Unfair Fair Trade

I have decided to speak up about something that is close to my heart for obvious reasons, and because I continually come across so much misinformation on the subject. I am also disturbed by the marketing hype that seems to allow lazy consumers to feel good about buying something that is not necessarily what it purports to be.  

Fair Trade - is it fair?  There really isn't an easy answer to this, but I would like to give those who are interested at least a little more information on the other less well researched side of this subject.  Don't get me wrong, the principle behind providing a minimum price for the purchase of coffee or any other product for that matter, is a noble one.  I am sure that many who market the official certified product believe they are doing something positive.  But, the fact is, institutionalizing the pricing of coffee or other commodities does not necessarily solve the real problem, and in some cases may even unfairly penalizes those for whom it was intended.

Let's start with the fact that becoming 'Certified Fair Trade' is expensive.  The bureaucratic and business hurdles needed to become certified are often too much and too expensive for the poorest farmers.  So, by example, the biggest supplier of Fair Trade coffee to the United States is Mexico.  Coffee laborer wages are 18 times higher in Mexico than in Ethiopia where Fair Trade coffee is much less well represented.

Secondly, the chosen method to acquire certification often results in farmers grouping together in cooperatives to defray the costs of certification.  As a result, the coffee is then mixed together and what might be exceptionally good from one farm is rendered mediocre by the product eventually produced by the cooperative.  Even worse, there are many instances, where the higher grade coffees are sold at a competitive price above the Fair Trade minimum and lower standard coffees are designated for the Fair Trade market where the minimum price can be demanded despite the low quality.

Thirdly, the Fair Trade label has been used by unscrupulous corporations who can garner goodwill and kudos for their company by claiming to support the poor farmers when actually they are simply using the lack of knowledge on the part of the consumer to increase sales.

The organization responsible for promoting Fair Trade in the US is called Transfair USA, and like any organization of its type, it requires millions of dollars to maintain.  The consumer eventually pays for this extra expense and so, for potentially lower grade coffee from a cooperative, to compensate for the 'fair' price and the administrative cost and without really benefitting the truly poor farmers, we end up paying a premium.

So what is the solution to this conundrum?  Well, in most cases, if you actually ask the farmers concerned, they will tell you that the problem does not really lie in procuring a good price for the coffee, but in the environment in which they actually produce the coffee.  In Kenya, where the government controls coffee production and even the exporting of coffee through the coffee auction, corruption and exploitation results in having to pay inflated prices for milling and other processes mandated by the government.  Then, the government takes its cut in the auction process, thus diminishing the money actually making its way back to the farmer.  

This is an all too common situation, and highlights the real problem.  If we believe in the operation of a free market economy, then why do we believe in what amounts to price fixing in the trading of certain commodities such as coffee?  If farmers produce a great product, then the resulting demand will no doubt push the price up accordingly.  At the heart of this problem is one of my own concerns with the US coffee market.  The consumer just isn't discerning enough.  If the majority of people who drink coffee would simply refuse to gulp down millions of gallons of poor quality beverage every day, and would be willing to pay for quality, then quality of the coffee would attract the appropriate price.  If we wish to impact the lives of the farmers in countries where corruption and bad practice are stifling the farmers' ability to succeed, then we should make a stand just as we do when convenient with other countries on human rights abuses.  If we truly want to help the farmers, then we should be working with them to improve practices and their environment in relationships across country borders that allow us to bring a truly exceptional product to the market place, for which they get their just rewards.  This might take the form of investment in new equipment and updating practices.  Though, the irony here is that Brazil, which is now highly mechanized in its coffee production has disposed of 10s of thousands of coffee related jobs for poor workers by the introduction of mechanization.

Fair Trade sounds good, means well and has the right starting point, but the outworking is not only flawed, it actually damages those who are unable to get on board, and it is tantamount to price fixing and inflates the underlying cost through unnecessary administration and certification costs.

At Buon Giorno, we will continually seek to purchase the best quality coffee from suppliers who are ethical enough to pursue relationships with farmers with no middle man and who are intent on increasing the proliferation of quality coffee in the United States just like any other product that has to rely on its quality to attract sales.

I look forward to your comments.

David

If you are interested, you can read some similar thoughts in an article last year in the British Daily Telegraph