists in the East Indies. The organization created a label for products that met certain wage standards.
Quotas remained a part of the agreement until 1989, when the organization was unable to negotiate a new agreement in time for the next year. It was decided that the 1983 agreement would be extended, but without the quotas because they had not yet been determined. A new agreement could not be negotiated until 1992.
From 1990 to 1992, without the quotas in place, coffee prices reached an all-time low because coffee price quotas could not be decided.
The agreements of 2001 and 2007 aimed to stabilize the coffee economy by promoting coffee consumption, raising the standard of living of growers by providing economic counselling, expanding research to include niche markets and quality relating to geographic area, and conducting studies of sustainability, principles similar to fair trade.
Following the inception of fair trade certification, the "Transfair" label was later launched in Germany, and within ten years three other labeling organizations commenced: The Fairtrade Foundation, TransFair USA, and Rättvisemärkt. In 1997, these four organizations jointly created Fairtrade International (formerly called FLO, or Fairtrade Labelling Organizations International), which continues to set Fairtrade standards, inspecting and certifying growers.
Fair trade organizations
The fair trade labeling organizations having most of the market share and who sell through supermarkets refer to a definition developed by FINE, an association of four international fair trade networks (Fairtrade Labelling Organizations International, World Fair Trade Organization (WFTO), Network of European World shops and European Fair Trade Association (EFTA)). The standards developed by Fairtrade Labelling Organization are the most widely used.
The certification scheme is run by Fairtrade International (FLO).
Coffee packers pay Fairtrade a fee for the right to use the Fairtrade logo, which gives consumers an assurance that the coffee meets Fairtrade criteria. The coffee with this certification mark must be produced by farmers and cooperatives that meet these criteria.
Coffee retailers are not restricted by Fairtrade to sell Fairtrade coffee as a premium product and charge as much as they like for the coffee.
Importers of Fairtrade coffee have to be registered with Fairtrade and pay a fee. Under the Fairtrade International standards they are obliged to pay a minimum price to the exporting organization, currently $1.40c/lb New York Board of Trade “C” contract, F.O.B. origin for Arabica, and $1.05 for Robusta London “EURONEXT LIFFE” contract, F.O.B origin with 30c/lb extra for organic. When the world price is above this level, they are obliged to pay 20c/lb above the world price.
Certified Fairtrade coffee is normally exported by secondary or tertiary cooperatives, marketing this coffee on behalf of the cooperatives the farmers belong to with arrangements that may be complex. There is not enough demand to take all the certified coffee produced, so most has to be sold as uncertified. In 2001 only 13.6% could be sold as certified so limits were placed on new cooperatives joining the scheme. This plus an increased demand put up sales of certified to around 50% in 2003 with a figure of 37% commonly cited in recent years. Some exporting cooperatives do not manage to sell any of their output as certified, and others sell as little as 8%.
The exporting cooperatives incur costs including certification and inspection fees, additional marketing costs, costs of conforming to standards, and additional costs of cooperative operation, costs which are incurred on all coffee production, even if little or none is marketed as certified, with a higher price, so the cooperatives may make a loss on Fairtrade membership. Weber reports cooperatives not able to cover the extra costs of a marketing team for Fairtrade, with one covering only 70% of these costs after six years of Fairtrade membership.
Any deficit after paying these costs means a lower price for farmers, while any surplus will normally go on “social projects” for “common goals” organized by the exporting cooperative rather than as extra payment for farmers. These may include the building of classrooms, baseball fields, or the establishment of women's groups, for instance.
Enforcement of standards
FLO-CERT, a for-profit business owned by Fairtrade International, handles producer certification, inspecting and certifying producer organizations in more than 50 countries in Africa, Asia, and Latin America. In the fair trade debate there are many complaints of failure to enforce these standards, with farmers, cooperatives, importers and packers.
The marketing system
The marketing system for Fairtrade and non-Fairtrade coffee is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying the normal importers, packers and distributors and advertising agencies to handle their brand rather than doing it themselves, for cost reasons.
Many fair trade organizations remain that adhere to a greater or smaller degree to the original objectives of fair trade than the mainstream of Fairtrade International and its associate. These market products through alternative channels where possible, and market through specialist fair trade shops, but they have a small proportion of the total market.
Criticisms of fair trade have been made as a result of independent research, and these are summarized in the fair trade debate.
There are also some criticisms of fair trade specific to coffee. Colleen Haight of the Stanford Innovation Review argues that fair trade coffee is merely a way to market the idea of ethical consumerism. Quality and transparency concerns regarding coffee are increasingly common amongst some consumers and coffee companies, as seen through the rise of the third wave coffee movement. Maintaining a balance between ethical and higher-quality coffee may be difficult with fair trade coffee due to what some coffee roasters deem as insufficient quality incentive within many fair-trade certified coffee farms. Deborah Sick’s research, involving interviews with coffee farmers in Costa Rica, finds that many farmers often produce more fair trade coffee than they can sell, so will often end up selling to independent buyers that will often pay more than fair trade buyers can. Some scholars are concerned of the artificial stimulation of coffee production, especially since worldwide demand for coffee is relatively inelastic.
Many who believe fair trade coffee is insufficient utilize the direct trade model, which allows for more control over quality concerns, farmer empowerment, and sustainability issues. It also is valuable in harboring closer farmer to roaster business relationships, which can ultimately increase quality of life and profits for coffee growers and buyers alike. However, direct trade is a new concept that is only utilized by for profit businesses like Counter Culture Coffee and Intelligentsia Coffee and therefore has no third party certification.
- ^ a b Max Havelaar Foundation. "HOW DID IT ACTUALLY START?". FairTrade Max Havelaar Netherlands (in Dutch and English). Max Havelaar Foundation. Retrieved 5 August 2012.
- ^ "History of The International Coffee Organization". International Coffee Organization. Retrieved 6 September 2014.
- ^ Fair Trade USA (2010). "CERTIFICATION & YOUR BUSINESS". Fair Trade USA. Fair Trade USA. Retrieved 5 August 2012.
- ^ "Trade Standard". Fairtrade Labelling Organizations International. Retrieved 6 September 2014.
- ^ Fairtrade Labelling Organizations International e.V. (2011) “Generic Fairtrade Trade Standard,” p11 "Archived copy" (PDF). Archived from the original (PDF) on 2013-05-02. Retrieved 2013-01-15. accessed 15/1/2013
- ^ Griffiths, P., ‘Ethical objections to Fairtrade’ Journal of Business Ethics July 2011(DOI) 10.1007/s10551-011-0972-0 www.springerlink.com Accessed at http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
- ^ Fairtrade International (FLO), “Fairtrade Minimum Price and Fairtrade Premium Table” 18.12.2012, accessed 8.1.2013; Fairtrade International (FLO) (2011), “Fairtrade Standard for Coffee for Small Producer Organizations” version: 01.04.2011 http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-04-01_EN_SPO_Coffee.pdf accessed 15/1/2013.
- ^ Fairtrade International (FLO) (2011), “Fairtrade Standard for Coffee for Small Producer Organizations” version: 01.04.2011 http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-04-01_EN_SPO_Coffee.pdf accessed 15/1/2013; Fairtrade Labelling Organizations International e.V. (2011), “Fairtrade Standard for Small Producer Organizations”, version: 01.05.2011_v1.1 http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-07-11_SPO_EN.pdf accessed 15/1/2013; Fairtrade Labelling Organizations International e.V. (2011) “Generic Fairtrade Trade Standard, p 16” "Archived copy" (PDF). Archived from the original (PDF) on 2013-05-02. Retrieved 2013-01-15. accessed 15/1/2013
- ^ Weber, J. (2006), ‘Rationing in the Fair Trade coffee market: who enters and how?’, Paper presented at the ‘Second International Colloquium: Fair Trade and Sustainable Development’, University of Quebec, Montreal, 19–21 June; de Janvry, A., McIntosh, C., & Sadoulet, E. (2010). Fair Trade and Free Entry: The Dissipation of Producer Benefits in a Disequilibrium Market. Retrieved December 24, 2012, from http://are.berkeley.edu/~alain/workingpapers.html.
