Fair-trade coffee: not so fair?

In a piece in The National Post (Saturday, May 14 2011) titled “Fair-trade coffee producers often end up poorer”, Lawrence Solomon writes:

Coffee is one of our guilty pleasures, and not only because of the calories that can be packed into a double latte. Many of us feel guilty that our pleasure is coming at the expense of the Third World coffee farmer, so much so that we gladly pay more for “fair-trade” coffee, which certifies that farmers receive more revenue for their crop.

Saturday, on World Fair Trade Day, we have something else to feel guilty about. That fair-trade cup of coffee we savour may not only fail to ease the lot of poor farmers, it may actually help to impoverish them, according to a study out recently from Germany’s University of Hohenheim.

The study, which followed hundreds of Nicaraguan coffee farmers over a decade, concluded that farmers producing for the fair-trade market “are more often found below the absolute poverty line than conventional producers.

“Over a period of 10 years, our analysis shows that organic and organic-fair trade farmers have become poorer relative to conventional producers.”

These findings do not surprise me. I speak as someone who has had contact with various Third World producers in my capacity as president of Green Beanery, a company I founded seven years ago to raise funds for Energy Probe Research Foundation, a federal charity that I manage. Green Beanery sells more varieties of coffee, including fair trade and organic coffees, than any other company in Canada, giving me occasion to witness the nature of the fair-trade business, and hear first hand of its impact on small producers that supply us.

The fair-trade business is filled with contradictions.

For starters, it discriminates against the very poorest of the world’s coffee farmers, most of whom are African, by requiring them to pay high certification fees. These fees — one of the factors that the German study cites as contributing to the farmers’ impoverishment — are especially perverse, given that the majority of Third World farmers are not only too poor to pay the certification fees, they’re also too poor to pay for the fertilizers and the pesticides that would disqualify coffee as certified organic.

Their coffee is organic by default, but because the farmers can’t provide the fees that certification agencies demand to fly down and check on their operations, the farmers lose out on the premium prices that can be fetched by certified coffee.

To add to the perversity, it’s an open secret that the certification process is lax and almost impossible to police, making it little more than a high-priced honour system. Although the certification associations have done their best to tighten flaws in the system, farmers and middlemen who want to get around the system inevitably do, bagging unearned profits. Those who remain scrupulous and follow the onerous and costly regulations — another source of inefficiency the German study notes in its analysis — lose out.

The full article is found at: http://opinion.financialpost.com/2011/05/14/lawrence-solomon-fair-trade-coffee-producers-often-end-up-poorer/

One Comment on “Fair-trade coffee: not so fair?”

  1. Rob Clarke says:

    Fairtrade Canada response to Lawrence Solomon’s National Post story “Fair-trade coffee fix”

    Fairtrade aims to offer producers a better deal and improved terms of trade. We are constantly working to deepen Fairtrade’s impact on producers and we welcome rigorous research and healthy debate around these issues. Lawrence Solomon’s criticism of the system in his May 14th article “Fair-trade coffee fix”, however, is highly flawed.
    Firstly, Mr. Solomon claims that a recent study in northern Nicaragua indicates that Fairtrade coffee may help to impoverish farmers. What he neglects to mention is that the Fairtrade producers studied received higher farm-gate prices than conventional producers and that significant production losses (unrelated to Fairtrade) may have accounted for revenue loss. While the study’s findings may highlight the need for further research, Mr. Solomon‘s suggestion that these results are generalizable is highly flawed, given that the authors conclude that the study results cannot be applied to regions beyond the study area.
    Secondly, Mr. Solomon purports that Fairtrade discriminates against the poorest of the world’s coffee farmers, many of whom are in Africa, through high certification fees. While it does cost money to uphold the system’s rigorous certification standards, these costs are split amongst the hundreds or thousands of members that belong to the co-operative. Fairtrade International offers funding for impoverished producers to meet up to 75% of the cost for poorest producers through its Producer Certification Fund. In addition, according to Fairtrade International’s 2008 figures, 60% of Fairtrade individual farmers and workers are, in fact, based in Africa.
    Thirdly, Mr. Solomon again criticizes the Fairtrade certification system as being “lax and almost impossible to police.” FLO-Cert, an independent organization that conducts rigorous producer audits, ensures that relevant social and environmental standards are met and that producers receive the Fairtrade guaranteed price and premium. FLO-Cert is ISO 65 certified, and ISO 65 is the leading, internationally recognized quality norm for bodies operating a product certification system.
    Finally, there is indeed a reason why many Fairtrade merchants refer to the many additional benefits of Fairtrade: Fairtrade is about much more than price.
    Beyond a minimum floor price that protects coffee producers from the volatility of world markets, organizations receive an additional sum of money called the Fairtrade premium. This money goes into a communal fund for workers and farmers to use to improve their social, economic and environmental conditions. Smallholder producers, as landowners who choose to join democratically-owned co-operatives, are in the best position to determine how to meet their own needs. As such, these individuals determine how the premium will be spent, investing in, for example, education and healthcare, farm improvements to increase yield and quality, or processing facilities to increase income. In 2009 alone, the Fairtrade system returned €53 Million to producers in Fairtrade premiums.
    And there’s much more to Fair Trade, such as access to credit, long term contracts, transparency and accountability, the prohibition of forced and child labour, gender equity and environmental sustainability. Needless to say, Mr. Solomon is wrong in saying that consumers have something to feel guilty about. Globally, consumers spent €3.4 Billion on Fairtrade products in 2009, contributing to a market-based system that benefits more than 1.2 million farmers, workers and their families, and recently joined in celebrating Fair Trade Fortnight and World Fair Trade Day across Canada. We’d call that something to feel great about.

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