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are not going directly to farmers, the quality of Fair Trade coffee is uneven, and the model is technologically outdated.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 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. 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 s and s, 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 s, 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 s 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 s, 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 , 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 s, 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 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 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. This can be seen in the case of Fair Trade coffee, which is typically priced as a high-end product. This is a worthy move if the coffee is of a high quality, but if it is not of sufficient quality to merit this price tag, then it risks turning consumers away from Fair Trade produce, and further impeding its reach to mass markets where it can truly make an important change to consumer habits.
Fair Trade is a concept worth embracing, but first it must prioritize effective and transparent processes of production and distribution.
What Fair Trade aims to achieve is admirable, but what it could potentially achieve is far greater. This price guarantee is intended to augment and stabilize the revenues of producers in developing countries, so that they can invest in social welfare infrastructure and environmentally friendly farming methods. It is worth noting at the outset that there are some slight variations in the way this concept is spelled or presented. When people discuss fair trade, the conversation usually begins with coffee, which remains by far the most economically significant product category covered by fair trade.
Although fair trade has expanded to include other agricultural and manufactured products, such as bananas, tea, honey, sugar, rice, cacao, organic cotton, textiles, and handicrafts, any attempt to evaluate the success or failure of the fair trade movement must begin with an examination of its role in the coffee industry.
With corporate coffee giants like Starbucks vaunting their sales of fair trade coffee, most consumers have become aware of the movement, although few are able to precisely define the mandatory standards that must be satisfied in order for a product to be called fair trade. Now, fair trade coffee is as ubiquitous on supermarket shelves as food deemed certifiably organic—but compared to the organic label, the fair trade certification process is more complex and subject to different interpretations from different certifying bodies.
In this chapter, you will be asked to consider whether a New York—based specialty coffee chain should make the transition to selling exclusively fair trade coffee and tea products.
Should she ignore what she has read? Making the switch will increase costs to her consumers, whose cup of coffee will have to go up in price by twenty-five to fifty cents—but on the positive side she will be able to claim that her business is socially responsible and sustainable. Does a coffee shop chain that aspires to the highest level of social responsibility have an obligation to engage in fair trade, even if the existing fair trade system is not perfect?
In order to discuss this issue, we need to arrive at a deeper understanding of what fair trade means. As with many other progressive social programs, the fair trade concept can be traced back to the personal initiatives of a few dedicated reformers with a social conscience.
In , Edna Ruth Byler, an American businesswoman, had the idea of importing needlecrafts from impoverished Puerto Rican communities and paying their creators a fair wage for their work. Today, Ten Thousand Villages maintains long-term relationships with artisans in 38 countries that provide stable opportunities for income. The first fair trade organization in Europe was in the United Kingdom, an offshoot of Oxfam UK, which during the s had sold crafts made by Chinese refugees.
By , this had developed into the fair trade Organization, and in , the Netherlands initiated its own cooperative, fair trade Original. World Shops became the first retail distribution network of fair trade products and the first European World Shops conference was held in Guatemalan-grown fair trade coffee was introduced in the Netherlands in In , the first fair trade coffee brand, Max Havelaar, hit the market.
Within a year, Max Havelaar commanded a 3-percent share of all coffee sales in the Netherlands. By the late s, there were several national fair trade cooperatives operating in Europe under different umbrella organizations, some of which spanned the jurisdiction of several countries.
Fair trade quickly outgrew its European origins. Five years later, the first network of fair trade organizations was founded in North America, called the Fair Trade Federation.
There are currently 23 members of FLO around the world. TransFair got its start in California, importing the production of Nicaraguan coffee farmers. In , four European Fair Trade organizations banded together to form an international coalition to promote and more clearly define fair trade practices around the world. Calling their coalition FINE, these organizations set forth one of the most commonly used definitions of fair trade:.
Fair trade, in the view of its supporters, is quite different from free trade, the defining international economic strategy of the twentieth century. The primary goal of free trade is to increase the economic growth of both developed and developing nations. The massive and continuing expansion of global free trade has been driven by consumers and manufacturers in developed nations. Fair trade, on the other hand, is intended to serve the interests of workers in developing nations.
Fair trade is meant to empower manufacturers and farmers in developing nations by providing them with privileged access to socially conscious consumers in the developed world.
However, as we shall see, the system is more complicated than one might expect, and a well-informed consumer or business needs to go deeper to have a sufficient basis for evaluating fair trade and deciding whether or not to participate in it. One of the reasons for the complexity of the fair trade system is that there is no universal fair trade authority.
There are several important international organizations that serve a coordinating function, but none of these has the power to impose standards on all players in the field. In fact, there are many different kinds of fair trade organizations: international nonprofit organizations, regional nonprofit organizations, local nonprofit organizations that certify fair trade brands, local nonprofit organizations that certify fair trade farming and exporting cooperatives, and finally, both nonprofit and for-profit inspection organizations that visit the farming cooperatives to determine whether they meet the criteria to be certified as fair trade.
Let us describe a few of the most important organizations. The WFTO serves as a global network and clearinghouse, serving the interests of over independent organizations in more than 70 countries. Note, however, that other organizations may still prefer to certify a product as fair trade. FLO-CERT is a private, for-profit company that carries out certification audits for national organizations that wish to authorize local brands and vendors to use the Fairtrade label.
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