- ^ Muradian, R., and W. Pelupessy. 2005. “Governing the Coffee Chain: The Role of Voluntary Regulatory Systems” World Development 33(12): 2029-2044., cited in de Janvry, A., McIntosh, C., & Sadoulet, E. (2010). Fair Trade and Free Entry: The Dissipation of Producer Benefits in a Disequilibrium Market. Retrieved December 24, 2012, from http://are.berkeley.edu/~alain/workingpapers.html.
- ^ Levi, Margaret, and April Linton. 2003. “Fair Trade: A Cup at a Time?” Politics and Society 31(3): 407-32. cited in de Janvry, A., McIntosh, C., & Sadoulet, E. (2010). Fair Trade and Free Entry: The Dissipation of Producer Benefits in a Disequilibrium Market. Retrieved December 24, 2012, from http://are.berkeley.edu/~alain/workingpapers.html.
- ^ a b Weber, J. (2006), ‘Rationing in the Fair Trade coffee market: who enters and how?’, Paper presented at the ‘Second International Colloquium: Fair Trade and Sustainable Development’, University of Quebec, Montreal, 19–21 June
- ^ Riedel, C. P., F. M. Lopez, A. Widdows, A. Manji and M. Schneider (2005), ‘Impacts of Fair Trade: trade and market linkages’, Proceedings of the 18th International Farming Symposium, 31 October–3 November, Rome: Food and Agricultural Organisation, http://www.fao.org/ farmingsystems
- ^ Fairtrade International (FLO) (2011), “Fairtrade Standard for Coffee for Small Producer Organizations” version: 01.04.2011 http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/2012-04-01_EN_SPO_Coffee.pdf accessed 15/1/2013; Fairtrade Labelling Organizations International e.V. (2011), “Fairtrade Standard for Small Producer Organizations”, version: 01.05.2011_v1.1 p28; Fairtrade International. (2013). Coffee. Retrieved January 3, 2013, from Fairtrade International: http://www.fairtrade.net/coffee.html.
- ^ FLO-CERT (2008). FLO-CERT Archived 2009-09-18 at the Wayback Machine.. URL accessed on August 1, 2008.
- ^ Davies, I.A. and A Crane, ‘Ethical Decision Making in Fair Trade Companies’, Journal of Business Ethics 45: 79–92, 2003. P84
- ^ Ballet, Jerome and Aurelie Carimentrand ‘Fair trade and the Depersonalization of Ethics’ Journal of Business Ethics (2010) 92:317–330 _ Springer 2010 DOI 10.1007/s10551-010-0576-0.
- ^ "The Problem with Fair Trade Coffee (SSIR)". ssir.org. Retrieved 2017-04-17.
- ^ Sick, Deborah (2008-08-20). "Coffee, Farming Families, and Fair Trade in Costa Rica: New Markets, Same Old Problems?". Latin American Research Review. 43 (3): 193–208. doi:10.1353/lar.0.0042. ISSN 1542-4278.
- ^ "Voting with your trolley". The Economist. 2006-12-07. ISSN 0013-0613. Retrieved 2017-04-17.
- ^ "What is Direct Trade coffee?". www.ethicalcoffee.net. Retrieved 2017-04-17.
- ^ "Sustainability | Counter Culture Coffee". Counter Culture Coffee. 2016-08-11. Retrieved 2017-04-17.
- ^ "Learn & Do | Community | Direct Trade | Intelligentsia Coffee". www.intelligentsiacoffee.com. Retrieved 2017-04-17.
What is Fair Trade coffee?
Fair Trade certification
What is Fair Trade coffee?
In the United States, Fair Trade certification is granted by Fair Trade USA, a non-profit organization that began certifying coffee in 1998 and has since included many other products, ranging from tea to chocolate to fruits and spices. It uses the logo at right (redesigned in 2012) to identify certified products. Similar organizations control Fair Trade certifications in other countries.
On September 15, 2011, Fair Trade USA announced its resignation from Fair Trade International, the international association of fair trade organizations (the Fairtrade International logo is shown at right). The resignation took effect on December 31, 2011, so Fair Trade USA has now embarked on a different course from the rest of the world's fair trade organizations.
Not surprisingly, the split has been controversial. Fair Trade USA defends it as part of its Fair Trade for All initiative that aims to expand the scope of fair trade products. Critics say Fair Trade USA will do that by allowing coffee produced on large estates and plantations, harvested by transient workers, to gain the certification, instead of limiting it to the small-grower cooperatives that qualify under the world system. Opponents of the change say it is impossible to ensure transient workers at these large operations are getting the "fair" wage that is the centerpiece of fair trade. Instead, they see this as a dilution of the Fair Trade standard that will allow large corporations who sell high volumes of coffee to use the Fair Trade label. (See the resources at the bottom of the page for links to more detailed discussions of these issues.)
What are the environmental standards?
Standards in the U.S. are now in flux, due to the split with the international organization. Worldwide, Fair Trade standards encourage sustainable agriculture practices, but farmers do have some leeway. Most Fair Trade coffee is also certified organic, for example, but agrochemicals can be used by those not certified as organic. Most (but again, not all) Fair Trade coffee is shade grown under natural tree canopies.
Farmers must also follow sustainable practices for disposing of hazardous and organic wastes, maintain buffer zones around bodies of water, and minimize water use, avoid erosion and conserve the soil.
What are the labor standards?
Again, standards in the U.S. are being revised. Historically, the very foundation of Fair Trade certification was the establishment of a minimum price. A guaranteed minimum price keeps small farmers in business and prevents the decay of rural communities that rely on agriculture. It enables more families to send their children to school, rather than having them work in the fields.
Effective April 1, 2011, the minimum price set by Fairtrade International for washed arabica coffee beans was increased to $1.40 per pound. Another 30 cents is added if the coffee is also certified as organic. An additional 20 cents, called the Fairtrade Premium, is collected and is used to fund social and business development projects in the producing communities. One fourth of that premium is set aside for efforts to improve quality and productivity. These prices are paid to the farmers' cooperatives, which then distribute profits after expenses. Not all coffee grown by small farmers meets the standards for these minimum prices.
Fair Trade farms must also meet labor standards such as paying a minimum wage to workers, allowing workers to organize, and ensuring health and safety standards.
What's the downside?
Because Fair Trade USA is revising its standards and its approach to certification, it is hard to assess the program right now. It seems likely that Fair Trade USA's changes will address one of the common criticisms of the international program, which is that only cooperatives of small farmers can participate. Individual farmers, small or large, cannot get the certification on their own.
Critics of Fair Trade USA's split are concerned that standards will be watered down. As with Rainforest Alliance certification, for example, a product may be eligible to use the Fair Trade label even if only a small percentage was grown under the Fair Trade standards. In a sense, this represents a philosophical divide between those who believe higher standards are important and those who believe broader participation (i.e., including more producers) is ultimately more beneficial.
From a completely different perspective, proponents of free trade argue that price controls may benefit a few but at the expense of many. Some, especially in the U.K., are turned off because they believe the Fair Trade organization there is too preachy and spends far too much money promoting itself.
How does the coffee I buy get certified as Fair Trade?
Inspectors visit the sites to determine if the Fair Trade criteria are being met. Followup inspections are done annually.
The Problem with Fair Trade Coffee
Jesus Lopez Hernandez picks ripe coffee cherries on a farm associated with Cooperativo Las Brumas, near Matagala, Nicaragua. (Photo by Janet Jarman/Corbis)
Peter Giuliano is in many ways the model of a Fair Trade coffee advocate. He began his career as a humble barista, worked his way up the ladder, and in 1995 co-founded Counter Culture Coffee, a wholesale roasting and coffee education enterprise in Durham, N.C. In his role as the green coffee buyer, Giuliano has developed close working relationships with farmers throughout the coffee-growing world, traveling extensively to Latin America, Indonesia, and Africa. He has been active for more than a decade in the Specialty Coffee Association of America, the world’s largest coffee trade association, and currently serves as its president.
