Fair Trade Coffee: The Good And The Bad

Fair Trade isn’t just a label that you’ll see at farmer’s markets and in independent coffee shops anymore. Walk into almost any suburban grocery store and you’ll find Fair Trade certified coffee. I’ve even heard reports of Fair Trade coffee at Walmart. (How that works, I don’t know.) It’s not secret that Fair Trade is becoming more and more popular, but what exactly does the label mean and why does the system attract criticism.

What Is Fair Trade Coffee?

The Wikipedia style answer is that Fair Trade is an organized social movement and market based approach aimed to help farmers via higher prices for their products, along with higher environment and social standards.

It sounds like an answer that my economics 101 teacher in college would’ve said. Before you zone out, let me try to break it down into something that’s in English.

The Fair Trade process starts on the coffee farm, where third party auditors make sure certain environmental and social standards are met. (Keep reading for those standards.) A farmer with Fair Trade certification earns a higher price for his or her coffee, a price per pound that’s above the standard commodity price.

After the coffee leaves the farm, third party organizations track the beans as they’re processed, imported, sold to retailers and roasters in the United States. The auditors make sure environmental and social standards are kept through out the whole process and that there’s a transparency to see where the beans come from and where the money goes.

It’s really an over-simplified explanation, but hopefully if you had no idea how the system works, it gives you a basic understanding.

Fair Trade Requirements

To become Fair Trade certified, farmers have to meet the following requirements:

• Fair price and credit: Democratically organized farmer groups receive a guaranteed minimum floor price and an additional premium for certified organic products. Farmer organizations are also eligible for pre-harvest credit.
• Fair labor conditions: Workers on Fair Trade farms enjoy freedom of association, safe working conditions, and living wages. Forced child labor is strictly prohibited.
• Direct trade: With Fair Trade, importers purchase from Fair Trade producer groups as directly as possible, eliminating unnecessary middlemen and empowering farmers to develop the business capacity necessary to compete in the global marketplace.
• Democratic and transparent organizations: Fair Trade farmers and farm workers decide democratically how to invest their Fair Trade premiums.
• Community development: Fair Trade farmers and farm workers invest Fair Trade premiums in social and business development projects like scholarship programs, quality improvement and social empowerment trainings, and organic certification.
• Environmental sustainability: Harmful agrochemicals and GMOs are strictly prohibited in favor of environmentally sustainable farming methods that protect farmer health and preserve valuable ecosystems for future generations.

(via Fair Trade USA)

Fair Trade Criticisms

Fair Trade has it’s benefits for both the coffee farmer and the coffee drinker, but some believe that it’s doesn’t do much (or enough) to fix the problems in the poverty stricken coffee growing regions.

One of the most common criticisms is that the amount of money that farmers spend to get their farm ready for certification and for the actual certification is more than they’ll earn selling their coffee, even with the increased Fair Trade premium price.

Another common complaint is that too often the premiums that farmers earn, don’t end up making it back to the farmer or even benefiting them. A percentage of the Fair Trade premium price that farmers earn goes to the co-ops that organize the farmers and process their coffee, getting it ready to be exported. The co-ops are supposed to be transparent and democratically run, but it doesn’t always work like that.

There’s a coffee industry secret that Fair Trade coffee doesn’t always mean higher quality coffee. Fair Trade requirements speak only to the way coffee is grown and harvested, not to the quality of the beans. The example that I’ve read about several times is of farmers who sell their best coffee directly because they can get higher prices for it. Then they’ll sell their average coffee via Fair Trade because it’s also better than what they would get if they sold it directly.

To answer some of the criticisms, I talked to Jenna Larson, a PR person for Fair Trade USA, the largest Fair Trade certification organization of coffee that comes into the United States. (My questions are in bold, her answers are in italics.)

The cost of certification and preparing for certification might be too expensive for some farmers and the increase in premiums paid for their product, might not be enough to cover to their additional expenses.

Paying for certification is actually very important for the Fair Trade farmer; it means that the farmers themselves own the certificate, and are then able to sell to whomever they choose under Fair Trade terms.

Additionally, Fair Trade certification is about so much more than owning a certificate or earning a fair price. There is a value in the model that cannot be achieved through any other system of trade, a value that has prompted over 1.5 million farmers and workers worldwide to become Fair Trade Certified. The difference is that Fair Trade provides access to vibrant, global markets; it provides long-term, direct relationships between farmers and their international buyers; it protects farmers and workers from things like harmful pesticides, exploitation, unsafe working conditions, slave and child labor, etc..; and it empowers farmers and workers to invest in the well being of their families and communities through the Fair Trade premium fund (a separate fund, on top of the minimum or market price, paid to farmers and specifically earmarked for development projects, e.g. building a school, healthcare, clean water).

