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Fair trade coffee

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Fair trade coffee
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See also Fair trade debate (WP)

Fair trade coffee is Wikipedia:coffee which is purchased directly from the growers for a higher price than standard coffee. Wikipedia:Fair trade coffee is one of many fair trade certified products available around the world. The purpose of fair trade is to promote healthier working conditions and greater economic incentives for producers.[1]

Coffee farmers producing fair trade-certified coffee are required to be part of a "co-op" (co-operatives) with other local growers. The co-ops determine how the premiums from fair trade coffee will be spent.[2] Growers are guaranteed a minimum price for the coffee, and if market prices exceed the minimum, they receive a premium that is calculated in accordance with every pound1 produced.[1]

Fair trade coffee has become increasingly popular over the last ten years, and is now offered at a significant number of coffee retailers worldwide. In 2004, 24,222 tonnes (of 7,050,000 tonnes produced worldwide) were fair trade; in 2005, 33,991 tonnes out of 6,685,000 tonnes were fair trade, an increase from 0.34% to 0.51%.

The inevitable increase in price due to the Fair Trade organization's costs is more than counterbalanced by the decrease in costs from the large percentage taken by middlemen being removed from the equation. [3] As with any other reduction in employment to gain efficiency, middlemen jobs are removed from the market, to be compared with an improvement in product price and fairer practice.

What should be important to the fair trade debate (WP) is the actual impact on grower prices, and while this is an important part of many activists' arguments, those who are against Fair Trade can potentially share an interest in common with the international coffee companies who are closer to the retail end of supply, and receive the bulk of the profit: critizing Fair Trade practices. 


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Criticism

Transnational corporations such as Wikipedia:Proctor and Gamble’s Wikipedia:Folger's, Wikipedia:McDonald’s, and Wikipedia:Starbuck’s now sell Fair Trade coffee, using their large consumer base and strong advertising campaigns to bring in Fair Trade consumers. Fair Trade activists are now concerned that the morally driven small Fair-Trade-oriented businesses are going to be pushed out of their original customer market.

When large corporations sell Fair Trade coffee, consumers are easily brought to the larger, well known companies for their Fair Trade coffee. This takes out the small coffee shops’ edge of selling consumer-oriented, special coffee’s like Fair Trade coffee and continues the success of big businesses in the coffee industry.


Ethics

Critics believe the Fair Trade certification is abused by marking up retail prices significantly, while only providing the growers with marginally higher prices.[4][5]

When large corporations like Wikipedia:Wal-Mart can afford to sell Fair Trade coffee, and choose to do so as an economic decision for profit, many consumers see the gap between large corporations supporting Fair Trade coffee growers in other countries but in the meantime the same corporations do not pay their workers wages similar to their profits and often put smaller, local business owners out of work. Some smaller sellers of Fair Trade coffee, who sell Fair Trade coffee as more than an economic decision are losing their Fair Trade market to these larger companies and many have suggested that Wikipedia:TransFair USA come up with a tiered labeling system so as to show that these small business owners are truly committed to Fair Trade and are not making the same larger profits off of the Fair Trade label that the large corporations can.[6]

Another criticism is that the per-pound price for Fair Trade coffee is that of the 1990 International Coffee Organization price, which is only moderately above the cost of production. Fair Trade farmers make $0.20-$0.30 per pound of coffee they grow and sell and as a result do not make much profit off of Fair Trade like the final sellers do.[6]

Some argue that Fair Trade pushes under-empowered growers into forming cooperatives, creating islands of democracy in often autocratic regimes. Others challenge the assumption that encouraging farmers to form cooperatives is a good idea; their argument proposes the hypothetical that co-ops can be just as corrupt as any other organization. In a system meant to eliminate middlemen that pitches itself as a direct connection to growers, co-ops add a level of bureaucracy between consumer and producer; this assumes, of course, that all middlemen are bad. The farmer does not directly receive the $1.26 per pound but instead receives whatever portion the co-op decides; this, of course, assumes that the co-op might decide to give an amount too small. Therefore, the reasoning goes, a corruptly managed co-op could mask the real price of coffees from individual farmers and turn a profit greater than that of the farmers themselves.[5]

Marketing concerns

Fair Trade is a commercial brand. For a fee its owners licence commercial firms the right to use the brand in marketing, and they expect to make a profit out of doing so. Coffee producer cooperatives pay a fee to become certified Fair Trade producers, and a fee is paid at packer level in the consuming country, possibly on behalf of the packer, distributor or retailer.