Giuliano originally embraced the Fair Trade-certification model—which pays producers an above-market “fair trade” price provided they meet specific labor, environmental, and production standards—because he believed it was the best way to empower growers and drive the sustainable development of one of the world’s largest commodities. Today, Giuliano no longer purchases Fair Trade-certified coffee for his business. “I think fair trade as a concept is very relevant,” says Giuliano. But “I think the Fair Trade-certified FLO model is not relevant at all and kind of never has been, because they were doing something different than they were selling to the consumer. … That’s exactly why I left TransFair [now Fair Trade USA]. They’re selling a different thing than they’re producing.”
Giuliano is among a growing group of coffee growers, roasters, and importers who believe that Fair Trade-certified coffee is not living up to its chief promise to reduce poverty. Retailers explain that neither FLO—the Fairtrade Labelling Organizations International umbrella group—nor Fair Trade USA, the American standards and certification arm of FLO, has sufficient data showing positive economic impact on growers. Yet both nonprofits state that their mission is to “use a market-based approach that empowers farmers to get a fair price for their harvest, helps workers create safe working conditions, provides a decent living wage, and guarantees the right to organize.”1 (In this article, the term Fair Trade coffee refers to coffee that has been certified as “Fair Trade” by FLO or Fair Trade USA; the term Fair Trade refers to the certification model of FLO and Fair Trade USA; and the term fair trade refers to the movement to improve the lives of growers and other producers through trade.)
FLO rules cover artisans and farmers who produce not just coffee but also a variety of goods, including tea, cocoa, bananas, sugar, honey, rice, flowers, cotton, and even sports balls. Its certification process requires producing organizations to comply with a set of minimum standards “designed to support the sustainable development of small-scale producers and agricultural workers in the poorest countries in the world.” 2 These standards—31 pages of general and product-specific standards—detail member farm size, electoral processes and democratic organization, contractual transparency and reporting, and environmental standards, to name only a few. Supporting organizations, such as Fair Trade USA, in Oakland, Calif., ensure that the product is properly handled, labeled, and marketed in the consuming country.
Like many economic and political movements, the fair trade movement arose to address the perceived failure of the market and remedy important social issues. As the name implies, Fair Trade has sought not only to protect farmers but also to correct the legacy of the colonial mercantilist system and the kind of crony capitalism where large businesses obtain special privileges from local governments, preventing small businesses from competing and flourishing. To its credit, Fair Trade USA has played a significant role in getting American consumers to pay more attention to the economic plight of poor coffee growers. Although Fair Trade coffee still accounts for only a small fraction of overall coffee sales, the market for Fair Trade coffee has grown markedly over the last decade, and purchases of Fair Trade coffee have helped improve the lives of many small growers.
Despite these achievements, the system by which Fair Trade USA hopes to achieve its ends is seriously flawed, limiting both its market potential and the benefits it provides growers and workers. Among the concerns are that the premiums paid by consumers are not going directly to farmers, the quality of Fair Trade coffee is uneven, and the model is technologically outdated. This article will examine why, over the past 20 years, Fair Trade coffee has evolved from an economic and social justice movement to largely a marketing model for ethical consumerism—and why the model persists regardless of its limitations.
The Origins of Fair Trade
The idea of fair trade has been around since people first started exchanging goods with one another. The history of trade has shown, however, that exchange has not always been fair. The mercantile system that dominated Western Europe from the 16th to the late 18th century was a nationalistic system intended to enrich the state. Businesses, such as the Dutch East India Company, operating for the benefit of the mother country in “the colonies,” were afforded monopoly privileges and protected from local competition by tariffs. Under these circumstances, trade was anything but fair. Local workers often were compelled through force—slavery or indentured servitude—to work long hours under terrible conditions. In the 1940s and 1950s, nongovernmental and religious organizations, such as Ten Thousand Villages and SERRV International, attempted to create supply chains that were fair to producers, mostly creators of handicrafts. In the 1960s, the fair trade movement began to take shape, along with the criticism that industrialized countries and multinational corporations were using their power for further enrichment to the detriment of poorer counties and producers, particularly of agricultural products like coffee.
Adding to these perceived economic imbalances is the cyclical nature of the coffee business. As an agricultural product that is sensitive to growing conditions and temperature fluctuations, coffee is subject to exaggerated boom-bust cycles. Booms occur when farm output is low, causing price increases due to limited supply; bust cycles occur when there is a bumper crop, causing price declines due to large supply. Price stabilization is an objective commonly sought by less-developed countries through commodity agreements. Thus the International Commodity Agreement (ICA) evolved as a means to stabilize the chronic price fluctuations and endemic instability of the coffee industry. The first of these agreements arose in the 1940s to provide stability during wartime, when the European markets were unavailable to Latin American producers.
After the war, a boom in coffee demand made renewal of the agreement unnecessary. But during the late 1950s, down cycles threatened economies once again. The ICA essentially was little more than a cartel agreement between the member countries (coffee producers) to restrict output during bust periods to maintain higher prices, storing the surplus beans to sell later when output was low. Because the US government was concerned about the spread of communism in Latin America, it supported the cartel by enforcing import restrictions. In 1989, however, with the fall of the Berlin Wall and the waning of communist influence, the United States lost interest in supporting the agreement and withdrew. Without US enforcement, the cartel fell prey to rampant cheating on the part of its members and eventually dissolved. Attempts have since been made to resurrect the cartel—but though it exists in name, it remains largely ineffective.
Recognizing the dire circumstances confronting farmers during the late 1980s, when the price of coffee once again plunged, fair trade activists formulated a system whereby farmers could obtain access to international markets and reasonable reward for their labor. In 1988 a coalition of those economic justice activists created the first fair trade certification initiative in the Netherlands, called Max Havelaar, after a fictional Dutch character who opposed the exploitation of coffee farmers by Dutch colonialists in the East Indies. The organization created a label for products that met certain wage standards. Other similar organizations arose within Europe, eventually merging in 1997 to create FLO, based in Bonn, Germany, which today sets the Fair Trade-certification standards and serves to inspect and certify the producer organizations.
Why do we care about fairly traded coffee? One reason is the importance of coffee to the economies of the countries in which the crop is grown. Coffee is the second most valuable commodity exported from developing countries, petroleum being the first. For many of the world’s least developed countries, such as Honduras, Ethiopia, and Guatemala, coffee exports make up an enormous share of the export earnings, comprising in some cases more than 50 percent of foreign exchange earnings.3 In addition, many of the coffee growers are small and their businesses are financially marginal.
Although some of the world’s poorest countries produce coffee, the preponderance of that production is consumed by the citizens of the world’s wealthiest countries. The United States is the world’s single largest consuming country, buying more than 22 percent of world coffee imports; the combined countries of the European Union import roughly 67 percent, 4 with other countries importing the remaining 10 percent. According to the Specialty Coffee Retailer, an industry resource site, specialty coffee in 2010 accounted for $13.65 billion in sales, one-third of the nation’s $40 billion coffee industry. The Specialty Coffee Association of America reports that approximately 23 million people in the United States drink specialty or gourmet coffee daily. Fair Trade coffee, which has grown steadily from 76,059 pounds in 1998 to 109,795,363 pounds in 2009,5 constitutes only about 4 percent of that $14 billion market.
The primary way in by which FLO and Fair Trade USA attempt to alleviate poverty and jump-start economic development among coffee growers is a mechanism called a price floor, a limit on how low a price can be charged for a product. As of March 2011, FLO fixed a price floor of $1.40 per pound of green coffee beans. FLO also indexes that floor to the New York Coffee Exchange price, so that when prices rise above $1.40 per pound for commodity, or non-specialty, coffee, the Fair Trade price paid is always at least 20 cents per pound higher than the price for commodity coffee.
Commodity coffee is broken into grades, but within each grade the coffee is standardized. This means that beans from one batch are assumed to be identical to those in any other batch. It is a standardized product. Specialty coffee, on the other hand, is sold because of its distinctive flavor characteristics. Because specialty coffees are of a higher grade, they command higher prices. Fair Trade coffee can come in any quality grade, but the coffee is considered part of the specialty coffee market because of its special production requirements and pricing structure. It is these requirements and pricing structure that create a quality problem for Fair Trade coffee.