Fair Trade USA also does everything we can to make certification affordable for farmers. We even have a producer grant fund to help farmers overcome specific market constraints. Fair Trade USA also fundraises to generate money for projects that strengthen farming communities once they are certified. From 2006-2011 we raised $12.4 million to put into projects like price risk management training for coffee farmers in Colombia, or quality improvement training for cocoa farmers in Ghana. The higher the quality, the higher the price farmers receive for their goods.

Also, is Fair Trade just a step in the right direction or a real solution to the problems created by unfair trade?

We by no means claim that Fair Trade is the sole solution to global poverty. Poverty is an extremely complicated issue with deep roots in history, weak governments, war, and of course trade. Fair Trade is one approach in the agricultural (and textile) sector, that seeks to harness the power of the market and alleviate poverty through a more just system of trade.

We are so proud of what we, Fair Trade USA and our committed partners, have accomplished in the last 13 years. Through better prices and community development premiums, we have helped 1.5 million farmers and their families earn approximately $225 MM in additional income. Still, with 2 billion people living on less than $2 USD a day, Fair Trade can and must do more. Fair Trade has to work for far more people if we ever hope to make a significant dent in global poverty.

That is why Fair Trade USA is embarking on a new innovation strategy, aimed at doubling the impact of Fair Trade by 2015. In order to reach this goal, we are 1.) Partnering with global financial institutions, industry partners, NGO’s, leading social entrepreneurs and in-country service providers to help strengthen existing Fair Trade farming communities 2.) Innovating the Fair Trade model to include far more people, and 3.) Igniting consumer involvement to increase Fair Trade awareness and sales. We call this effort Fair Trade for All.

For years, many stakeholders have rightly criticized the Fair Trade system for inconsistencies in how Fair Trade principles have been applied. In some product categories, such as coffee, cocoa and sugar, Fair Trade certification has been limited to cooperatives. In other categories, such as rice in India, communities of small independent farmers are allowed to obtain certification. And in other categories, like bananas, tea and flowers, farm workers on large farms can also receive Fair Trade benefits. Fair Trade USA is working to eliminate these inconsistencies which exclude many farmers and workers from the benefits of Fair Trade.

To this end, we are adapting existing standards from the above categories, and applying them to farm workers and independent smallholders (small-scale farmers who, for one reason or another, cannot join or form a cooperative), and report on system-wide sales for both cooperatives and pilot farms to ensure new producers are not displacing the sales of current cooperatives.

There is currently one farm certified under these new standards in the pilot phase, a 100% organic coffee estate in Brazil called Fazenda Nossa Senhora de Fatima. The farm’s democratically-elected Fair Trade committee has already used the extra income from Fair Trade to provide eye and dental care for the 110 workers and their families. Last week, one of the older farmers with poor eyesight received her very first pair of glasses. It’s a truly inspiring story.

As we innovate, we are also extremely committed to ensuring that cooperatives remain strong and competitive into the future, as they are truly the backbone of the Fair Trade movement. Part of this effort includes the development of innovative new partnerships with global financial institutions, industry partners, NGOs, leading social entrepreneurs and in-country service providers. We call this cooperative strengthening effort ‘Co-op Link’, which focuses on increasing market opportunities; improving access to capital; creating programs to improve quality and productivity; and expanding the training available to cooperatives. For these efforts we have raised a total of $12.4 million since 2006, $5 million in 2011 alone.

Alternatives To Fair Trade

Alternatives to Fair Trade fall into two categories, certification alternatives and direct trade.

One certification alternative is More Than Fair. They aim to be a simpler and more credible certification system. Their certification guarantees that the coffee is grown sustainability and that the final product is high quality.

The members of More Than Fair are a combination of farmers, roasters and coffee retailers. They advocate transparency and work to improve the lives of the farmers and the quality of their coffee. They say that via their website coffee drinkers can connect directly with the farmers, roasters and retailers, holding them accountable for their actions and coffee.

Direct Trade is when the coffee roasters cut out the middlemen and certification organizations to buy directly from the farmer. The direct trade system. is growing more and more popular with premium specialty coffee roasters across the country. The system works in many cases because it builds a mutually beneficial relationship between the farmers and the roasters, allowing those that are unhappy with third party certifications to have more control over the bean quality, environmental issues and social concerns.

Further Reading:

Fair Trade USA: Why We Parted Ways with Fair Trade International

The Problem with Fair Trade Coffee

Does the label on the coffee bag matter to you? Are you a Fair Trade Fan?

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If you’re interested in buying Fair Trade, More Than Fair or Direct Trade coffee, please visit our sister site Coffee Responsibly.

Photo by jakeliefer