Jump to content

Fair trade coffee: Difference between revisions

From Wikipedia, the free encyclopedia
Browse history interactively
← Previous editNext edit →
Content deleted Content added
VisualWikitext
AidWorker (talk | contribs)
216 edits
Put in verifiable facts on the marketing system, Removed political statements of editor
No edit summary
Line 1: Line 1:

(This article is a criticism of Fair Trade Coffee)
Fair Trade is a commercial brand. For a fee its owners licence commercial firms the right to use the brand in marketing, and they expect to make a profit out of doing so. Coffee producer cooperatives pay a fee to become certified Fair Trade producers, and a fee is paid at packer level in the consuming country, possibly on behalf of the packer, distributor or retailer.
Fair Trade is a commercial brand. For a fee its owners licence commercial firms the right to use the brand in marketing, and they expect to make a profit out of doing so. Coffee producer cooperatives pay a fee to become certified Fair Trade producers, and a fee is paid at packer level in the consuming country, possibly on behalf of the packer, distributor or retailer.
This article will concentrate on the Fairtrade brand, as it is by far the biggest. Other Fair Trade operations differ in detail. The Fairtrade Foundation manages the brand.
This article will concentrate on the Fairtrade brand, as it is by far the biggest. Other Fair Trade operations differ in detail. The Fairtrade Foundation manages the brand.

Revision as of 21:01, 20 May 2012

(This article is a criticism of Fair Trade Coffee) Fair Trade is a commercial brand. For a fee its owners licence commercial firms the right to use the brand in marketing, and they expect to make a profit out of doing so. Coffee producer cooperatives pay a fee to become certified Fair Trade producers, and a fee is paid at packer level in the consuming country, possibly on behalf of the packer, distributor or retailer. This article will concentrate on the Fairtrade brand, as it is by far the biggest. Other Fair Trade operations differ in detail. The Fairtrade Foundation manages the brand. The marketing system for Fairtrade and non-Fairtrade coffee is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying importers, packers and distributors and advertising agencies to handle their brand, for obvious cost reasons. In the producing country Fairtrade is marketed by Fairtrade registered primary cooperatives exporting through secondary cooperatives, and non-Fairtrade partly by the same cooperatives, partly by non-Fairtrade registered cooperatives exporting through the same secondary cooperatives and partly by trading firms. To become certified Fairtrade producers, the primary cooperative and its member farmers must operate to certain political standards, imposed from Europe, though many producers and consumers may not share these political objectives. The Fairtrade Foundation monitors whether these are achieved. In the Fair trade debate there are many complaints of failure to enforce these standards, with producers, cooperatives, importers and packers profiting by evading them. Any coffee that (a) is produced by members of a certified Fairtrade cooperative and (b) is sold with the Fairtrade brand should receive a minimum price FOB New York, which is payable to the exporting cooperative, not the farmer. This is below the world price much of the time, and irrelevant, but it is significantly above the world price when world prices collapse. In addition, the price paid should be 10c per pound above the world price at all times. Examples are quoted in the Fair trade debate of importers using their buying power to pay exporters less than this for certified coffee, or otherwise avoiding their responsibility. .</ref> paying exporters less than the Fairtrade price for Fairtrade coffee (kickbacks)[1] failure to provide the credit and other services specified[2] theft or preferential treatment for ruling elites of cooperatives [3] not paying laborers the specified minimum wage [4] However, far more certified coffee is produced than the market will take, so cooperatives can sell only a limited amount as certified, perhaps 15% to 50%, as branded. The rest must be sold at the normal unbranded world price.

How much reaches the farmer?

Nobody in the Fairtrade industry is willing to disclose how much extra they charge for their branded coffee, how much of this extra charge reaches the third world, how much reaches the farmers or whether the farmers make a profit from Fairtrade. In four cases it has been possible to find out. One British café chain was passing on less than one percent of the extra charged to the exporting cooperative;[5] in Finland, Valkila, Haaparanta and Niemi[6] found that consumers paid much more for Fairtrade, and that only 11.5% reached the exporter. Kilian, Jones, Pratt and Villalobos[7] talk of US Fairtrade coffee getting $5 per lb extra at retail, of which the exporter would have received only 2%. Mendoza and Bastiaensen[8] calculated that in the UK only 1.6% to 18% of the extra charged for one product line reached the farmer. All these studies assume that the importers paid the full Fairtrade price, which is not necessarily the case.[9] Critics claim that many counter-examples would be needed to show that these are not typical. These calculations may be optimistic, as they do not take into account what happens between the farmer and the exporter. The first problem is that cooperatives incur costs to achieve certification, and all their production has to meet the standards. If only a small proportion can be sold as branded, they get little extra revenue to cover the extra costs and make a loss from Fairtrade. There are no examples in the literature of all the extra revenue reaching the farmer. If a Fairtrade cooperative is inefficient or corrupt, which is often the case with cooperatives, the farmers cannot sell instead to other cooperatives or traders without losing the Fairtrade premium. There are anecdotes of traders paying more for unbranded coffee than Fairtrade cooperatives pay their farmers, and of cooperatives paying more than traders, but it is impossible to say that either is normally the case. Farmers, too, incur a lot of costs in meeting Fairtrade standards, do a lot more manual work in the hot sun, and have to hire labour rather than use family labour. It is questionable whether the additional price compensates them for this: there appear to be no case studies investigating this. Fairtrade encouraged Nicaraguan farmers to switch to organic coffee, which resulted in a higher price per pound, but a lower net income because of higher costs and lower yields.[10]

