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Fair Trade Coffee
Fair Trade Coffee
From Wikipedia, the free encyclopedia
Fair trade coffee is coffee which is purchased directly from the growers for a higher price than standard coffee. Fair Trade coffee is one of many Fair Trade certified products available around the world. The purpose of fair trade is to promote healthier working conditions and greater economic incentive for producers. Coffee farmers producing Fair Trade certified coffee are required to be part of a coop with other local growers. The coops determine how the premiums from Fair Trade coffee will be spent. Growers are guaranteed a minimum price for the coffee, and if market prices exceed the minimum, they receive a per pound premium. Fair Trade coffee has become increasingly popular over the last 10 years, and is now offered at most places coffee is sold.
History of Fair Trade Coffee
Regulations Prior To Fair Trade
Prior to Fair Trade certification, coffee prices were regulated by the International Coffee Organization according to the regulations set forth by the International Coffee Agreement of 1962. The agreement, which was negotiated at the United Nations headquarter in New York by the Coffee Study Group, set limits on the amount of coffee imported and exported from countries so there would not be excess supply, and consequently a drop in price. The ICA existed five years, then was renewed in 1968. The agreement was renegotiated in 1976 due to increasing coffee prices, largely a result of a severe frost in Brazil. The new agreement allowed for the suspension of price quotas if the supply of coffee could not meet the demand, and enabling them if prices dropped too low. In 1983, the agreement was again redrawn, this time creating a database on coffee trade, and implementing stricter import and export regulations. Quotas remained a part of the agreement until 1989, when the organization was unable to negotiate a new agreement in time for the next year. It was decided that the 1983 agreement would be extended, but without the quotas because they had not yet been determined. A new agreement could not be negotiated until 1992. From 1990 to 1992, without the quotas in place, coffee prices reached an all time low. Because coffee price quotas could not be decided, the new agreement of 1994 focused on public awareness, providing the public with a forum for comment and access to documents. The agreements of 2001 and 2007 aimed to stabilize the coffee economy by promoting coffee consumption, raising the standard of living of growers by providing economic counseling, expanding research to include niche markets and quality relating to geographic area, and conducting studies of sustainability, principles similar to Fair Trade.
Beginning of Fair Trade
Fair Trade certification began in the Netherlands in 1988 in response to dropping coffee prices in the world market.The supply of coffee was greater than the demand, and since no price quotas had been reimplemented by the International Coffee Act,the market was flooded. Fair Trade certification aimed to artificially raise coffee prices in order to ensure growers sufficient wages to turn a profit. The original name of the organization was "Max Havelaar", after a fictional Dutch character who opposed the exploitation of coffee farmers by Dutch colonialists in the East Indies. The organization created a label for products which met certain wage standards. Within ten years three other labeling organizations began: the Fair Trade Foundation, TransFair USA, and Rättvisemärkt. In 1997 these four organizations jointly created the Fair Trade Labeling Organization, which sets Fair Trade standards, and inspects and certifies growers.
The Fair Trade Certification label allows farmers and farm
workers to escape poverty by providing them the skills and the
means to compete in the global market of agriculture products.
Although Fair Trade began in the late 1940's, certification and
labeling was not enacted until 1988. This label assures
consumers that strict social, environmental, and economic
measures are taken when the production and trade of an
agriculture product occurs. Fair Trade standards require that
farmers receive fair wholesale prices for their crops. This
ensures that farmers will receive approximately $1.26 per pound
of raw coffee beans as opposed to the world market average of
Farmers who are involved with Fair Trade receive minimum floor
price and an additional premium for certified organic products.
In addition to the price standards of Fair Trade labeling there
are other principles that must be abided by.
Standards for Fair Trade Coffee Certification:
Fair labor conditions: Those who
work with Fair Trade farms are able to work with freedom of
association, safe working conditions, and fair wages. Child
labor is strictly prohibited.
Examples of community development:
Colombia: Members of the COSURCA coffee cooperative
successfully prevented the cultivation of more than 1,600 acres
of coca and poppy used to produce illicit drugs.
In 1997, Fair Trade Labeling Organization, or FLO was created to support and protect disadvantaged producers within the Fair Trade market. FLO is a non-profit organization based in Bonn, Germany, that sets Fair Trade Certification standards and certifies producers.This umbrella organization has 20 labeling initiatives worldwide that work within it to certify the products.The FLO sets the price floor for the coffee. The current pricing is available on the FLO website  .