This article will concentrate on the Fairtrade brand, as it is by far the biggest. Other Fair Trade operations differ in detail. The Fairtrade Foundation manages the brand.

The marketing system for Fairtrade and non-Fairtrade coffee is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying importers, packers and distributors and advertising agencies to handle their brand, for obvious cost reasons. In the producing country Fairtrade is marketed by Fairtrade registered primary cooperatives exporting through secondary cooperatives, and non-Fairtrade partly by the same cooperatives, partly by non-Fairtrade registered cooperatives exporting through the same secondary cooperatives and partly by trading firms.

To become certified Fairtrade producers, the primary cooperative and its member farmers must operate to certain political standards, imposed from Europe, though many producers and consumers may not share these political objectives. The Fairtrade Foundation monitors whether these are achieved. In the Wikipedia:Fair trade debate there are many complaints of failure to enforce these standards, with producers, cooperatives, importers and packers profiting by evading them.

Any coffee that (a) is produced by members of a certified Fairtrade cooperative and (b) is sold with the Fairtrade brand should receive a minimum price FOB New York, which is payable to the exporting cooperative, not the farmer. This is below the world price much of the time, and irrelevant, but it is significantly above the world price when world prices collapse. In addition, the price paid should be 10c per pound above the world price at all times. Examples are quoted in the Wikipedia:Fair trade debate of importers using their buying power to pay exporters less than this for certified coffee, or otherwise avoiding their responsibility.</ref> paying exporters less than the Fairtrade price for Fairtrade coffee (kickbacks)[7] failure to provide the credit and other services specified[8] theft or preferential treatment for ruling elites of cooperatives [9] not paying laborers the specified minimum wage [10] However, far more certified coffee is produced than the market will take, so cooperatives can sell only a limited amount as certified, perhaps 15% to 50%, as branded. The rest must be sold at the normal unbranded world price.

Fair Trade creates a Wikipedia:price floor for coffee, which some economists believe has adverse affects on both growers and consumers. By setting prices artificially high, Fair Trade encourages more people to grow coffee, leading to a surplus. Since no one really understands the so-called Law of Wikipedia:Supply and demand, critics can get away with saying that demand is decreased because prices are higher, despite the fact that economists now more often say the opposite: because prices are high, sellers queue up to sell, increasing supply. These critics claim farmers will be unable to sell their coffee.[11]

Fair Trade claims to be ‘ethical marketing’, but this is challenged in the Wikipedia:Fair trade debate. Griffiths[12] in particular argues that much of it is the criminal offence of Unfair Trading in the EU.

Impact on non-Fairtrade farmers

Critics argue primarily and somewhat hypocritically against Fairtrade's competitiveness; charging that Fairtrade, but not all other Fair Trade businesses, harm all non-Fairtrade farmers by being more effective, and use a truly mindboggling example of Wikipedia:Communist Wikipedia:Vietnam's Fair Trade success story as an example of unfair competition with other 'poorer countries'.

Fairtrade claims that its farmers are paid higher prices and are given special advice on better techniques, both of which will lead to increased output being sold on the global market. Economists[13] assert that, as the demand for coffee, in particular, is highly inelastic, a small increase in supply means a large fall in market price, so perhaps a million Fairtrade farmers get a higher price and 24 million others get a substantially lower price. Their conclusion is that the Fairtrade minimum price means that when the world market price collapses, it is the non-Fairtrade farmers, and particularly the poorest, who have to cut down their coffee trees.

This argument is supported by mainstream economists. This argument is often illustrated with the example in which Vietnam paid its coffee farmers over the world price in the 1980s, planting lots of coffee, then flooding the world market in the 1990s.[14] Smith (2010) questioned the relevance of the Vietnam example,[15] and Griffiths published a sharp rejoinder.[16][17]


