Fair trade. How fair?

23-01-2015 Coffee culture

Good morning Jones Brothers!

Today we’re talking Fairtrade… and specifically about the ‘fair’ in the ‘trade’. The term has been banded about for years… the apparent holy grail of production, farming and trading best practices. But it has also been the subject of much criticism due to the wide range of controversial issues it raises.

The scheme was originally set up with the anything-but-simple mission of providing “better prices, decent working conditions, local sustainability and fair terms of trade for farmers and workers in the developing world”. Farmers who pay for certification are assured a minimum price – which can never fall below market level – and a premium to invest in their communities.

Before going on, we should point out that Fairtrade is not a system Jones Brothers Coffee supports and for very good reason. The reality is that many of us pick up items in the supermarket on sight of the Fairtrade symbol. We believe that somehow this means we’re benefiting the aforementioned farmers and workers in the developing world, but in fact, the Fairtrade system could easily be renamed Unfairtrade. You see, retailers just see Fairtrade items as reason to raise prices and thereby generating greater profit for themselves. There is no regulatory or enforcing body in place to ensure that a percentage of the profits generated are returned to the farmers. No regulatory or enforcing body! Put simply, by buying Fairtrade, the ‘good’ you are doing is often just the lining of retailer’s pockets.

The Fairtrade system guarantees a minimum price but quality isn’t considered so Fairtrade coffee is often lower quality. Coffee is basically a commodity and as market price is often above the guaranteed minimum from Fairtrade, coffee buyers buy on quality at market rates. This means that Fairtrade coffee isn’t purchased full stop! This is happening at the moment, as we’re seeing unprecedented market prices, as a result of world-leading coffee grower, Brazil’s devastating drought. The Fairtrade system is therefore practically null and void when lower quality Fairtrade coffees are competing on the commodity market at the same price.

So Fairtrade offers little benefit to the farmers. It certainly doesn’t provide a safety net to help poor farmers earn a better living. Perhaps it is nothing more than an example of western feel-good tokenism that holds back modernisation?

The topic is huge and could be the subject of an entire blog never mind a single short post. But here are some key points for you to consider:

  • Most consumers are willing to pay more for Fairtrade products in the belief that this helps the poor farmers so what happens to this money? Sadly, very little reaches the poor farmers!
  • The Fairtrade Foundation does not monitor how much more money retailers charge for Fairtrade goods
  • Furthermore, retailers almost never sell identical Fairtrade and non-Fairtrade lines side by side, so it is rarely possible to determine how much extra is charged or how much reaches the producers
  • Since Fairtrade charges a 1.9% licencing fee at wholesale, the maximum that reaches the Third World, even if traders charge unrealistically low margins, is 50%, and a much smaller amount would reach the target farmers
  • The Fairtrade Foundation does not monitor how much money actually reaches the farmer.
  • Fairtrade farmers are forced to sell through cooperatives, which are often inefficient or corrupt. They cannot choose the buyer who offers the best price or switch when their cooperative is going bankrupt
  • Fairtrade is undoubtedly profitable for traders in rich countries. In fact, it’s even aimed at richer farmers: in order to join Fairtrade, cooperatives must meet quality and political standards which means their farmers must be relatively skilled, educated and well capitalised, and so these farmers are, therefore, far from the poorest farmers
  • The majority of Fairtrade suppliers are in the higher income or middle income Third World countries, such as Costa Rica and Mexico, with relatively few in the poorest countries. Mexico has 70 times the GNP per head of Sierra Leone and much larger coffee farms. Is this not diverting money away from the poorest farmers?
  • Fairtrade reduces the incentive to diversify crop production and encourages the utilisation of resources on marginal land that could be better employed for other produce
  • Coffee farms must not be more than 12 acres in size and they are not allowed to employ any full-time workers. This means that during harvest season migrant workers must be employed on short-term contracts. These rural poor are therefore expressly excluded from the stability of long-term employment by Fairtrade rules

Interesting, is it not? And this just the cusp of the argument! Fairtrade, we believe, distorts markets, exaggerates its claims, prices out the poorest farmers and perpetuates inefficient modes of production.

Here at Jones Brothers Coffee, we only buy Specialty Graded coffee direct from the farmers and this is priced much higher than commodity coffee as well as Fair Trade coffee due to the higher quality. We actively support an initiative called UTZ Certified (www.utzcertified.org), which is based on traceability, social and agricultural policies. By not focusing only on price, it eradicates many of the flaws of the Fairtrade system.

If you remember one thing:

The next time you find yourself browsing the shelves at Jumbo, think twice before picking out the item with the Fairtrade logo. It might try to swing your moral compass but hopefully, you know now better!

Love what we brew!
The Bean Team