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Fair Trade, Free Markets, and the Bitter Fight Behind Your Morning Cup of Coffee

How do you make the billion-dollar coffee industry more fair to small farmers and impoverished laborers? Those in the fair trade movement think they have an answer — but can't agree on what it is.
Photo via Wikimedia Commons

Today, thousands of Americans will choose to pay a premium for a cup of fair trade-certified coffee. And chances are, few of them have any real idea what that means.

At its most basic, the idea behind fair trade is that if consumers pay a little more, the lives of the laborers at the bottom of the supply chain will improve. The movement is most famously associated with coffee — the first batch was sold in a Dutch supermarket in 1988 — but you can now buy fair trade beer, vodka, shoes, guitar straps, smartphones, lampshades, basketballs, chewing gum, boxer shorts, Halloween costumes, spaghetti, and condoms. There are fair trade churches, synagogues, and mosques. You can attend a fair trade university, and you can live in a fair trade town.


Saturday marks World Fair Trade Day. But more than 25 years after the movement began, the annual "worldwide festival of events celebrating Fair Trade as a tangible contribution to the fight against poverty and exploitation" arrives amid a fractious battle going on in the coffee industry. There is no longer any standard definition of fair trade, and different fair trade labels are issued by many self-appointed authorities, all of whom follow their own rules. A once-simple concept has become a convoluted tangle of competing — sometimes opposing — standards that change from product to product.

"People are so fucking confused now about what fair trade actually means," said Dean Cycon, founder of Dean's Beans Organic Coffee Company, a 100 percent fair trade roaster in Orange, Massachusetts. "You can thank Paul for a lot of that."

* * *

Paul Rice is the president of Fair Trade USA, a San Francisco-based nonprofit that "audits and certifies transactions between US companies and their international suppliers to guarantee that the farmers and workers producing Fair Trade Certified goods are paid fair prices and wages." Fair Trade USA has long been the organization responsible for making sure the fair trade products being sold on the American market have been grown, processed, or manufactured in a socially responsible way.

Rice, who has an MBA from Berkeley, says that Fair trade is viable because consumers want it — no one likes to think their latte contributes to someone else's misery. According to a study released last year, a team of Harvard and Stanford professors found that consumers are willing to spend 23 percent more for coffee labeled Fair Trade. Nevertheless, only about 5 percent of the coffee sold today in the United States is certified fair trade.


For years, the broader fair trade movement struggled to figure out a way to increase the amount of coffee it certified and sold. Coffee is one of the most heavily traded commodities in the world. In the US alone, coffee is a $48 billion-a-year business. So trying to disrupt the global coffee industry by ethically sourcing a few thousand pounds of beans a year is like trying to put the screws to Big Oil by riding your bike to work on Wednesdays.

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In the fall of 2011, Rice came up with what he believed was a solution. If he could expand supply by certifying industrial coffee plantations in addition to the small farmers with whom the movement had always worked, more fair trade coffee would be sold. Rice called this concept Fair Trade for All, and presented it as something that would "double the impact" of fair trade by 2015.

Big industrial plantations had always been purposefully excluded from fair trade certification. That exclusion meant that the 4 million people working on those plantations were effectively excluded from enjoying the benefits — though research has found workers on big plantations have it better than workers on small farms — so Rice argued that in addition to increasing sales, allowing big plantations to be part of the system would potentially benefit millions of workers. And it wouldn't cut into smaller farms' profits, Rice believed, because the movement had plenty of room to grow.


"We have about 30 million out of 200 million American adults buying Fair Trade products right now," Rice told VICE News. "The reality is that consumers want these products, and more and more of them are joining the broader movement every year."

* * *

Not everyone agreed with Rice.

When he brought the idea for Fair Trade for All to Fairtrade International — the Bonn, Germany non-profit under whose umbrella the world's various fair trade labelers and certifiers had previously coalesced — they told Rice they were dead-set against it. The fear was that working with large plantations would put the smaller farming co-ops that historically made up the backbone of the movement at a competitive disadvantage. So in the fall of 2011, Rice severed ties with Fairtrade International (then known as Fairtrade Labeling Organizations International). Shorty thereafter, he set up Fair Trade USA as its own independent entity.

Fair Trade USA would no longer have to pay 20 percent of its revenues — $10.4 million in 2013, the most recent year for which data is available — to Fairtrade International under its standard membership agreement. As Rice told VICE News, the plan was to bring the large plantations and non-organized independents into the fair trade system slowly, with 12 farms in six Latin American countries and Ethiopia.