To understand how the problem arises, one must understand that the low consumer demand for Fair Trade coffee means that not all of a particular farmer’s coffee, which will be of varying quality, may be sold at the Fair Trade price. The rest must be sold on the market at whatever price the quality of the coffee will support.
A simple example illustrates this point. A farmer has two bags of coffee to sell and there is a Fair Trade buyer for only one bag. The farmer knows bag A would be worth $1.70 per pound on the open market because the quality is high and bag B would be worth only $1.20 because the quality is lower. Which should he sell as Fair Trade coffee for the guaranteed price of $1.40? If he sells bag A as Fair Trade, he earns $1.40 (the Fair Trade price) and sells bag B for $1.20 (the market price), equaling $2.60. If he sells bag B as Fair Trade coffee he earns $1.40, and sells bag A at the market price for $1.70, he earns a total of $3.10. To maximize his income, therefore, he will choose to sell his lower quality coffee as Fair Trade coffee. Also, if the farmer knows that his lower quality beans can be sold at $1.40 per pound (provided there is demand), he may decide to increase his income by reallocating his resources to boost the quality of some beans over others. For example, he might stop fertilizing one group of plants and concentrate on improving the quality of the others. Thus the chances increase that the Fair Trade coffee will be of consistently lower quality. This problem is accentuated when the price of coffee rises to 30-year highs, as it has done recently.
One of the unique characteristics of the FLO and Fair Trade USA model is that only certain types of growers can qualify for certification—specifically, small growers who do not rely on permanent hired labor and belong to democratically run cooperatives. This means that private estate farmers and multinational companies like Kraft or Nestlé that grow their own coffee cannot be certified as Fair Trade coffee, even if they pay producers well, help create environmentally sustainable and organic products, and build schools and medical clinics for grower communities.
Although the cooperative requirement may seem unusual, it follows logically from the experience of Paul Rice, founder and president of Fair Trade USA. Rice spent most of the early 1980s working with cooperative farmers in Latin America, studying and implementing training programs for small farmer organizations on behalf of the Nicaragua Agrarian Reform Ministry under the Sandinista administration. In 1990, he became the first CEO of prodecoop, a fair trade organic cooperative representing almost 3,000 small coffee farmers in northern Nicaragua. Then in 1998, he founded Fair Trade USA. Rice sees cooperatives as the key to the empowerment of the independent coffee farmer, providing a union-like type of collective bargaining power that enables cooperative leaders to negotiate pricing for the individual members.
Membership in a cooperative is a requirement of Fair Trade regulations. Another core element is the premium—the subsidy (now 20 cents per pound) paid by purchasers to ensure economic and environmental sustainability. Premiums are retained by the cooperative and do not pass directly to farmers. Instead, the farmers vote on how the premium is to be spent for their collective use. They may decide to use it to upgrade the milling equipment of a cooperative, improve irrigation, or provide some community benefit, such as medical or educational facilities.
Fair Trade USA is a nonprofit, but an unusually sustainable one. It gets most of its revenues from service fees from retailers. For every pound of Fair Trade coffee sold in the United States, retailers must pay 10 cents to Fair Trade USA. That 10 cents helps the organization promote its brand, which has led some in the coffee business to say that Fair Trade USA is primarily a marketing organization. In 2009, the nonprofit had a budget of $10 million, 70 percent of which was funded by fees. The remaining 30 percent came from philanthropic contributions, mostly from foundation grants and private donors.
People in the coffee industry find it hard to criticize FLO and Fair Trade USA, because of its mission “to empower family farmers and workers around the world, while enriching the lives of those struggling in poverty” and to create wider conditions for sustainable development, equity, and environmental responsibility.6 “I’m hook, line, and sinker for the Fair Trade mission,” says Shirin Moayyad, director of coffee purchasing for Peet’s Coffee & Tea Inc. “When I read [the statement], I thought, there’s nothing I disagree with here. Everything here I believe in.” Yet Moayyad has concerns about the effectiveness of the model, mostly because she does not see FLO making progress toward those goals.
Whole Foods Market initially rejected the Fair Trade model. The supermarket chain only recently began buying Fair Trade coffee, through its private label coffee, Allegro, in response to the demand from their consumers. Jeff Teter, president of Allegro Coffee, a specialty coffee business begun in 1985 and sold to Whole Foods in 1997, said that his main concern has been the quality of Fair Trade coffee. “To get great quality coffee, you pay the market price. Now, in our instance, it’s a lot more than what the Fair Trade floor prices are,” he says. As for social justice for coffee growers, Teter responds: “We were living the model at least 10 years before Paul Rice and TransFair people got started here in America. … Paul Rice and his group have done an amazing job convincing a small group of vocal and active consumers in America to be suspicious of anybody who isn’t FT.” Rice disagrees, arguing, “Fair Trade is the only certification program today that ensures and proves that farmers are getting more money.”
An Imperfect Model
My field and analytical research has found that there are distinct limitations to the Fair Trade model.7 Perhaps the most serious challenge is the extraordinarily high price of coffee. “The market today is five times higher than when FLO entered the United States. The market’s at $2.50 (per pound for commodity coffee) today vs. the 40 cents or 50 cents (per pound) it was at in 2001,” says Dennis Macray, former director of global sustainability at Starbucks Coffee Co. This price shift dampens farmers’ desire to sell their high-quality coffee at the Fair Trade price. Many co-ops, according to Macray, are choosing to default on the Fair Trade contracts, so that they can do better for their members by selling on the open market. Macray, who is now an independent sustainability consultant with clients such as the Bill & Melinda Gates Foundation, says the default problem is seriously compounded by the perceptions of quality. Some roasters express concern that the quality of Fair Trade coffee is not at the same high levels as other types of specialty coffee sold alongside it. “For some cooperatives the Fair Trade price became the ceiling, not the floor. … Many Fair Trade buyers do not see a reason why they should pay any more than the fair trade price for the value that is Fair Trade,” explains Macray.
In the past, coffee growers were often isolated in remote regions and had little access to market information on the value of their product. Unscrupulous buyers might offer only very low prices, taking advantage of farmers’ lack of information. Today, however, growers have access to coffee price fluctuations on their cell phones and, in many cases, have a keener understanding of how to negotiate with foreign distributors to get the best price per pound. In addition, the growing demand for very high quality coffee has led to a tremendous increase in the number of buyers traveling to more remote regions to ensure the supply they require.
Another important flaw is FLO’s inability to alter the circumstances of the poorest of the poor in the coffee farming community. Although FLO does dictate certain minimal labor standards, such as paying workers minimum wage and banning child labor, the primary focus and beneficiary is the small farmer, who, in turn, is defined as a small landowner. The poorest segment of the farming community, however, is the migrant laborer who does not have the resources to own land and thus cannot be part of a cooperative. In Costa Rica, for example, most small farms, including those selling Fair Trade coffee, employ migrant laborers for harvesting, particularly from Nicaragua and Panama. Rice believes that because the “yields are so low on a small farm and it’s basically family run, the migrant labor issue is not as relevant.” But at the same time he admits that the benefits of Fair Trade do not reach migrant laborers; he says he wants to expand the model to serve this population.
Rice has never wavered from his view that Fair Trade’s “central goal is to alleviate poverty,” and he is adamant that the organization’s model is as relevant as it was 20 years ago. But during that time many of FLO’s provisions of have become duplications of regulations already in place in Latin American countries, such as minimum wage requirements, credit financing, and contracting terms. “I just don’t think that the benefits are trickling down,” says Philip Sansone, president and executive director of the Whole Planet Foundation (the philanthropic arm of Whole Foods). Rice disagrees and defends his model. “The small holders in Latin America would have no way of climbing out of poverty,” he says. “One-acre farmers standing alone are pretty much always going to be victimized by stronger market forces, be they middlemen or moneylenders. At those farm unit sizes and yields, no one is viable in the global market if they stand alone.”
