Fair Trade Betrayal

Last year Fair Trade USA stunned the coffee industry with its announcement that it was pulling out of Fairtrade Labelling Organization (FLO), the international body that governs the use of the Fair Trade mark, and changing its criteria to allow certification of estates as part of a new initiative they are calling "Fair Trade For All."

This decision was made without consulting producer groups or licensed roasters currently certified with Fair Trade USA and came as a shock to both parties. Members were left confused, as it seemed that Fair Trade USA had abandoned its core supporters. Fair Trade USA claimed that it had to act unilaterally since FLO had spurned earlier efforts to expand the certification criteria.

By and large, this move has had little overall public impact. Indeed, it seems as if the general response has been a collective yawn both within the industry and among customers. This comes at an especially dangerous time for the Fair Trade movement as it has been revealed that there is explicit language in the Central American Free Trade Agreement (CAFTA) that poses a direct threat to protections for small producer groups and Non-Government Organizations (NGO's).

Should we care?

That all depends on how you perceive the Fair Trade mark. Does it represent a movement or a market? If it is a market, then expanding the criteria would seem to be a good thing. But if it is a movement . . . criteria matters.  This movement vs. market question has long dogged Fair Trade since it began and it may be helpful to review a little history on how we got here. 

For the better part of the past half century, since the ending of WWII, the price of coffee was controlled by the International Coffee Agreement administered by the International Coffee Organization. This agreement came about after world leaders reflected on the many causes that led to war and national instability. It was recognized that there was a link between poverty and terrorism (I know, crazy, right?). In an effort to build stability in the developing world it was decided that developed nations needed to work together in order to create income stability. Coffee was seen as a logical vehicle to this end since the areas it is grown in tend to be hotbeds of revolutionary impulses. The International Coffee Agreement was a tool to regulate the flow of coffee around the world in order to maintain a stable price that farmers could rely on to provide a positive cash crop.  Not only would the amount of coffee produced be regulated, but so too the amount of coffee imported into developed nations that were party to the agreement. The Soviet Union was not a part of the agreement since they did not have a convertible currency, neither was much of the middle east, since imports there were considered marginal.

Did it work? Well, aside from a couple of years of severe frost in Brazil when coffee prices soared, the answer is unequivocally yes. Unless, of course, you are a commodities speculator. Its hard to make much money in a stable market.  And if you subscribe to Free Trade ideology, nothing rubs you wrong more than a working, international, market control mechanism. So, in a wave of market reform movements unleashed in the 1980's, the International Coffee Agreement was suspended in 1989 with the result in the collapse of the price of coffee since Brazil had been stockpiling coffee for years and now could dump it on the world market, much of it below exportable grade; coffee trash, as it were, since the agreement not only covered how much a country could export but of what quality as well.

I recall when this happened. I had been a coffee roaster for only a few years then and I couldn't believe my good fortune. Almost overnight, the price of coffee was cut in half. It was a boon for profitability- if you were a roaster, that is. If you were a coffee farmer, particularly a small coffee farmer, it was disastrous. Before long, I would reconsider what kind of boon this was. I began to notice the availability of good quality coffee drying up. Today, I am embarrassed to admit that it took the decline in coffee quality to wake me up to poverty around the world, but that's the truth of it.

As I began my travels around the world learning about coffee growing, what I began to understand was the connection of environment to coffee's flavor. The coffees I loved the most, the ones that really stood out to me, were the ones coming from traditional farms. It was these traditional farms that were the most under threat in the new "market" reality. The new reality stated that it was a speculator who dictated the price paid for coffee.  The new reality said if you couldn't compete with the market, then you need to leave. And leave the farmers did, swelling the population in urban areas where jobs were few and crime was high.

During this same period missionary groups and activists began to bring the issues of globalization to the public's eye. Ten Thousand Villages promoted indigenous handicrafts and the Max Havelaar label was born in Europe. Small producer farmers in Mexico pushed to use the Max Havelaar label for coffee. In 1989, forty Alternative Trade Organizations (ATO) joined together to form the International Federation for Alternative Trade, and the founding of the Fair Trade Federation.

These organizations united South and the North, developing with the developed activists with markets. Out of this grew a tension between two competing visions, according to Daniel Jaffee, author of Brewing Justice, one that sees Fair Trade as a tool for modifying the dominant economic model and the other that emphasizes fair conditions for products from the South.

In the first vision, cooperative models are promoted to contrast the dominance of market forces that favor multinational corporations who have a history of exploiting under-represented communities, especially rural village communities. The second vision sees the march of globalized commerce as a given and seeks to merely reform certain aspects of its practices, such as working conditions. Is Fair trade a corrective to the structural unfairness of globalization or is it an alternative, competing vision of world trade? What's important to our discussion here, though, is that it is the close collaboration of cooperative groups that provided the formation of the Fair Trade movement in the beginning. It could be said that it was these cooperative groups that co-founded Fair Trade, and as a result have a say in its criteria.