The World Fair Trade Organization (WFTO), a fair trade policy and lobbying group based in the Netherlands, said in a statement, "This action seems more to satisfy and enrich the very people whose actions caused Fair Trade to be established in the first place, at the expense of the small farmer/producer…. It is not unthinkable under this scenario to have a multinational operation own the entire supply chain and be able to label it as Fair Trade. This is completely unacceptable to the WFTO."


Cycon, who ended his association with Fair Trade USA after the split, put it more bluntly.

"Paul Rice lives in a very comfortable, secluded tower," he told VICE News. "He's got plenty of funding, so he doesn't have to defend Fair Trade USA's decisions to anyone…. He said Screw the movement, I'll just start my own thing, and he pushed plantations in the face of complete opposition of the co-op farmers."

Rice says he has plenty of supporters, and points out that Bill Clinton once told him he saw the Fair Trade concept as "infinitely expandable."

"The rising tide lifts everyone's boat," Rice said. "Growers are generating their own wealth without anyone's charity, and the consumer appetite for products that taste great and make a difference is not a fixed one. The mainstreaming of fair trade is an upward spiral for everyone."

But just because fair trade coffee currently makes up a tiny percentage of all coffee sold doesn't necessarily mean there is a much larger, easy-to-exploit market for fair trade coffee. Rodney North of Equal Exchange — a Massachusetts importer and distributor that brought the first shipment of fair trade coffee into the United States in 1991 — said that when Rice first floated the idea of opening up to big plantations, people in the movement were very vocal about the fact that there was already a large surplus of fair trade coffee not being sold. But North says Rice assured everyone that Fair Trade USA had identified a ready-and-waiting market that would have no problem absorbing the additional product.


North also pointed out that at least four of the 12 participating plantations dropped out of the Fair Trade for All pilot program within the first year, at least two of them because they couldn't find buyers for their newly certified Fair Trade coffee. So does that mean Fair Trade for All didn't fulfill Rice's stated goal of doubling the impact of Fair Trade by 2015?

"I'd like to reframe the issue just a bit, if you don't mind," Jenna Larson of Fair Trade USA recently told VICE News. "I think the press initially positioned the Fair Trade for All pilot as something that would double the impact we have in coffee, but when we talked about doubling impact, we weren't referring solely to the coffee program."

She said the recent introductions by Fair Trade USA of, among other things, Fair Trade apparel, Fair Trade coconuts, and Fair Trade seafood allowed Fair Trade USA to disburse nearly double the usual amount of funds last year. (But to a greatly expanded pool of recipients.) Of the original 12 large plantations in what Fair Trade USA called its Coffee Innovation Program, Larson said they are continuing to work with four, "along with several others." As for the original eight with whom they're no longer working, she said they "chose not to move forward for a variety of reasons."

Fair Trade USA said they'd release a public report on the pilot in January 2014 but never did. (When asked why, Larson wouldn't say.) An independent impact assessment, funded by the Ford Foundation and Green Mountain Coffee Roasters, is currently underway; results are expected toward the end of 2016.


According to figures sent to VICE News by Larson, less than 1 percent of all Fair Trade USA-certified coffee came from large plantations last year. If Fair Trade for All does constitute an existential threat to small coffee farmers, it hasn't yet materialized.

* * *

In 2013, Fairtrade International, the organization from which Fair Trade USA broke away, launched its own American operation called Fairtrade America to compete against Fair Trade USA in the American market. This leaves coffee drinkers with a choice between Fair Trade and Fairtrade — awfully similar labels for the average consumer despite the significant difference in their philosophies.

A number of large companies like Kirkland Coffee (owned by Costco) and Mondelez have chosen to partner with Fairtrade America instead of with Rice and Fair Trade USA. Starbucks, which began including fair trade coffee in its product mix under pressure from activists in 2000, is affiliated with both organizations — and also has its own version of Fair Trade, which it calls C.A.F.E. Practices.

And it gets even more complicated. Many independent coffee importers, roasters, and retailers collectively known as the "third wave" — think boutique, high-end coffee merchants rather than Starbucks or Folgers — have embraced something called direct trade. Rather than a structured organization with rules and infighting, direct trade simply means that sellers deal directly with growers. There is no authority watching out to make sure rules are being followed, because the market makes the rules.


