Fair Trade coffee enthusiasts should confront reality.

• Author: Weber, Jeremy

From university cafeterias to supermarkets in the developed world, people are buying Fair Trade (FT) coffee certified by the FLO-Cert, the certifying entity of Fairtrade Labelling Organizations International (FLO). The assumption is that such purchases will contribute 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 Fair Trade organizations (FLO, International Federation for Alternative Trade, Network of European World Shops, and the European Fair Trade Association),

Fair 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 Fair Trade necessarily "contribute to sustainable development." It is true that the Fair 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 Fair Trade coffee debates and governance must address these issues if Fair 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 Fair Trade instead of objectively analyzing the workings of the Fair Trade coffee system. For example, the financial manager of a Peruvian Fair 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 Fair 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 Fair Trade coffee assured me that the problem with Fair Trade is the participation of too many ideologically uncommitted entities. Even though this director was new to the job and had never visited a Fair Trade coffee cooperative, he had already determined the cause of the problem. This knee-jerk, blame-greedy-corporations reaction is common among Fair Trade enthusiasts. At the 2nd International Fair Trade Colloquium held in Montreal in June of 2006 the hot topic was the participation of large corporations in the Fair Trade coffee system (Nebenzahl 2006).

The Gap: Promotional Materials and Reality

While the participation of large transnational companies may alter the dynamics of the Fair Trade coffee system, Fair Trade faces more serious practical issues. A large gap divides the story depicted by Fair Trade marketing materials from the standards of FLO and the advantages of producer participation. This misleading representation of Fair Trade has led many socially conscious coffee drinkers to hold unexamined assumptions about the benefits of Fair Trade.

In trying to boost sales many retailers claim that Fair Trade coffee guarantees a living wage to coffee growers. A major promoter of Fair Trade coffee, Global Exchange (2005), states on its website, "Fair Trade guarantees to poor farmers organized in cooperatives around the world: a living wage." While it remains to be seen what constitutes a "living wage," in reality, Fair Trade guarantees nothing to producers. Fair Trade ensures a minimum price to organizations of producers, but not to individual producers. The organization serves as an intermediary between the producer and the market. Producers receive the price stipulated in the organization's export contract, which...