Impact on non-Fairtrade farmers

Critics argue that Fairtrade, but not all other Fair Trade businesses, harm all non-Fairtrade farmers. Fairtrade claims that its farmers are paid higher prices and are given special advice on better techniques, both of which will lead to increased output being sold on the global market. Economists[11] assert that, as the demand for coffee, in particular, is highly inelastic, a small increase in supply means a large fall in market price, so perhaps a million Fairtrade farmers get a higher price and 24 million others get a substantially lower price. Their conclusion is that the Fairtrade minimum price means that when the world market price collapses, it is the non-Fairtrade farmers, and particularly the poorest, who have to cut down their coffee trees. This argument is supported by mainstream economists. This argument is often illustrated with the example in which Vietnam paid its coffee farmers over the world price in the 1980s, planting lots of coffee, then flooding the world market in the 1990s.[12] Smith (2010) questioned the relevance of the Vietnam example, [13] and Griffiths published a sharp rejoinder. [14][15]

Other examples of how Fairtrade harms non-Fairtrade producers are set out in the Fair trade debate

Ethical Marketing

Fair Trade claims to be ‘ethical marketing’, but this is challenged in the Fair trade debate. Griffiths[16] in particular argues that much of it is the criminal offence of Unfair Trading in the EU.


See also

References

  1. ^ Raynolds, L. T. (2009). Mainstreaming Fair Trade Coffee: from Partnership to Traceability. World Development , 37 (6) p. 1089);Valkila, J., Haaparanta, P., & Niemi, N. (2010). Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fair Trade Farmers to Finnish Consumers. Journal of Business Ethics , 97: p264; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua – Sustainable development or a poverty trap? Ecological Economics , 68 3018-3025.
  2. ^ Reed, D. (2009). What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86:3-26; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua – Sustainable development or a poverty trap? Ecological Economics , 68 pp. 3022-3); Barrientos, S., Conroy, M. E., & Jones, E. (2007). Northern Social Movements and Fair Trade. In L. Raynolds, D. D. Murray, & J. Wilkinson, Fair Trade: The Challenges of Transforming Globalization (pp. 51–62). London and New York: Routledge.; Mendoza, R. (2000). The hierarchical legacy in coffee commodity chains. In R. Ruben, & J. Bastiaensen, Rural development in Central America. New York: St. Martin’s Press, p.34–9; Mendoza, R., & J. Bastiaensen, J. (2003). Fair Trade and the Coffee Crisis in the Nicaraguan Segovias. Small Enterprise Development , 14(2), p. 42; Moore, G., Gibbon, J., & Slack, R. (2006). The mainstreaming of Fair Trade: a macromarketing perspective. Journal of Strategic Marketing , 14 329-352; Reed, D. (2009). What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86: p. 12).
  3. ^ ; Mendoza, R., & J. Bastiaensen, J. (2003). Fair Trade and the Coffee Crisis in the Nicaraguan Segovias. Small Enterprise Development , 14(2), 36–46; Berndt, C. E. (2007). Is Fair Trade in coffee production fair and useful? Evidence from Costa Rica and Guatemala and implications for policy. Washington DC.: Mercatus 65 Policy Series, Policy Comment 11, Mercatus Centre, George Mason University)
  4. ^ Weitzman, H. (2006, September 8). The bitter cost of ‘Fair Trade’ coffee. Financial Times; Weitzman, H. (2006, September 9). ‘’Ethical-coffee’ workers paid below legal minimum. Financial Times ; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua – Sustainable development or a poverty trap? Ecological Economics , 68 p. 3023)
  5. ^ Griffiths, P., ‘Ethical objections to Fairtrade’ Journal of Business Ethics July 2011(DOI) 10.1007/s10551-011-0972-0 www.springerlink.com Accessed at http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
