Big Surprise: Fair Trade Coffee is a Scam
The Financial Times reports that:
"'Ethical' coffee is being produced in Peru, the world’s top exporter of Fairtrade coffee, by labourers paid less than the legal minimum wage. Industry insiders have also told the FT of non-certified coffee being marked and exported as Fairtrade, and of certified coffee being illegally planted in protected rainforest.
This casts doubt on the certification process used by Fairtrade and similar marks that require producers to pay the minimum wage.
It also raises questions about the assurances certifiers give consumers about how premium-priced fair trade coffee is produced...
...Though certified coffee makes up less than 2 per cent of the global coffee trade it has become increasingly mainstream as large retailers such as Starbucks and McDonald’s adopt it."
Comments (8)
Mark Brabson
Delaware North Companies, has quite a racket going in "fair trade" coffee's, through their distributer, Seattle's Best. DNC, for anybody not aware, has Federal concession's contracts at greater than 90% of National Parks and other federal facilities. They are pushing this "fair trade" coffee exclusively at all federal concessions. With DNC involved, the fact that scams are underway is not suprising in the least. They also get benefits from the Feds for using this bogus coffee.
Published: September 21, 2006 9:56 PM
P.M.Lawrence
According to my own researches, growing coffee in developing countries causes harm in most cases regardless of whether it is "fair" trade or not.
The thing is, those are developing countries, and almost by definition they lack the right sort of institutions to maintain equitable results during the development transition. Subsistence farmers get displaced as land and/or water resources get taken up by export-oriented cash crops like coffee, and so on.
Looking at what happens to coffee growers is missing the inherent spillover onto those who really are at the bottom of the heap, the newly marginalised and dispossessed (with sound institutions already in place, they would have been bought out for fair compensation - but that doesn't happen).
Apart from anything else, there is a spurious appearance of improvement for the few who make the career change into cash crops; they go from (say) $2 per week but with food and lodging supplied by subsistence activity to (say) $5 per week but needing to live off that.
That is, the usual formulation "...have to live on $N per day..." is faulty for semi-subsistence farmers - their income is more nearly discretionary and they don't live on it.
Anyhow, there are exceptions, e.g. in East Timor where coffee growth usually does not displace subsistence resources but instead reclaims resources abandoned during endemic fighting. But usually, cash crop production in developing countries hurts and marginalises subsistence farmers, and this does not show up in looking at cash crop labour wages.
Incidentally, sweat shops do not inherently produce this behaviour. That is, creating a sweatshop in a developing country does not have the built in complement of reducing alternative ways of living. However, it is quite possible for these enterprises to do that quite separately, e.g. through local lobbying to drive more locals into the cash economy (fairly standard colonialism and neocolonialism).
Published: September 22, 2006 4:32 AM
Francisco Torres
The thing is, those are developing countries, and almost by definition they lack the right sort of institutions to maintain equitable results during the development transition.
What they lack is property rights. We in Latin America are drowning in institutions. However, even with the "right" kind of institutions, I fail to see how is it unfair to the peasants what others are doing with their own property, even if it is growing coffee.
Subsistence farmers get displaced as land and/or water resources get taken up by export-oriented cash crops like coffee, and so on.
Again, this indicates that the problem is one of property rights. The US should have the "right" kind of institutions (being a developed country) and yet private property rights are not assured either - I do not believe that not having the "right" kind of institutions is the problem here.
with sound institutions already in place, they would have been bought out for fair compensation - but that doesn't happen.
Only problem is that "fair compensation" is a subjective term. The only sound compensation is that which the market provides, and not some institution, the reason being that institutions fall into the economic calculation problem whenever they try to make decisions on what is "fair" and what is not.
Growing coffee by itself should not displace peasants. If I own a piece of land and a coffee grower wants to have it, he or she should offer to buy it at a price I like. That is the market solution. The "Institutional" solution would be one of expropriation, a la Eminent Domain or through bribing a State bureaucrat.