Many coffee vendors are now advertising Fair Trade certified coffee. This is most likely a result of increasing public awareness of Fair Trade, and increased pressure from consumers. Sam's Club, Wal Mart, Dunkin' Donuts, McDonald's, and Starbucks all offer Fair Trade certified coffee, as do most independent coffee shops. All espresso served at Dunkin' Donuts is Fair Trade certified, as is all coffee sold at McDonald's in England. Starbucks coffee is one of the largest purchasers of Fair Trade certified coffee in the world, planning to purchase 40 million pounds of green, unroasted coffee in 2009. This is in part because the company purchases massive quantities of coffee. In 2008, Fair Trade certified coffee comprised only 5% of the total coffee purchased by the company.
Though large scale coffee corporations are becoming figureheads for Fair Trade, smaller companies such as Just Coffee, Higher Grounds, and Pura Vida are now working to successfully advocate Fair Trade coffee. Aside from word of mouth marketing, these small businesses are forming tour groups to various coffee producing countries, such as Guatemala and Mexico, to show consumers first hand what coffee farming with Fair Trade entails. These tours allow people to become ambassadors of Fair Trade and gain support for the movement.  This type of marketing provokes a growth for popularity and demand. In 2006, nearly 65 million pounds of fair-trade coffee were imported to the U.S., 45% more than the year before, and twice as much as in 2004, according to TransFair USA, in Oakland, Calif., the only third-party certifier of fair-trade goods in the U.S. Trans Fair nearly doubles every year in applicants that want to certify their coffee products. This is because over the past ten years, the demand for Fair Trade coffee has increased significantly and will continue to grow.
Other advocates for Fair Trade coffee include various religious groups and churches across the U.S. From Catholic to Methodist, the concept of Fair Trade has been referenced in sermons and further enforced with fellowship hours consisting of Fair trade coffee as part of the refreshment. Many church groups feel that this organization emulates Christianity by carrying out good works for others and the environment. For many of the faith-based organizations, fair trade is a way to connect younger members with an applicable message of how to be a good Christian.
Fair Trade creates a price floor for coffee, which some economists believe has adverse affects on both growers and consumers. By setting prices artificially high, Fair Trade encourages more people to grow coffee, leading to a surplus. According to the rules of Supply and demand, demand is decreased because prices are higher. Critics claim farmers will be unable to sell their coffee.
Transnational corporations such as Proctor and Gamble’s Folger’s, McDonald’s, and Starbuck’s now sell Fair Trade coffee, using their large consumer base and strong advertising campaigns to bring in Fair Trade consumers. Fair Trade activists are now concerned that the morally driven small Fair-Trade-oriented businesses are going to be pushed out of their original customer market.
When large corporations sell Fair Trade coffee, consumers are easily brought to the larger, well known companies for their Fair Trade coffee. This takes out the small coffee shops’ edge of selling consumer-oriented, special coffee’s like Fair Trade coffee and continues the success of big businesses in the coffee industry.
Generally, Fair Trade goods don't cost more than other goods because the large percentage taken by middlemen is removed from the equation.  However, as a result of Fair Trade’s elimination of the middle man, numerous jobs are removed from the market without the guarantee of finding another.
Critics believe the Fair Trade certification is abused by marking up retail prices significantly, while only providing the growers with marginally higher prices. When large corporations like Wal-Mart can afford to sell Fair Trade coffee, and choose to do so as an economic decision for profit, many consumers see the gap between large corporations supporting Fair Trade coffee growers in other countries but in the meantime the same corporations do not pay their workers wages similar to their profits and often put smaller, local business owners out of work. Some smaller sellers of Fair Trade coffee, who sell Fair Trade coffee as more than an economic decision are losing their Fair Trade market to these larger companies and many have suggested that TransFair USA come up with a tiered labeling system so as to show that these small business owners are truly committed to Fair Trade and aren’t making the same larger profits off of the Fair Trade label that the large corporations can.
Another criticism is that the per-pound price for Fair Trade coffee is that of the 1990 International Coffee Organization price, which is only moderately above the cost of production. Fair Trade farmers make $0.20-$0.30 per pound of coffee they grow and sell and as a result do not make much profit off of Fair Trade like the final sellers do. While some argue that Fair Trade pushes under-empowered growers into forming cooperatives, creating islands of democracy in often autocratic regimes, others challenge the assumption that encouraging farmers to form cooperatives is a good idea. This is because co-ops can be just as corrupt as any other organization. In a system meant to eliminate middlemen that pitches itself as a direct connection to growers, co-ops add a level of bureaucracy between consumer and producer. The farmer doesn’t directly receive the $1.26 but instead receives whatever portion the co-op decides. Therefore, a corruptly managed co-op can mask the real price of coffees from individual farmers and turn a profit greater than that of the farmers themselves.
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