Another challenge for FLO is the issue of transparency in business dealings. FLO regulations require a great amount of record keeping, to ensure that individual farmers have access to all information pertaining to the cooperative’s sales and farming practices, enabling them to make more informed business and agricultural decisions. But this record keeping has proven to be a hurdle in some cases. In addition to being time-consuming, it has also raised language and literacy barriers. Certification forms, for example, only recently were made available in Spanish. “They want a record to be kept of every daily activity, with dates and names, products, etc. They want everything kept track of. The small producers, on the other hand, can hardly write their own name,” 8 said Jesus Gonzales, a farmer at Tajumuco Cooperative in Guatemala. Records kept by cooperatives have shown that premiums paid for Fair Trade coffee are often used not for schools or organic farming but to build nicer facilities for cooperatives or to pay for extra office staff. Gerardo Alberto de Leon, manager of Fedecocagua, the largest cooperative in Guatemala selling Fair Trade coffee, told me during my 2006 field research, “The premium we use here [at the cooperative]—you saw our coffee lab, it is very professional.”
Although the cooperative lab may improve quality or sales or aid in member education, it is not necessarily where consumers who buy Fair Trade coffee think their money is going. Macray says coffee consumers want to know that the extra premiums are being used for social services. “Many licensees have started to question whether the premiums were being used for social good: schools, education, health, nutrition, and so on,” he says. “It became difficult to tell the story of where that premium was going. So in your retail shop, you want to be able to tell your customers, yeah, how we provide all this extra funding for these co-ops and it made these differences.”
FLO also provides incentives for some farmers to remain in the coffee business even though the market signals that they will not be successful. If a coffee farmer’s cost of production is higher than he is able to obtain for his product, he will go out of business. By offering a higher price, Fair Trade keeps him in a business for which his land may not be suitable. There are areas all over Latin America and Africa where the climate and growing conditions are simply not conducive to coffee growing. “Fair Trade directs itself to organizations and regions where there is a degree of marginality,” explains Eliecer Ureña Prado, dean of the School of Agricultural Economics at the University of Costa Rica. “We’re talking about unfavorable climates [for coffee production]. … Regions that are not competitive.”
The Future of Fair Trade Coffee
The FLO model has changed little since its inception. Although the Fair Trade price and premium for coffee has been adjusted upward over time, the rules and regulations have remained fairly static. Fair Trade’s chief legacy may be greater consumer awareness among coffee drinkers. “We generate awareness to create demand in the market,” explains Stacy Wagner, public relations manager at Fair Trade USA. And they have had tremendous success doing so. Today, according to Wagner, 50 percent of American households are aware of Fair Trade coffee, up from only 9 percent in 2005.
Representatives from Starbucks, Peet’s, and Green Mountain Coffee Roasters (which owns such brands as Caribou Coffee, Tully’s, and Newman’s Own) all report a push from consumers for more transparency of contract and socially responsible business practices. It is rare to find a coffee roaster or retailer these days that does not address social issues in some way. Some do so by offering Fair Trade coffee. Others, however, have sought out other solutions, such as adopting other certifications or by developing their own programs. “A number of importers and exporters in the coffee business are saying we can get more money into the pockets of farmers through direct trade than if we use the FLO model,” says Macray.
Examples of businesses that have risen to meet consumer demands include Starbucks, Peet’s, and Whole Foods’ Allegro coffee. Although Starbucks offers Fair Trade coffee as one of a number of options, they also have put into place a C.A.F.E. Practice—a program that defines socially responsible business guidelines for their buyers. Many coffee producers have taken note of this model and made their practices more sustainable to attract the attention of Starbucks’ buyers. Likewise, Peet’s buys a lot of coffee from TechnoServe, an organization working to improve the business practices of farmers in developing countries. “One of the objections to Fair Trade could be that the term ‘cooperative’ doesn’t perforce equate to ‘farmer,’” says Moayyad. “Just because a certain price is guaranteed to the cooperative, doesn’t actually mean that the farmer is receiving it.”
With TechnoServe, farmers get a much higher percentage of the proceeds—up to 60 percent more according to Moayyad, even though their stated focus is “developing entrepreneurs, building businesses and industries, and improving the business environment.” 9 TechnoServe’s model focuses on quality production and farm management. “It’s not a charity,” says Jim Reynolds, roast master emeritus of Peet’s, who has more than 30 years of buying experience. “It’s building skills and better business organization, so they can run their own co-ops more efficiently and earn better pricing by finding good buyers.” Teter also follows this type of socially responsible corporate investment. Allegro pays well above the Fair Trade price to obtain the quality coffees its customers want. In addition, 5 percent of Allegro’s profits goes to charity, and 85 percent is spent in growers’ communities.
“The model for sustainable coffee that was popular five years ago has changed quite a bit,” says Macray. “Five years ago, it was common practice to just go out and buy certified coffees and check the box; and today it’s about integrating sustainability and transparency into your supply chain. Companies are making it a core way of doing business.”
For more on Fair Trade:
Coffee is such an integral part of everyday life that few of us stop to think what goes into growing the beans that make this hugely popular beverage.
The history and importance of coffee
Legend has it that the energising effect of the coffee bean was first recognised by a 9th-century goatherd in the Kaffa province of Ethiopia, where the coffee tree originated. Coffee was almost certainly cultivated in Yemen long before the 15th century when Sufi mystics reportedly drank it to keep awake during extended hours of prayer. The drink was spread by Muslim pilgrims and traders across North Africa and the Middle East, where Arabian coffeehouses became centres of political activity. The Dutch planted coffee in Sri Lanka, India and Java in the late 1600s and later in South America. Within a few years Dutch colonies became the main suppliers of coffee to Europe, its production associated with colonial expansion and slavery. Coffee soon became one of the most valuable primary products in world trade. The first UK coffee house was opened in Oxford in 1650, followed two years later by one in London.
Global coffee consumption doubled over the last 40 years from 4.2m tonnes in 1970 to 8.7m tonnes in 2015. Coffee producing countries consume 30 per cent of the world’s coffee, led by Brazil whose consumption reached 1.2 million tonnes in 2015. The remaining 70 per cent of coffee produced is traded internationally; the US is the biggest importer, followed by Germany and Italy while the UK is the 8th largest importer accounting for 3.6% of world coffee imports.
Coffee is grown in more than 70 countries but over 60 per cent of the world’s coffee is produced by just four of them – Brazil, Vietnam, Colombia and Indonesia. Latin America is the largest regional producer with a 60 per cent share, followed by Asia and Oceania (27%), and Africa (13%).
For countries that produce it, coffee exports generate a significant proportion of national income and are a vital source of the foreign exchange earnings that governments rely on to improve health, education, infrastructure and other social services. For instance, Burundi relies on coffee for 60 per cent of its export earnings, Honduras for a quarter, Nicaragua for nearly a fifth. In Ethiopia, 15 million smallholders, nearly a fifth of the population, depend on coffee for their livelihood – high global commodity prices contributed to record coffee exports in 2010/11 which accounted for 30 per cent of the country’s total export earnings. In Uganda, half a million smallholders produce coffee, the primary source of income for around 2.5 million people or 8 per cent of the population.
The challenges facing coffee farmers
The global coffee sector faces many challenges in the next decade including the continuing global economic crisis, volatile coffee prices, shortages of coffee supply from key origins, rising production costs, reduced availability of land and labour, food security and poverty in coffee communities, and the impacts of climate change.The value of the global coffee market is an estimated $81bn, while the UK retail coffee market was worth £1bn in 2015. Coffee supply chains are often complex, with beans sometimes changing hands dozens of times on the journey from grower to consumer. The coffee supply chain has long been dominated by a small number of multinational trading and roasting companies. Three companies – ECOM, Neumann and Volcafe – control around 50 per cent of the global coffee trade, and 10 roasters, including Nestle and Jacobs Douwe Egberts, process almost 40 per cent of the coffee consumed worldwide.
But while coffee is clearly profitable for food companies, it’s a very different story for coffee farmers. The share of the retail value of coffee retained by the producer has fallen over the decades – in the 1970s, producers retained an average of 20 per cent of the retail price of coffee sold in a shop. When oversupply caused prices to crash to historic lows during the coffee crisis of 1994 – 2004, research found coffee growers received just 1-3 per cent of the price of a cup of coffee sold in a café in Europe or North America and 2-6 per cent of the value of coffee sold in a supermarket.
