In the last decade or so, there has been this great shift
towards recognising Fair Trade products such as coffee as a viable and more
humane option to big companies like Starbucks or Dunkin Donuts. Many of us have
at one time or another heard about fair trade. It would be more impressive than
not, to actually know a person who is from the Seattle/Portland/ Bellingham
area who actually has not heard of fair trade. And on paper, fair trade
products like coffee seem to be a great idea. The idea that I pay a little more
money for each cup of coffee that we get each day so that the producers of the
coffee beans in these often poor regions of the world, sounds very appealing. However,
when one begins to actually look at the numbers of this burgeoning “conscience-oriented”
industry, there is a lot of smoke and mirrors that would point to the idea that
Fair Trade is at this point in time, a unregulated marketing scheme where in
reality the farmers and growers of products like sugar, coffee are not seeing
any of the supposed capital that was promised by organisations such as FairTrade USAand Fairtrade Labelling Organizations Intl (FLO). In other words, we
as conscientious consumers are paying more money for a cup of coffee, money
that does not actually go to the farmers. In fact in many cases, producers of
coffee beans are better off not being part of the Fair Trade system because
they would see three to four times as much money given back to them compared to
what they would get by working with fair trade co-ops.
The problem first arises
in how the markets are set up in fair trade. In a post-International Coffee Agreement world where the price of coffee production has become extremely volatile (see page 4). In theory, Fair Trade organisations such as FLO attempt negate the volatility of these markets by setting prices for the markets. For example by setting a fixed price of $1.40 per pound of coffee, During those times of low prices of raw coffee, those fixed prices are a great buffer. However when prices rise, those who use fixed prices are often unable to demand higher prices for the coffee they produce. This becomes especially problematic when the coffee produced is varied in quality of grade. As Colleen Haight argues:
"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."
This tactic directly hurts the consumer and is less likely to buy fair trade if the belief that they are paying more for an inferior product. Which then directly negatively affects the fair trade producer because no one is willing to buy their product.
There also arises the issue that as globalisation occurs and growers who used to be isolated 10-30 years ago from the rest of the world, are now likely connected to the outside world. In other words, why go through a middle man like FLO when as a grower i can go straight to he buyer of the coffee and potentially make much more by directly selling the product?
There is also the trouble with transparency when it comes to Fair trade, there is a lack of regulation and oversight with these businesses. Often while the marketing of Fair Trade, companies highlight how the extra money that we as consumers will pay for that cup of fair-trade, very little of that extra capital that we paid is actually seen by the producer and that capital is spent on marketting and expanding operations. There is a lack of regulation to keep Fair trade operations honest to their goals marketed to consumers.
Moving forward, there is a great deal of potential for Fair trade but it needs to become more adaptable while more regulated by government bodies. With the collapse of the ICO, fair trade companies attempted to pick up where the ICO left off, however there is still a long way to go for Fair Trade to actually be a viable and consistent option for disenfranchised growers of products like coffee and sugar.
Other reading to look at:
"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."
This tactic directly hurts the consumer and is less likely to buy fair trade if the belief that they are paying more for an inferior product. Which then directly negatively affects the fair trade producer because no one is willing to buy their product.
There also arises the issue that as globalisation occurs and growers who used to be isolated 10-30 years ago from the rest of the world, are now likely connected to the outside world. In other words, why go through a middle man like FLO when as a grower i can go straight to he buyer of the coffee and potentially make much more by directly selling the product?
There is also the trouble with transparency when it comes to Fair trade, there is a lack of regulation and oversight with these businesses. Often while the marketing of Fair Trade, companies highlight how the extra money that we as consumers will pay for that cup of fair-trade, very little of that extra capital that we paid is actually seen by the producer and that capital is spent on marketting and expanding operations. There is a lack of regulation to keep Fair trade operations honest to their goals marketed to consumers.
Moving forward, there is a great deal of potential for Fair trade but it needs to become more adaptable while more regulated by government bodies. With the collapse of the ICO, fair trade companies attempted to pick up where the ICO left off, however there is still a long way to go for Fair Trade to actually be a viable and consistent option for disenfranchised growers of products like coffee and sugar.
Other reading to look at:
Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fair Trade Farmers to Finnish Consumer. (Use JSTOR to read)
Fairtrade is an Unjust Movement that Serves the Rich.
Fair Trade: Good Thing, or Bad?
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. - See more at:
http://ssir.org/articles/entry/the_problem_with_fair_trade_coffee#sthash.G9s5aTBX.dpuf
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. - See more at:
http://ssir.org/articles/entry/the_problem_with_fair_trade_coffee#sthash.G9s5aTBX.dpuf
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. - See more at:
http://ssir.org/articles/entry/the_problem_with_fair_trade_coffee#sthash.G9s5aTBX.dpuf
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. - See more at:
http://ssir.org/articles/entry/the_problem_with_fair_trade_coffee#sthash.G9s5aTBX.dpuf
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