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"[Direct trade has] shifted the narrative on what's the most effective way to ensure positive and impactful commercial relations between growers and roasters," said Jorge Cuevas, chief coffee officer at Portland, Oregon-based coffee importer Sustainable Harvest.

Ed Kaufmann is the head of roasting at Joe Coffee, a decade-old direct trade roaster and retailer based in New York that roasts about 260,000 pounds of beans a year for its 11 locations. (By comparison, Starbucks roasts between 400 million and 500 million pounds a year for its 21,000 locations.) Kaufmann, 38, said coffee can go through up to 20 different middlemen before it reaches a consumer's cup. But Kaufmann deals directly with every farmer from whom he buys coffee; thus, his supply chain is "no more than four or five links long." He rejects what he sees as the patronizing approach of Fair Trade (and Fairtrade) in general.

"My way is more like, 'Hey, tell me what you need to make, I'll tell you what I can spend, let's make a deal,'" Kaufmann told VICE News. "For a farmer, it's a simple equation. You get better prices for better quality. You get better quality if you treat your workers better. You want to keep the best ones coming back, and if a worker is being exploited, they'll go next door to another farm where they'll be treated better."


Whether the average coffee laborer actually has that kind of freedom is most certainly debatable, but Kaufmann does deal directly with the people from whom he buys the company's coffee. On a trip to Guatemala last year, he met Don Alejandro, a deeply tanned farmer whose cell phone launches into Led Zeppelin's "Immigrant Song" when someone calls. He also met Don Alejandro's wife, Sara, and his broker, Josue, who works with Don Alejandro throughout the year "to help him further develop his quality."

Kaufmann, Don Alejandro, and Josue in Guatemala. (Photo via Ed Kaufmann)

"I know them, I've met their wives, I've met their kids," Kaufmann said. "It's a lot harder to rip someone off when you've eaten a meal in their home."

A common criticism of direct trade is that it's not scalable; you can't eat in the home of every coffee producer with whom you deal if you're a massive seller. But Kaufmann says the model is scalable in spirit.

"If you have the right people in the middle, they can have dinner with the farmers on your behalf, in a figurative sense," he said. "It is also scalable in a way that if I needed 10 times more coffee than I get now, I use my chain to get it. I buy the whole farm's harvest, and his neighbor's farm, et cetera. I am still new to this, but it seems to be working."

Cycon, however, is unimpressed.

"The direct trade guys aren't bad people," he said. "But they're a bunch of young, neo-liberal, arrogant hipsters in skinny jeans who have no understanding of the dynamics of underdevelopment and poverty."


* * *

According to John Talbot, author of Grounds for Agreement: The Political Economy of the Coffee Commodity Chain, the free market has failed coffee.

In an article in the Georgetown University Journal of International Affairs titled "Coffee Crisis: The Case for a Regulated Market," he wrote: "Europeans, who developed a taste for the bean, planted it across their colonial empires. These regions were integrated into the world economy as coffee suppliers, but they have found it exceedingly difficult to break out of this role."

In other words, those at the bottom of the coffee production chain have been unable to move up. And so since the days of colonialism, the balance of power in coffee growing regions hasn't changed much. As Talbot told VICE News from his home in Kingston, Jamaica, where he teaches at the University of the West Indies, "What I said [in 2002] is now even more true."

The real money is made in processing coffee, not growing it. Over the years, Talbot says more and more of what happens after picking — the roasting, the packaging, and the rest of what the industry calls "value-added" — has been done in the consuming countries by the companies importing the beans and selling them.

According to another analysis by Talbot, as recently as the 1970s, roughly 75 cents of every dollar spent by consumers on coffee went to a worker in the countries that grow coffee. By the 1990s, that number was down to 16 cents.

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Given this, Talbot — along with others who have studied fair trade — believes government-regulated markets are the only path to better prices for coffee producers. Something called the International Coffee Agreement, in place in some form since 1962, kept prices relatively high through the 1980s. But disagreements and restructuring mostly eliminated those price supports.

And so, for better or worse, fair trade in all its iterations may still be the best bet for small coffee farmers and laborers.

"Fair Trade has touched off a virtuous cycle," said development economist Noah Enelow of the Portland, Oregon think tank Ecotrust. "Over the long run, farmers improve the management of their fields; improve the quality of their beans; reduce pesticide use; and get higher market prices, improved technical assistance, and increased access to financing. This is how development works — you can't necessarily trace each success to one specific thing…. There's no one hero."

Follow Justin Rohrlich on Twitter: @justinrohrlich

Photo via Wikimedia Commons