Farmers are also the worst affected by the notorious volatility of world coffee prices. In recent years the price of Arabica coffee has swung from a 30-year low of 45 cents a pound in 2001 to a 34-year high of almost 309 cents in 2011. Between May 2011 and December 2013, prices fell by 65% as a result of the Euro crisis and oversupply of coffee. And after drought in Brazil saw prices rise briefly in 2014, prices fell back to a range of 115 to 145 cents a pound in 2015 and 2016. This price volatility has significant consequences for those who depend on coffee for their livelihood, making it difficult for growers to predict their income for the coming season and budget for their household and farming needs. When prices are low farmers have neither the incentive nor resources to invest in good maintenance of their farms by applying fertilisers and pesticides or replacing old trees. When prices fall below the costs of production, farmers struggle to put adequate food on the table and pay medical bills and school fees.
Growing coffee is further complicated by the impacts of climate change that have caused disturbances to weather patterns and temperatures in producing countries increasing the risks faced by farmers depending on coffee sales.
How is Fairtrade making things better?
Fairtrade was started in response to the dire struggles of Mexican coffee farmers following the collapse of world coffee prices in the late 1980s. From the 1960s until 1989, the coffee market was kept in reasonable balance of supply and demand in part due to the 1962 International Coffee Agreement (ICA) and subsequent agreements, signed by governments of producing and consuming countries. The ICA regulated much of global coffee trade through a system of export quotas and buffer stocks which largely maintained stable and remunerative prices to growers. The economic clauses of the ICA were suspended in 1989 because of abuse of the quota system and their incompatibility with prevalent free market economic policies. Controversial IMF and World Bank structural adjustment programmes (SAP) required governments of producing countries to privatise state-controlled industries such as the coffee sector and open them to competition from private traders ostensibly to improve efficiency. As a consequence, world coffee prices immediately dropped by half to less than 80 cents a pound.
The collapse of the International Coffee Agreement and subsequent price crash was a major factor in the launch of the first Fairtrade label, Max Havelaar, under the initiative of the Dutch development agency Solidaridad. The first ‘Fairtrade’ coffee from Mexico was sold into Dutch supermarkets in 1989. It was branded Max Havelaar, after a fictional Dutch character who opposed the exploitation of coffee pickers in Dutch colonies.
Fairtrade was set up to ensure coffee farmers receive a fair and stable price for their coffee that covers average costs of sustainable production. Fairtrade certified co-operatives can count on at least the Fairtrade Minimum Price of $1.40 per pound for arabica coffee sold on Fairtrade terms (30 cents more if organic), plus an extra 20 cents per pound Fairtrade Premium to invest as they see fit – 5 cents of which is dedicated to improving productivity and quality. These tools give farmers the stability and confidence to budget for the next farming season and household expenses and drive development in their communities. For 15 of the last 25 years, when the global price for arabica coffee has often fallen well below the Fairtrade Minimum Price, it has ensured farmers can earn enough to cover at least the basic costs of sustainable production.
Fairtrade currently works with more than 812,000 farmers globally through 445 Fairtrade certified coffee producer organisations. Fairtrade coffee farmers cultivate coffee on more than 1.1 million hectares worldwide producing an estimated 549,400 tonnes of coffee of which 34% is also certified organic. The Fairtrade Premium is valuable additional capital that allows farmer organisations to reinvest in improving infrastructure, services to farmers such as training on better farming practices or credit and financial services, but also to support cash payments to farmer members who are struggling with food security or other basic needs. Fairtrade Standards are designed to deliver against all three pillars of sustainability – economic, social and environmental.
In addition to the Fairtrade Minimum Price and Fairtrade Premium, Fairtrade provides essential training and support to farmer organisations to help them thrive. One of the main focus areas is to train farmers to adapt better to changing climate and weather conditions. Watch coffee farmers in Peru share the lessons with other farmers as they adapt to climate change. Keeping the next generation engaged in the coffee sector is one of the challenges facing the industry. Learn more about the Fairtrade International Climate Change Programme and how Fairtrade coffee farmers are adapting to climate change here.
10 Reasons Fair-Trade Coffee Doesn't Work
I see you, smugly smiling over your morning cup of fair-trade coffee, gratified at the unimaginable impact your thoughtfully chosen beans must be bringing to poor coffee growers overseas.
Well, think again.
The academic evidence for any positive effect of fair-trade coffee on coffee growers is mixed at best. Several recent studies by researchers at Harvard, the University of Wisconsin, and the University of California indicate that fair-trade coffee has small to negligible effects on coffee growers, especially the poorest ones. The University of California researchers find that the lack of impact stems from the ill-conceived design of the fair-trade system. Indeed, a consensus among development economists indicates fair-trade coffee to be one of the least effective means for reducing poverty in developing countries.
Here's how the fair-trade system, overseen by the Fairtrade Labelling Organizations International (FLO) and its U.S. certification affiliate, Fair Trade USA, operates: Growers belonging to a selected group of overseas producer cooperatives are paid a minimum price of $1.40 per pound (in the case of Arabica beans) for all coffee that is able to be sold through fair-trade channels. This minimum price creates what economists call a "price floor" for fair-trade growers. If the market price rises higher than the price floor (as it has today, at nearly $2.00 per pound), then growers just receive the market price, along with a premium of $0.20 that is sent back for investment in the producer cooperative and the local community. In order to receive this price, growers must pay to become certified, join a democratically managed cooperative, agree to standards for pesticide and chemical fertilizer use, and pay "fair wages" to coffee laborers.
All of this is well-intentioned and sounds wonderful. The problem is that is doesn't work well. The University of California study shows how the fair-trade system fails to account for basic economic laws that undercut its benefits to growers, among other fundamental flaws.
Here are 10 reasons that fair-trade coffee doesn't do the amount of good you would expect:
1. The flawed design of the system undermines its own benefits. Recent research by development economists Alain de Janvry and Betty Sadoulet at U.C. Berkeley and Craig McIntosh at U.C. San Diego shows that when the world price of coffee falls (and the advantages of selling through fair-trade channels increase), more borrowers choose to obtain fair-trade certification. But this reduces the fraction of coffee that their cooperatives can sell at the fair-trade price. What they found after examining 13 years of data from cooperatives in Guatemala is that, on average, the economic benefits of participating in the fair-trade system are offset by the price the growers have to pay for fair-trade certification. In other words, they found that the long-term benefit over time from fair trade to be essentially zero.
2. Fair trade attracts bad beans. Every crop contains some beans that are of higher quality than others. If the market price for the low-quality beans is below $1.40 and the market price of high-quality beans is above $1.40, then the fair-trade system incentivizes growers to dump their bad beans into fair-trade channels. As economists will lecture to you unceasingly, incentives matter. As the bad beans are drawn into the fair-trade market (what economics calls "adverse selection"), potential buyers eschew buying the coffee for fear of being stuck with the low-quality beans. This phenomenon has limited the market for fair-trade coffee.
3. Fair trade imposes significant costs on impoverished growers. The University of California study estimates that fair-trade certification costs about $0.03 per pound. This doesn't sound like much, but in some years it is greater than any price benefit brought by the higher fair-trade price. Moreover, while restrictions on growing practices might seem to meet worthy environmental and social objectives, University of Wisconsin economist Brad Barham and colleagues find that costs to growers imposed by these restrictions on fertilizers and other inputs add to the production costs of impoverished growers, diminish yields, and mitigate the benefits of free trade. If coffee drinkers want to improve the environment, they should pay for it themselves, not impose added costs on impoverished coffee growers.
4. Fair trade doesn't help the poorest growers. In a recent study in Costa Rica, economists Raluca Dragusanu and Nathan Nunn at Harvard University found the modest benefits generated from fair trade to be concentrated among the most skilled coffee growers. They find no positive impact on coffee laborers, no positive impact on children's education, and negative impacts on the education of unskilled coffee workers' children. In contrast, the "impact reports" created by Fair Trade USA, which are available on their home page, are a series of documents that merely describe the nature and scope of the fair-trade programs for various commodities. These reports fail to demonstrate any positive impact of the program by any credible scientific standard of impact evaluation.