Published: September 22, 2006 10:31 AM
P.M.Lawrence
I think there's a language barrier here. Property is an institution of the necessary sort. And, while bureaucracy is another sort of institution, it's not the only thing "institution" can refer to - and, as you note, it's entirely the wrong sort of institution.
But it's not as simple as "property". It's necessary for the property institution to be mature and to apply to the right resources.
And there is nothing subjective about "fair" once you are away from a middle ground; a settlement that leaves someone without survival resources is obviously worthless, no matter how much it nominally costs.
There is no inconsistency between this and the market concept, since clearly nobody would make a free market transaction that conflicted with that. The point is, even absent any market comparisons, we can see that some sop of compensation that turns people out to starve is clearly not a fair compensation.
Published: September 23, 2006 3:31 AM
B. Smith
There are some great points here. There is a Website from South Africa you all should look at on why Fair Trade is a "myth"
http://www.aidc.org.za/?q=book/view/163
http://www.aidc.org.za/?q=book/view/361
http://www.aidc.org.za/?q=book/view/154
Published: October 2, 2006 4:05 AM
arya
According to information published on Fair Trade Labelling Organization's (FLO) website www.fairtrade.net (Fair Trade's umbrella organization), the Fair Trade price paid to coffee farmers is set at $US 1.06 per pound or $US 2.35 per kg (inclusive of a Fair Trade "premium" of $US 5 cents/Ib to be used for development projects within the community).
The same coffee - after having been processed in northern countries - is marketed and sold to socially-conscious (and naive) consumers under the Fair Trade label at an average retail price of $US 40- $US 50/kg, which means that the HUGE difference between the price paid to small-scale farmers ($US 2.35/KG) and the average retail price of coffee labelled, marketed and sold as Fair Trade ($US 40 to $US 50 per KG) generated from value-addition has ended up enriching the numerous mostly foreign economic agents within the supply chain(i.e. traders, exporters, shippers, processors, marketing agents, wholesalers and retailers, etc.)In this context, one wonders who is helping who...?
Furthermore, the coffee has not been processed in the country of origin, thus failing to create much needed local employment and to generate income within the local economy. Processing the coffee in the country of origin would also enable coffee producing nations to break free from the dictate of the world market and from the vicious trap cycle of declining prices of coffee on the world market accentuated by increases in production to offset the initial price decline, thus further decreasing world prices and further impoverishing coffee and other primary agricultural commodity producers in poor nations. This is a vicious trap cycle, which the Fair Trade "business" is brilliantly using to its advantage...The Fair Trade "business" is capitalizing and prospering on both declining prices of primary commodities on the world market and on the good conscious and naivete on Western consumers...
Fair Trade coffee statistics
-The Fair Trade price paid to coffee farmers ($US 2.35/kg) only represents about 5% of the average retail value of coffee beans sold to consumers under the Fair Trade label ($US 40/kg -$US 50/kg).
-1 KG of coffee makes on average 50 cups of coffee.
-The average starting retail price for a cup of coffee in coffee shops or restaurants in the West is $US1-$US2: Thus, the equivalent price paid for a cup of coffee is $US 50/kg to $US 100/kg. The "Fair" Trade price paid to small-scale farmers only represents 2.5%-5% of the average retail price of a cup of coffee in the West.
In this context, one wonders how "fair" the Fair Trade price paid to coffee farmers is and who is helping who...?
Published: October 9, 2006 7:50 AM
daniel
Hi, I just found a new web page that sells only Fair Trade Flowers from Colombia. the link is:
http://www.betterearthflowers.com/
Published: February 17, 2009 1:35 PM
Trade Expressions
The recent evolution of the Fair Trade movement has been towards a more clearly defined, universal set of Fair Trade standards. As these standards continue to evolve and gain clarity, the commitment is to always meet or exceed recognized international standards.
Published: October 20, 2009 4:35 AM