As the conversation regarding Fair Trade is growing among a larger circle, it has become a topic of differentiated opinions. Is it Fair? Does it work? Or has it become just another paid stamp to make consumers feel like they are “doing the right thing” as Fair Trade was designed to do when it was developed in the mid 20th century. The original concept was to improve the overall quality of life of the global poor, while helping the manufacturers educate themselves and improve business acumen by setting a guaranteed minimum price for their crop. Great Idea in its inception.
There is an article by Sarah Stanley asking the question of whether or not Fair Trade cures poverty as it was in part designed to do. The Article explains that coffee is what economists call an inelastic good. That means that if the price of coffee increases, the quantity demanded will not decrease by a lot. Victor V. Claar, Ph.D., is professor of economics at Henderson State University states “If coffee prices rise, coffee drinkers will probably buy less coffee, but probably not much less.” Spikes occur frequently in coffee prices due to bad weather and the delicacy of Arabica coffee plants. The price of coffee is volatile and is, according to fair trade advocates, too low.
Fairtrade International (Formerly known as the Fairtrade Labelling Organization-FLO) sets forth the requirements and certifies growers and goods. FLO oversees the fair trade market of many different goods. Coffee is one of the most common fair trade goods, but it is not the only one. FLO defines “fair trade” as:
An alternative approach to conventional trade and is based on a partnership between producers and consumers. Fairtrade offers producers a better deal and improved terms of trade. This allows them the opportunity to improve their lives and plan for their future. Fairtrade offers consumers a powerful way to reduce poverty through their every day shopping.
There is an application fee in the neighborhood of $3200.00 which is a large outlay for most coffee farmers. The regulations stipulate coffee growers may not hire laborers, but should rely on family members; coffee growers may not utilize child labor. However, if adults own a fair trade farm, their children will look for work down the road at another non fair trade coffee farm. Thus, they will no longer with their parents or older siblings, but will be working on their own. In effect, child labor is not eliminated it is simply displaced. Another interesting point explained by Claar is The artificially high price, set by FLO and other fair grade organizations, greatly increases the quantity supplied by incentivizing individuals, who would normally pursue other endeavors, to enter the coffee industry as growers and by incentivizing current coffee suppliers to grow more. This excess of coffee and coffee growers makes everyone in the industry poorer. Growers will produce more coffee than consumers want. Coffee growers that are not fair trade certified become significantly poorer because they will have to charge a much lower price for their coffee than they would in a truly free market. So at the end of the day, if you want to get paid, you have to pay for it.
Knowing that coffee is produced in third world countries, we are relying on the “Honor System” in an environment that is financially struggling for every penny earned and we see that the consumer also suffers, but not just because he or she is paying more for a morning brew. Fair trade coffee growers have little to no incentive to grow the best crop as they are guaranteed the highest prices no matter what. In some cases, fair trade growers have been known to sell lower quality crops in the fair trade market and then sell higher quality coffee beans in the non-fair trade market for a competitive price. A guaranteed price means that growers do not have to guarantee quality.
The well intentioned fair trade movement places coffee growers in “golden handcuffs.” The incentive of slightly higher prices encourages growers to stay in that industry when they might otherwise pursue more productive endeavors. Claar and Hester both pointed out during their presentation at Acton University that “you will never have a middle class lifestyle growing coffee.” In the end, Claar cautions, the fair trade movement is a marketing scheme. When you pay extra for a cup of fair trade coffee, you’re paying to look like a caring person or feel like a caring person, but you’re not necessarily helping coffee growers. Spending more money on a cup of fair trade coffee is seen as an act of social responsibility. Basically, the organizations leading the movement are attempting to bundle charity or social justice with coffee.
To learn more about it, you can download Claar’s presentation from Acton University 2012 or you can read his book, Fair Trade? Its Prospects as a Poverty Solution. Although the fair trade movement is essentially a marketing scheme that possibly does more harm than good, it came from good intentions.
We encourage you to give this article some thought regarding whether or not the cup you are paying for is “worth it” in that if there is any farming or sourcing information available on what you are purchasing, look into it. Reggie’s Roast Coffee is a Jamaica Blue Mountain Coffee Farmer as well as a Roaster who sources Fair Trade Organics. We work with brokers who can identify and acknowledge the Fair Trade principles are in effect and working to the degree stipulated. When asked why we don’t supply the Fair Trade and Organic logo on our coffee’s packaging, the response, not only as coffee farmers ourselves, but roasters in regard to this conversation; is we pay a premium price because the farmers have paid to be certified and are working to better themselves. We as Roasters pay a fair price so the Farmers get a fair price. If we payed to use and reproduce the seal, the Farmers don’t gain, only the certifiers do.