5. Relatively little fair-trade coffee originates from the poorest countries. The poorest coffee-growing countries are in Africa: Ethiopia, Kenya, and Tanzania. Fair-trade exports from these countries represent less than 10 percent of coffee marketed through fair trade, while the share of fair-trade coffee from middle-income countries such as Mexico, Brazil, and Colombia is many times higher. Effective poverty interventions should be targeted at most poor, not the medium-poor.
6. Purported benefits of the fair-trade system lack transparency. Although fair trade pays a $0.20 premium over the world coffee price to growers for "social and economic investments at the community and organizational level," how this money is actually spent in the home country is vague at best. In an article in the Stanford Social Innovation Review, California State University economist Colleen Haight finds that many of these funds are invested in coffee cooperatives' buildings and salaries, not in schools, which may explain why researchers fail to uncover positive impacts from fair trade on local education.
7. The fair-trade system is inefficient at transferring coffee consumers' goodwill to producers. In an experiment run by my graduate students in San Francisco (described in The Taste of Many Mountains), we found that the median coffee drinker is -- amazingly -- willing to pay a premium of 50 cents for a cup of fair-trade coffee. However, we find that even in the best-case scenario for fair trade, when world prices are at their lowest, the maximum amount a fair-trade grower from that same cup of coffee would receive is only one third of a cent.
8. Direct trade is probably more efficient and sustainable than fair trade. Under direct trade, a coffee buyer contracts directly with specific growers overseas to offer a higher coffee price, often in exchange for a higher-quality product and a long-term relationship. Although direct trade is certainly not a panacea, more real value is created in the system, making it an arguably more efficient means of transmitting resources from coffee drinkers to coffee growers.
9. We should encourage less coffee production, not more. Efforts to help coffee growers by paying them more for their coffee all stimulate more coffee production, which is precisely the wrong way to help coffee growers. It is lower worldwide coffee production that brings the most benefit to each grower, by raising coffee prices. Thus the best approaches to helping coffee growers involve helping people move away from coffee production. Interventions in coffee communities like microfinance, cash grants to start new enterprises, and internationally sponsoring the children of coffee growers to help these children obtain more and better education help coffee growers worldwide because they reduce the world supply of coffee. This benefits everyone, because as coffee growers and their children move to other occupations, all producers in the world benefit from higher coffee prices. Artificially stimulating more coffee production keeps coffee growers poor.
10. Fair-trade coffee fails to address the root of poverty issues. Core poverty issues in developing countries suggest thoughtful, strategic interventions in areas such as health, education, infrastructure, entrepreneurial activity, and governance. If these core issues can be effectively addressed, a new array of occupational choices will open to the poor, allowing them to lift themselves out of rural poverty. Instead of providing credible evidence of impact in any of these key areas, fair-trade coffee incentivizes production of more coffee (see #9).
The most damaging aspect of the fair-trade coffee system may be that it misleads well-meaning coffee consumers into believing that by buying fair-trade coffee they are doing something meaningful and helpful for the poor, while the best evidence suggests that other types of programs are far more effective. And this tragically misdirects energy and attention away from approaches to fighting poverty that actually work quite well. Perhaps a main reason that fair-trade coffee continues to have credibility with many in the general population is the immense marketing campaign undertaken by Fair Trade USA, which continues to promote itself despite the self-neutralizing flaws in its poorly designed system.
In a recent magazine article, I surveyed 16 leading development economists to rate 10 common types of anti-poverty programs in terms of their effectiveness. Fair-trade coffee ranked second to last, ahead of only providing laptop computers to school children in poor countries (another intervention that has been rigorously studied and found to lack positive impacts on intended beneficiaries). Providing fresh water to rural villages finished first. Efforts to improve children's health through deworming campaigns and providing mosquito nets to mitigate malaria infection finished second and third. Sponsoring a child overseas was fourth. Providing clean-burning stoves to mitigate indoor air pollution and deforestation was fifth.
Let's focus on ways to help the poor that work -- and leave behind the things that don't.
Bruce Wydick is a professor of economics and international studies at the University of San Francisco. His new book, The Taste of Many Mountains, is about the lives of coffee growers in Guatemala and the impact of fair-trade coffee and is published by Thomas Nelson (HarperCollins).
What is Fair Trade Coffee?
If you love coffee, you have likely heard about fair trade. From Starbucks to Whole Foods, more and more corporations are offering fair trade coffee. Fair trade merchandise ranges from clothing to consumables, with coffee being one of the most common commodities. But what exactly is fair trade, and why is it so popular?
What is fair trade?
Fair Trade is a movement that promotes fair pay and ethical treatment for producer groups in developing countries when they export their goods to the developed world. It is regulated by a set of standards set in place by non-profit, third party fair trade associations who award certifications to companies that adhere to the 10 principles of fair trade.
Obstacles in Developing Countries
- Few Jobs- In areas where employment opportunities are scarce, people are left with no other option than to work long hours for low wages, often in unsafe conditions.
- Low Value- If local markets become saturated, the value of locally-produced commodities (such as coffee) drops substantially.
- Unfair Trade Deals- Additionally, middlemen, or commodities traders, pay farmers lower prices than their goods are worth in order to raise their own profits. As a result, farmers, their families, and their communities suffer.
Solutions Fair Trade Offers
- Long-Term Commitments- A true fair trade company will commit to working with the same producer for a minimum of 3 years. Real change takes time, so long-term agreements give farmers a chance to improve their methods under the guidance of their distributor. Producers who sell their goods to a fair trade company are paid livable wages for their work, are educated about human rights, and are ensured safe working conditions.
- New Markets- By selling their goods to North America and Europe, producers can get a better price because the demand is higher in those markets than at the local level.
- Eliminate Middlemen- Distributors work directly with producers. In the context of coffee, this means that green coffee buyers (who purchase coffee berries before they are roasted) travel to the developing world and meet with farmers to form trading relationships built on trust.
10 Principles of Fair Trade
1. Create employment opportunities in the developing world.
2. Practice transparency in communication and take accountability in actions.
3. Focus on improving the lives of producers through long-term agreements and interest-free cash advances.
4. Pay a fair wage to producer groups promptly and in the amount previously agreed upon by both parties.
5. Prohibit the use of child labor and forced labor.
6. Do not discriminate based on race, caste, ethnicity, religion, disability, gender, sexual orientation, political affiliation, HIV/Aids status, or age.
7. Maintain safe and healthy working conditions.
8. Foster independence for producer groups by encouraging them to improve their internal management skills and access new markets.
9. Promote fair trade by raising awareness of the issues in the developing world and how ethical trade can improve the lives of producers.
10. Respect the environment by using responsible production methods.
Fair Trade Certifications
Fair trade coffee companies must meet the standards set up by fair trade organizations. They can then apply for fair trade certification and pay membership fees to fair trade associations. In order to maintain this certification, fair trade coffee brands complete an annual assessment that includes information such as how many times each producer has been visited to ensure that working conditions are up to par. Peer reviews are also common in the certification process, meaning that competitors will assess each other and report back to their organization. That way, you can trust that a company that is fair trade certified is keeping up with all 10 principles of fair trade.
Once they are certified, they can put a Fair Trade Certified™ logo on their packaging.
Fair trade associations include:
- Fairtrade International
- Fair Trade Federation
- World Fair Trade Organization
How Does Fair Trade Relate to Coffee?
The best coffee in the world grows in a specific climate that can be found in regions near the equator. Unfortunately, many of the countries where this climate exists face economic uncertainties due to governmental issues or other factors.
Second only to oil, coffee is the commodity with the highest volume being exported to the developed world. The high demand for coffee in North America and Europe creates an opportunity for farmers in developing countries to export their coffee. But it also means that is up to us as consumers to be aware of where our coffee comes from.
Fair Trade Coffee Pricing
Many times, farmers join together and form cooperatives in their communities. These cooperatives can sell their product to coffee companies based in North America and Europe. Fair trade coffee companies work directly with farmers to agree on a price that will work for both parties, taking into account factors such as market value and operation expenses. Once a sustainable price is agreed on, the company will pay the farmers a portion of the order cost upfront. This helps the farmers cover their expenses until the order is complete, at which time they receive the remaining balance of their order price.