As Farmers Markets gained popularity in the US as a way for consumers to experience face to face interactions with food producers, standards based certification acts as an effective surrogate where such face to face interactions are impossible, allowing customers to embed such transactions with greater morality and responsibility. 

In 1997 all of the national certification entities united to create the Fairtrade Labelling Organization (FLO) in Bonn, Germany to create an international standard for certification and in 1999 Transfair USA debuted the mark in the US. It was a heady time for anti-globalization activism, and Starbucks was a favored target. It would be here that the clash of Fair Trade activism in the North would be played out, and the actions of Transfair USA would set a questionable precedent for the future of Fair Trade in the US.

An aggressive consumer awareness campaign highlighting the poor pay farmers received for coffee narrowed the discussion of Fair Trade in the US, much in the same way that the meaning of Organic has been reduced to a question of allowable inputs. This narrowing of message may have seemed necessary to communicate to consumers used to sound bite narratives and easy solutions. Indeed, just purchasing coffee with the Fair Trade label was an easy way to feel good about purchasing a product whose origins are largely shrouded in mystery.  But focusing on consumers meant that many roasters found themselves on the defensive, not the least of them as what many considered the biggest baddie of them all: Starbucks. In one of the more convoluted explanations, Starbucks claimed that there was both not enough supply and not enough demand for Fair Trade Certified coffee!

Transfair USA was quick to want to work with Starbucks, seeing them as a way to mainstream the idea of Fair Trade to consumers and a way to leverage other roasters. But the decision in 2000 to bring Starbucks into the Fair Trade movement caused a number of problems. The first was that the contract agreement was secret, while the Fair Trade system is supposed to be transparent. The arrangement exposed the issue of Transfair USA being both a certifier and promoter, while FLO has separated the certification and promotional functions to protect legitimacy. The certifier is the gatekeeper of that legitimacy.

Rather than creating greater acceptance for Fair Trade products, the entry of Starbucks raised serious questions about corporate involvement.  Some worried that large corporations could sow confusion about the level of their involvement with Fair Trade, using the mark to essentially deflect consumer concerns of exploitative trade arrangements. If Transfair USA allows such companies to promote the Fair Trade seal, wouldn't that lead to consumers being cynical about the integrity of Fair Trade?

These issues compelled Cooperative Coffees Network to withdrawal from Transfair USA in 2004. Over the next few years an exodus of roasters occurred, citing a lack of commitment to Fair Trade principals. Many began promoting the Fair Trade Federation mark, which certifies companies who commit to 100% Fair Trade purchases. But for those roasters who, for various reasons, unable to source all of their coffees from Fair Trade sources there was no alternative.

Meanwhile, some roasters began creating their own look-alike seals, under the nomenclature "Direct Trade," and sowing further confusion among consumers by claiming that they were better than Fair Trade since they claimed to pay higher prices to farmers than the Fair Trade specified minimums. Such copy cat seals are particularly deleterious. It would be akin to Walmart deciding that it wanted to allow its customers the experience of a farmers market and setting up a fake market populated by representatives of Tyson and Monsanto in their parking lot. Direct Trade is the Intelligent Design alternative, it suggests certification legitimacy where none exists.

But when the certifier is also the promoter, there is the tendency to wish to expand available products to certify. This is exactly what has happened to Fair Trade. Consumers wished to see the seal on other products beyond coffee, especially tea and bananas. The problem being that these products are rarely grown in cooperative farms. So the criteria for these products focused on fair labor standards.

If these products can be certified Fair Trade and not come from cooperatives, why not coffee? At the 2003 FLO annual assembly this very question came to a vote. The vote failed due to substantial opposition from farmer organizations and progressive roasters. Transfair USA's (now Fair Trade USA) claim that FLO was dragging its heals on the question is partly true, due to the fact that it is a member organization and the members opposed the idea. Fair Trade USA's decision then to pull out of FLO and move ahead with certifying estates is in direct conflict with member directives. That they made this decision without consulting even their own members further complicates the matter.  Who did they do it for? Roaster members were not asking for it, and producing members certainly were not behind the idea. Their "Fair for All" campaign suggests that they are doing it for farm laborers who currently do not have a stake in the current certification criteria. But the fact is there are already certifying agencies that do address this, namely Utz Certified and Rainforest Alliance.

