‘Fairtrade’ coffee… a means for consumers to “satisfy their palate and their conscience at the same time” (The Economist).
I recently conducted an experiment whereby I asked a number of people whether they buy ordinary coffee or that labelled Fairtrade. Where these people did buy Fairtrade coffee, I was curious to find out whether their choice was based in an assumed ethical value, and how aware they were of the label’s economic model.
All bar one respondent proudly supported Fairtrade and its claims to ‘useful’ consumption. They blindly believed that by drinking their favourite cup, they could somehow change the world for coffee growers. The final respondent was not a coffee drinker.
The origins of Fairtrade are diverse and somewhat questionable. The Fairtrade certification was officially established by the Max Havelaar Foundation in 1988 in the Netherlands. Its birth followed in the trend of post-World War II charity developments. This period is known for the rapid development of not-for profit groups that aimed to aid developing countries. In particular, the optimism during the 1960s about development prospects nourished alternative trade organisations (ATOs) which attempted to support small producers in developing countries.
The premise of Havelaar’s Fair Trade is multi-fold. It aims to protect farmers by guaranteeing a fixed minimum price for goods. This price is above market average. Furthermore, producers are assured sales regardless of whether the broader economic context is strong or weak. Fairtrade also seeks to correct the legacy of the colonial mercantilist system, and the kind of crony capitalism whereby large businesses obtain special privileges from local governments, preventing small businesses from competing and flourishing.
Fair Trade, however, is not as good for producers as many assume. Companies that sell Fair Trade coffee usually buy it in bulk, for the set minimum price. It is sold at a premium, not all of which is directed to growers. Some profit is retained by the café where the beverage is sold, and some is directed towards paying for Fair Trade certification. FLO-CERT, the organisation responsible for certifying and inspecting provider and traders, charges between $2,000 and $4,000, plus annual fees, for the right to sell under the Fairtrade label. Its sister company, Fairtrade International, sets standards for trade, and runs the producer support unit.
In other words, by purchasing Fairtrade products, consumers are not making the ethical gesture that they believe they are. Whilst they pay a premium, this is not necessarily reflected in any additional funds obtained by producers. Companies that sell Fairtrade are making a profit through marketing themselves as ‘ethical’.
Very few companies mention that they pay for certification. One example is Hudsons Coffee, whose Fairtrade coffee is labelled ‘Fairtrade certification requires a ‘premium’ to be paid for having its label’.
There are alternatives to Fairtrade that offer greater benefits to producers and are more transparent. The International Coffee Organisation (ICO), in conjection with the United Nations, developed an International Coffee Agreement in the early 1960s. This Agreement was most recently updated in 2007, and reflects ICO’s mission to make a “practical contribution to the development of a sustainable world coffee sector and to reducing poverty in developing countries.” Whilst reaching Agreements has sometimes proved problematic, ICO imitates many of the objectives of Fairtrade, and proves that Fairtrade is not alone in its objectives to help producers.
Another economic issue with Fairtrade is its effect on supply. If a premium is available for fair-trade coffee, shouldn’t other growers enter the market to take advantage of it? Such a scenario would also raise distributional questions. If higher coffee prices attract market entrants, then coffee-growing nations will shift resources into that sector, which might be good for grower incomes, but could potentially inhibit the development of other economic activities.
The cost of bringing coffee beans to shops is not as high as what consumers pay for the end product. Furthermore, the Fairtrade premium in not reflective of the real value gained by producers. In esence, Fairtrade is a clever marketing trend based on an assumed ‘ethical value’. There should be more awareness of the labels true value, for the benefit of consumers and producers alike.
