FAIR TRADE COFFEE ENTHUSIASTS SHOULD CONFRONT REALITY

Abstract

From university cafeterias to supermarkets in the developed world, people are buying Trade (FT) coffee certified by the FLO-Cert, the certifying entity of Fairtrade Labelling Organizations International (FLO). The assumption is that such purchases will to the welfare of marginalized producers in the developing world. While sales of FT coffee in Europe have stabilized, the North American and Japanese markets are growing rapidly. Total sales increased 40 percent from 2004 to 2005, to a total volume of 33,992 metric tons (MT) (FTO 2005). What is Fair Trade? According to FINE, the umbrella organization that comprises the four largest Trade organizations (FLO, International Federation for Alternative Trade, Network of European World Shops, and the European Trade Association), Trade is a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers--especially in the South [FINE 2001]. The FINE definition optimistically assumes that the trading partnerships and conditions promoted by Trade necessarily contribute to sustainable development. It is true that the Trade coffee system--the producers, exporters, importers, and retailers operating by the rules and standards of FLO--has improved living standards for many participating coffee growers (Bacon 2005, Raynolds 2004). Yet the system faces vexing issues such as a disconnect between promotional materials and reality, excess supply, and the marginalization of economically disadvantaged producers and groups. Those involved in Trade coffee debates and governance must address these issues if Trade is to be an effective mechanism for rural development in coffee producing regions. The Search for Culprits Unfortunately, many of those close to the movement prefer to blame profit-seeking corporations for hijacking Trade instead of objectively analyzing the workings of the Trade coffee system. For example, the financial manager of a Peruvian Trade coffee exporter explained to me that his company's critique of FLO is that it will allow companies like Nestle to participate, even though such companies are only in Trade for the profit. Never mind that the company he works for is a privately owned, for-profit export company. As Adam Smith so well noted, the interest of the merchants (including coffee exporters) is always to narrow the competition and expand the market. Likewise, the executive director of a major retailer of Trade coffee assured me that the problem with Trade is the participation of too many ideologically uncommitted entities. Even though this director was new to the job and had never visited a Trade coffee cooperative, he had already determined the cause of the problem. This knee-jerk, blame-greedy-corporations reaction is common among Trade enthusiasts. At the 2nd International Trade Colloquium held in Montreal in June of 2006 the hot topic was the participation of large corporations in the Trade coffee system (Nebenzahl 2006). The Gap: Promotional Materials and Reality While the participation of large transnational companies may alter the dynamics of the Trade coffee system, Trade faces more serious practical issues. A large gap divides the story depicted by Trade marketing materials from the standards of FLO and the advantages of producer participation. This misleading representation of Trade has led many socially conscious coffee drinkers to hold unexamined assumptions about the benefits of Trade. In trying to boost sales many retailers claim that Trade coffee guarantees a living wage to coffee growers. A major promoter of Trade coffee, Global Exchange (2005), states on its website, Fair Trade guarantees to poor farmers organized in cooperatives around the world: a living wage. …