This has left US roasters who wish to remain true to the original tenets of Fair Trade in something of a quandary. Moreover, it left FLO without a certifying agent for the largest consumer coffee market in the world. In the interim, Fair Trade Canada has accepted those roasters formerly certified with Fair Trade USA who wished to comply with international standards.  Many roasters, however, have taken a wait and see approach with Fair Trade USA. For their part, Fair Trade USA has stepped up promotions of cooperative projects, perhaps as a way to deflect criticism. Regardless, their decision to include estates in their criteria is a betrayal to the cooperative groups who help create Fair Trade. Many of these groups are ambivalent to this change, some are outraged, but know that Fair Trade USA still commands the largest consumer market for certified coffee.

Should we care?

I think we should. Fair Trade Certified coffee still represents a tiny fraction of sales in the US market. Fair Trade was built on the ideals of cooperative enterprise and it is this ideal that is being eroded by Fair Trade USA "experiment" with certifying estates. Small farmer producers are still the most vulnerable players in global commerce. By supporting small farmer producers you strengthen village communities, giving a voice to those who traditionally have had little say in their's or their children's future. Fair Trade is more than just a marketing label, it is a commitment. Fair Trade USA has betrayed that commitment by placing brand promotion over label integrity.

For our own part, we have made the transition to Fair Trade International. Fair Trade USA's move to separate itself from FLO represents a final blow to what has been, admittedly, an increasingly tenuous relationship. As a small roaster committed to small farmer cooperatives, Fair Trade USA's move is a slap in the face to not only small producers but small roasters as well. It seems to me that this move is one simply to increase Fair Trade USA's available products, and thus increase its own coffers. It is not something that we want to be a part of, nor is it something that is in the best interest of coffee producers. It is a betrayal to its members, both South and North.


Fair Trade Federation said...


Thank you for this excellent and informative summary of the evolution of fair trade coffee. I particularly appreciate your distinction between two visions of fair trade – a “do no harm” model of improving wages and working conditions in the Global South, and a model that seeks to transform trade relationships. Certainly these two models can and do co-exist, and we should continue to talk about the role that each model plays within fair trade.

As you mention, the Fair Trade Federation supports organizations like Cooperative Coffees that have made the well being of marginalized producers their primary concern. By doing so, these companies seek to transform the conventional buyer-seller interaction; they create open contracts, honor long term relationships, and support democratically organized cooperatives. This is a high bar that not everyone chooses – and we’re proud that our members have reached it.

The fair trade movement must grow, and it must grow with integrity. Thanks for your contributions to the conversation.

-Renee Bowers, Executive Director
Fair Trade Federation

Unknown said...
This comment has been removed by the author.
Unknown said...

Hey there,

Great thought provoking article-- thanks for putting it out there.

I do want to point out that the Co-op Coffees network itself did not pull out of the TFUSA system in 2004. Four individual roasters in the CC network (Just Coffee Co-op, Cafe Campesino, Dean's Beans, and Larry's Beans) did leave at that time. However, the importing co-op stayed officially a licensee as many of its other members did not want to leave the label.

Thanks again for your work and your analysis. I agree with Renee' that there is room for different approaches in fair trade, but we should be very clear about how they break down and what our motivations are within the movement/market.

Take care!

Matt Earley
Co-founder, Just Coffee Cooperative

Jonathan Rosenthal said...

Thanks for covering important issues and history. I would love to see fair trade folks grapple with the issue of how to change the marketplace. Is the small is beautiful approach enough? How will it go from its tiny niche status to change the way all things are traded? Or, less pie in the sky, how do we go from less than 1% of the US coffee trade to 100%? What happens if we stay 1%?

I am deeply disturbed by the way FTUSA has acted. Their unilateral actions are, for me, arrogant and destructive. Yet, I do think they are grappling with how to best leverage massive change. And, while I have long argued with Paul Rice about theories of change, I agree with him on one point: the activist part of fair trade has not developed a theory of change that deals with the majority of the market. And therefore, deals with the majority of coffee produced and sold.

The tension between the marketplace and these ideals is huge and challenging. Let us not leave the choices to be top down colonial approach or tiny democratic approach.

And, I believe that FTUSA no longer cares much about the “movement.” They are looking to engage the corporations of the world. Activists were useful in the early phases of label building. They are now moving beyond that phase and have less and less use for us.

I hope we can learn from the US Democratic Party that allowing others to define the terms of debate is a weak strategy.

I urge us all to develop new approaches that do develop this kind of macro view. I continue to think there must be better ways to transform the whole marketplace that stay true to our values of inclusion, transparency and maximum justice possible.

hostuniversal said...

Maybe it's time to look at change in a wider context and work out what FT's role is in the wider transition the world is going through. Fair Trade doesn't exist all on its own, there are 10s of 1000 of other organisations who share the same values but do something different. By coming together we could develop scale without losing diversity really offer a platform for transformation never seen before. I'd like to think-tank that one.