See also

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References

  1. ↑ 1.0 1.1 Staff (2000-2006). Fair Trade Coffee. coffeeresearch.org. Coffee Research Institute. URL accessed on 27 May 2012.
  2. ↑ Fair Trade | World Centric
  3. ↑ http://students.robinson.cam.ac.uk/rcsanew/fair-trade-it-really-all-much-fairer
  4. ↑ Fair Trade in Bloom - NYTimes.com
  5. ↑ 5.0 5.1 Absolution in Your Cup - Reason Magazine
  6. ↑ 6.0 6.1 subter » What’s Wrong With Fair Trade
  7. ↑ Raynolds, L. T. (2009). Mainstreaming Fair Trade Coffee: from Partnership to Traceability. World Development , 37 (6) p. 1089);Valkila, J., Haaparanta, P., & Niemi, N. (2010). Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fair Trade Farmers to Finnish Consumers. Journal of Business Ethics , 97: p264; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua – Sustainable development or a poverty trap? Ecological Economics , 68 3018-3025.
  8. ↑ Reed, D. (2009). What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86:3-26; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua – Sustainable development or a poverty trap? Ecological Economics , 68 pp. 3022-3); Barrientos, S., Conroy, M. E., & Jones, E. (2007). Northern Social Movements and Fair Trade. In L. Raynolds, D. D. Murray, & J. Wilkinson, Fair Trade: The Challenges of Transforming Globalization (pp. 51–62). London and New York: Routledge.; Mendoza, R. (2000). The hierarchical legacy in coffee commodity chains. In R. Ruben, & J. Bastiaensen, Rural development in Central America. New York: St. Martin’s Press, p.34–9; Mendoza, R., & J. Bastiaensen, J. (2003). Fair Trade and the Coffee Crisis in the Nicaraguan Segovias. Small Enterprise Development , 14(2), p. 42; Moore, G., Gibbon, J., & Slack, R. (2006). The mainstreaming of Fair Trade: a macromarketing perspective. Journal of Strategic Marketing , 14 329-352; Reed, D. (2009). What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86: p. 12).
  9. ↑ ; Mendoza, R., & J. Bastiaensen, J. (2003). Fair Trade and the Coffee Crisis in the Nicaraguan Segovias. Small Enterprise Development , 14(2), 36–46; Berndt, C. E. (2007). Is Fair Trade in coffee production fair and useful? Evidence from Costa Rica and Guatemala and implications for policy. Washington DC.: Mercatus 65 Policy Series, Policy Comment 11, Mercatus Centre, George Mason University)
  10. ↑ Weitzman, H. (2006, September 8). The bitter cost of ‘Fair Trade’ coffee. Financial Times; Weitzman, H. (2006, September 9). ‘’Ethical-coffee’ workers paid below legal minimum. Financial Times ; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua – Sustainable development or a poverty trap? Ecological Economics , 68 p. 3023)
  11. ↑ http://www.csmonitor.com/2008/0808/p09s02-coop.html
  12. ↑ Griffiths, P., ‘Ethical objections to Fairtrade’ Journal of Business Ethics July 2011(DOI) 10.1007/s10551-011-0972-0 www.springerlink.com Accessed at http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
  13. ↑ e.g.Griffiths, P. (2008) ‘Why Fairtrade Isn’t Fair’, Prospect, August Accessed at http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm; Booth, P. and L. Whetstone (2007) ‘Half a Cheer for Fair Trade’, Economic Affairs, 27, 2, 29–36; Sidwell, M. (2008) Unfair Trade, London: Adam Smith Institute.; Brink, Lindsey. (2004). Grounds for Complaint. URL accessed on September 25, 2006.; Mark, (2008). "Fighting the Tide: Alternative trade organizations in the era of global free trade - A comment," World Developmen, 36, 2953–2961´.
    Harford, T
    “The Undercover Economist.”, 2005]] Sam Bowman. Markets, poverty, and Fair Trade. Wikipedia:Adam Smith Institute. URL accessed on 2011-09-30.;name=”economist”>, ({{{year}}}). "Voting with your trolley," The Economist, {{{volume}}}, .
  14. ↑ Griffiths, ({{{year}}}). "Lack of Rigor in Defending Fairtrade," Economic Affairs, 31, 103–104.
  15. ↑ Fairtrade, (2010). "Lack of Rigor on Defending Fairtrade: Some important clarrifications of a distorting account – a reply to Perter Griffiths," Economic Affairs, 30, 50–53.
  16. ↑ Griffiths, P.: 2011, ‘Rejoinder: False Statements, Misrepresentation and Distortion in Defending Fairtrade’, Economic Affairs, 103-4. http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
  17. ↑ Griffiths, P.: 2011, ‘Rejoinder: False Statements, Misrepresentation and Distortion in Defending Fairtrade’, Full version: http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm

Additional sources

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