How Much Money Goes Back to Farmers?
A common misconception is that a portion of the price a customer pays for a fair trade item goes directly to the farmer. But really, the farmer will already have been paid in full by the time the product reaches shelves. The importance of buying fair trade commodities is that customers make it possible for fair trade organizations to continue placing orders from the developing world.
Often, coffee farmers will invest their earned profits in their communities for education, healthcare, the environment, or for improving living and working conditions. In order for these improvements to continue, it’s important that farmers receive consistent orders from distributors. But of course distributors can only buy as much as they can sell. So it’s a cycle that’s largely controlled by consumers’ choice to buy fair trade.
Why Buy Fair Trade Coffee?
Why is fair trade so popular? As people become more aware of problems in the developing world and the issues that arise as a result of unethical trading practices, more people are becoming conscious of where they spend their money. Consumers have the power to make a positive change through their purchasing decisions, because if more people support fair trade coffee brands, companies will be pushed to embrace ethical business practices. By providing fair wages to farmers, prohibiting child labor, and mandating sustainable regulations, fair trade associations promote healthier, happier lifestyles for communities in the developing world.
While the focus of fair trade is to improve the lives of people, the coffee produced under fair trade conditions is often of better quality than standard trade alternatives. This is because corners are not cut at any step of the process. For example, protecting the environment not only protects farmers against harmful chemicals, but it also yields a healthier coffee plant with more flavorful berries. So not only does fair trade coffee support farmers in the developing world, but it tastes great too.
When your company chooses to buy fair trade certified coffee brands, it is choosing to support equality for coffee farmers, sustainable business practices, and environmental responsibility. The purchase of fair trade coffee enables communities to become self-sufficient as they use their earnings to contribute to local education and healthcare.
How to Buy Fair Trade Coffee
When purchasing coffee beans and grounds, you should look for a fair trade certified logo. Many companies are not strictly fair trade, but they may offer some fair trade products. Some grocery stores and co-ops may have aisles dedicated to fair trade products. If you’re buying coffee in bulk online, product descriptions will mention Fair Trade and packages will show a Fair Trade Certified™ logo. You just need to look for them.
Some good fair trade coffee brands include:
- Equal Exchange
- Level Ground
- Pura Vida
- Higher Grounds
- Cafe Direct
- Grumpy Mule
What’s the difference between Fair Trade and Direct Trade?
Another thing you may have heard about while shopping for coffee is “direct trade.” The similarities between fair trade and direct trade are that they both cut out the middleman, meaning that green coffee buyers work directly with coffee farmers. Another similarity is that the result of building a long-term buying relationship yields a better quality coffee and a better quality of life for farmers.
The main difference between fair trade and direct trade is that they have different end goals. Fair trade was built to improve the lives of farmers, while direct trade places their focus on the quality of their coffee. But, just like fair trade’s social standards result in a better quality product, direct trade’s commitment to a high-quality product winds up helping farmers. Better quality requires long-term trading relationships and environmental responsibility, neither of which can be achieved without transparency, accountability, and fair wages. So, even though each of these trade movements has a different focus, they are both good options to consider when stocking your cafe.
Another difference is that while fair trade must be certified by a third party fair trade association, direct trade does not have a legal definition and each company defines what direct trade means to them. Since there is no certification process in place for direct trade at this time, you won’t see a direct trade logo on packages. This can make it harder to distinguish true direct trade brands from brands that use the term simply for marketing purposes. So, before buying a direct trade brand, it may be a good idea to check out their website and read about their sourcing standards.
Fair Trade vs. Direct Trade
|Fair Trade||Direct Trade|
|Standards are regulated by third party non-profit organizations||Standards are regulated by individual companies|
|Main objective is to improve lives of farmers (but has great quality as a result)||Main objective is to improve quality of coffee (but improves lives as a result)|
|Fair trade certified brands will have a logo on the packaging||There is no official direct trade certification or logo at this time|
Some direct trade coffee brands include:
- Counter Culture Coffee
- Stumptown Coffee Roasters
- Intelligentsia Coffee
- The Roasterie
- Passenger Coffee
- Square One Coffee
It is always a good idea to research brands and companies online prior to buying their coffee. Not only does coffee sourcing affect working conditions for farmers and the strength of their communities, but it is also a factor in the quality and flavor of the product itself. So the more you know about a brand, the more confident you can be about providing your guests with a good product.
7 Reasons You Should Buy Fair Trade Coffee
We have all heard much buzz lately about buying fair trade and organic products, particularly in reference to daily commodities such as coffee. But what does “fair trade” actually mean? And why is it so important to buy fair trade, organic coffee?
What is Fair Trade?
Fair Trade refers to the system of buying and selling goods and commodities in a way which the local producers and communities involved in the growth and production of the commodity are honored and paid a fair wage. Fair trade also may include policies that honor the local natural environment involved in the production, as well as the promotion of people-to-people connections, fairness and sustainability.
Almost 85% of Fair Trade Certified™ coffee is also organic. And although organic, fair trade coffee is usually more expensive. The list below will offer some great reasons why you should consider supporting the international community of fair trade coffee producers, despite the slightly higher price per bean.
1. Supports Environmental Sustainability
When you buy fair trade, organic coffee you also support environmental sustainability through organic practices that reduce and/or eliminate the use of harmful toxic agrochemicals, pesticides and other chemical additives. What is more, many fair trade coffee farmers work with sustainable production methods to help keep the natural environment thriving for generations to come.
2. Fair Price
You support a fair price for products. Certified fair trade coffee has been given a base price, which is set by the international Fair Trade Labeling Organization. Therefore, you don’t get ripped off, but neither do the workers that produces the beans.
3. Supports Local Communities & Workers
When you buy fair trade, organic coffee you help the workers, organizations and communities involved in the production to receive a living wage. This is a direct support against commodities practices that leave workers without the minimum salary required to have basic food, shelter, medical care and education.
4. Invests in Local Community Building
When you buy from a fair-trade producer, you also invest a small amount of your money in that local community. Whereas many coffee producers move into villages and towns and take-over local customs and culture, many fair trade coffee operatives reinvest revenues back into the local business and community.
Even more importantly, fair trade producers continually offer back a social premium to specific community development initiatives in the realms of housing, healthcare, education, leadership training and women’s programs.
5. Tastes Better & Healthier For You!
Fair-trade, organic coffee is better for your health and tastes better. As the demand for global coffee increases, methods of mass-producing coffee lead to lower-quality produce. Sustainably grown organic coffee is often grown slower, and under rain-forest canopy. It is also grown without chemical fertilizers and pesticides, allowing the coffee to keep all of its nutrients.
During the pressing process, organic coffee is processed without the use of the harsh chemicals commonly used on non-organic beans. What is more, organic coffee plants create soil that holds its complex nutrient base. These plants can then feed nutrients back into the beans at a slow and steady rate, adding a robust, smooth flavor to the beans. It also allows the native soil to retain its complex nutrient base (as compared to the depleted soils commonly found on full-sun coffee farms).
6. Help Increase and Preserve Biodiversity
Many birds in the U.S. move to “coffee country” in the winter. Unlike mass-produced coffee, which sometimes robs animals of their natural habitat, traditional fair-trade coffee plantations offer some of the last remaining bird habitats in countries like Colombia and Mexico. In fact, studies in these two countries show that organic “shade-grown” coffee plantations have up to 95% more bird life than large-scale, rain-forest-stripped “sun-grown” plantations.
7. Remove the Middle Man
That $4.00 Vente Mocha Latte you buy every day may have gone through the hands of up to ten different farmers, exporters, brokers, processors, roasters and retailers before it reached your lips. Fair trade coffee attempts to eliminate these costly middle men through working directly with cooperatives of small bean farmers.
†Results may vary. Information and statements made are for education purposes and are not intended to replace the advice of your doctor. Global Healing Center does not dispense medical advice, prescribe, or diagnose illness. The views and nutritional advice expressed by Global Healing Center are not intended to be a substitute for conventional medical service. If you have a severe medical condition or health concern, see your physician.This entry was posted in Foods, Healthy Foods, Nutrition