Wade is off the grid, so please enjoy this re-posting of a blog on Fair Trade from October 2011.

New Orleans While I was out of the country it seems Paul Rice, the CEO of FairTrade USA, came to speak at one of the local colleges, Tulane University, as part of a promo for a new department on civic engagement and social entrepreneurship there.  He seems to have argued that “profitability and sustainability were compatible” according to the report in the Times-Picayune by Naomi Martin.  Though Martin raises the issue of whether or not producers are “compensated fairly” at one point, she reports perhaps more correctly that with “’fair trade’ goods…suppliers are compensated at a higher rate than they would be otherwise.”

ACORN International is preparing to issue a report that looks more carefully at the claims of fair trade products and attempts to sort out the substance from the sizzle.  Additionally, since I’m wrapping my arms more firmly against the real business of buying and selling fair trade coffee and other products at Fair Grinds Coffeehouse in New Orleans, I’m also learning the real lessons that can be wildly different than what we hope might be the case every time we take a gulp.

I originally became skeptical of some of these claims while visiting with our partners, the women’s coffee and aloe vera cooperative, COMUCAP, in Marcala, Honduras in the mountains of the La Paz district, several hours from Tegucigalpa.  The way fair trade certification works there is a slight premium for fair trade certified coffee over the bulk market price of roughly a 10% per pound and if also certified as organic, then add roughly another quarter a pound.  This is what the actual producers with dirt on their hands receive at the point of production.
In the article Tulane professor Rick Aubry averred that “FairTrade USA has leveraged the consuming power of people who buy coffee and bananas in a way that lifts the millions of people who grow those products out of poverty.”  Wow!  I wish!!!

Looking at a Food First! Study a couple of years ago, the real economics are clearer:
In March of 2007, FLO [the international certifying agency] raised the floating Fairtrade premium from 5 cents to 10 cents [per pound], and the Organic differential—the additional premium for coffee that is certified Organic—from 15 to 20 cents (FLO, 2007a). This move came in response to a cost study by a farmers union that showed that Fairtrade prices were below the cost of production for many farmers.

Couple this with the fact that a that time the pricing by the certifiers was:
The trademarked Fair Trade Certified packaging label informs consumers that farmers received a $1.26 price floor and a 10 cent (floating) price premium above the market price.

By the time Fair Grinds makes a purchase either through national suppliers like Café Campesino on the West Coast or Gene’s Beans in Boston or wherever the cost after roasting and delivery is pushing $10 bucks a pound now.   Getting fair trade right off the docks at the Port of New Orleans, which we are now doing since we started managing the coffeehouse, we are paying almost that same rate for the finished beans.  The premium that is still sitting at the bottom of that cup of coffee for the real producers is mighty damn small and puny, and certainly not a ticket out of poverty for the farmers I have met and spoken to in Honduras and elsewhere.

The notion in a competitive market that Fair Grinds can charge more than Starbucks and other local competitors also seems wrong.  FairTrade USA (formally TransFair USA) may have some surveys that indicate that people say they will pay substantially more, but many on the other side of the counter do not hear the willingness in a recession to go as high as the claim.  Of course Costa’s, the big international coffeehouse chain, charges a quarter more for a fair-trade cup of coffee and simply keeps the quarter, while the customer is hoping somehow that they just helped the poor farmer in the global south.
What’s my point?  Yes, we need to support fair-trade.  But, we also need to do more to make sure that this is not simply marketing and hype and that the money really does move to improve the livelihoods of the producers and their communities.  This is part of real transparency as well, and we owe it to ourselves and our neighbors in the rest of the world to not just feel good, but to do good.