  6. ^ Valkila, J., Haaparanta, P., & Niemi, N. (2010). “Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fair Trade Farmers to Finnish Consumers.” Journal of Business Ethics , 97:257-270.
  7. ^ Kilian, B., Jones, C., Pratt, L., & Villalobos, A. (2006). “Is Sustainable Agriculture a Viable Strategy to Improve Farm Income in Central America? A Case Study on Coffee”. Journal of Business Research , 59(3), 322–330.
  8. ^ Mendoza, R., & J. Bastiaensen, J. (2003). “Fair Trade and the Coffee Crisis in the Nicaraguan Segovias.” Small Enterprise Development , 14(2), 36–46.
  9. ^ Raynolds, L. T. (2009). Mainstreaming Fair Trade Coffee: from Partnership to Traceability. World Development , 37 (6) 1083-1093, p. 1089); Valkila, J., Haaparanta, P., & Niemi, N. (2010). Empowering Coffee Traders? The Coffee Value Chain from Nicaraguan Fair Trade Farmers to Finnish Consumers. Journal of Business Ethics , 97:257-270 p. 264), Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua - Sustainable development or a poverty trap? Ecological Economics , 68 3018-3025, pp. 3022-3); Reed, D. (2009). What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86:3-26, , p. 12); Barrientos, S., Conroy, M. E., & Jones, E. (2007). Northern Social Movements and Fair Trade. In L. Raynolds, D. D. Murray, & J. Wilkinson, Fair Trade: The Challenges of Transforming Globalization (pp. 51–62). London and New York: Routledge. Quoted by Reed, D. (2009). What do Corporations have to do with Fair Trade? Positive and normative analysis from a value chain perspective. Journal of Business Ethics , 86:3-26 , p. 21.
  10. ^ Kilian, B., Jones, C., Pratt, L., & Villalobos, A. (2006). “Is Sustainable Agriculture a Viable Strategy to Improve Farm Income in Central America? A Case Study on Coffee”. Journal of Business Research , 59(3), 322–330.; Valkila, J. (2009). Fair Trade organic coffee production in Nicaragua - Sustainable development or a poverty trap? Ecological Economics , 68 3018-3025;Wilson, B. R. (2009). Indebted to Fair Trade? Coffee and Crisis in Nicaragua. Geoforum.
  11. ^ e.g.Griffiths, P. (2008) ‘Why Fairtrade Isn’t Fair’, Prospect, August Accessed at http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm; Booth, P. and L. Whetstone (2007) ‘Half a Cheer for Fair Trade’, Economic Affairs, 27, 2, 29–36; Sidwell, M. (2008) Unfair Trade, London: Adam Smith Institute.; Brink, Lindsey. (2004). Grounds for Complaint. URL accessed on September 25, 2006.; >Hayes, Mark (2008). "Fighting the Tide: Alternative trade organizations in the era of global free trade - A comment". World Developmen. 36 (12): 2953–2961.; Harford, T: “The Undercover Economist.”, 2005]] cite web | title = Markets, poverty, and Fair Trade | author = Sam Bowman | date = 11 March 2011 | url = http://www.adamsmith.org/blog/tax-and-economy/markets,-poverty,-and-fair-trade/ | publisher = Adam Smith Institute | accessdate = 2011-09-30 }};name=”economist”>"Voting with your trolley". The Economist. Dec 7th 2006. {{cite journal}}: Check date values in: |date= (help)
  12. ^ Peter, Griffiths. "Lack of Rigor in Defending Fairtrade". Economic Affairs. 31: 103–104.
  13. ^ Smith, Fairtrade (2010). "Lack of Rigor on Defending Fairtrade: Some important clarrifications of a distorting account – a reply to Perter Griffiths". Economic Affairs. 30 (2): 50–53.
  14. ^ Griffiths, P.: 2011, ‘Rejoinder: False Statements, Misrepresentation and Distortion in Defending Fairtrade’, Economic Affairs, 103-4. http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
  15. ^ Griffiths, P.: 2011, ‘Rejoinder: False Statements, Misrepresentation and Distortion in Defending Fairtrade’, Full version: http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
  16. ^ Griffiths, P., ‘Ethical objections to Fairtrade’ Journal of Business Ethics July 2011(DOI) 10.1007/s10551-011-0972-0 www.springerlink.com Accessed at http://www.griffithsspeaker.com/Fairtrade/why_fair_trade_isn.htm
Retrieved from "https://en.wikipedia.org/w/index.php?title=Fair_trade_coffee&oldid=493560576"