What Exactly Is Fair Trade? I Interview an Expert.

Today my newly-former employer publishes my interview with Fair Trade and international economics expert Jonathan Jacoby of the Center for American Progress. I always found myself wondering how exactly Fair Trade is put together, especially when confronting such things as a favorite coffee roaster Intelligentsia’s “Direct Trade” program, which claims to pay farmers even more than Fair Trade-certified sellers. About a month ago I interrogated Jonathan about how all this works, and here’s the product, after the jump.


Ask the Expert: Fair Trade
Fair Trade products are giving workers a greater share of the profits.

By Graham Webster
Thursday June 7, 2007

From coffee in your cup to cotton on your back, Fair Trade products are picking up steam in the marketplace. The movement behind the Fair Trade label is a broad coalition of consumers, governments, farmers, and entrepreneurs who work together to give people at the beginning of the supply chain a higher share of the final value of their work. Buying Fair Trade products is an easy way to reduce some of the human cost of the international trade system, but there is still a long way to go. Campus Progress sat down with Jonathan Jacoby, associate director for international economic policy at the Center for American Progress to learn more. Jacoby is a veteran of the Fair Trade movement, having worked with Oxfam America and the New York City Fair Trade Coalition to promote just and sustainable trade within government, among business leaders, and on college campuses.

Campus Progress: How would you describe Fair Trade? What is it and how does it work?

Jonathan Jacoby: Fair Trade is a bottom-up international trading model that promotes decent work and a dignified life for farmers and artisans in the developing world. In the more traditional top-down international trading model, the sellers at the end of the chain will try to maximize their profit margins, so the whole supply chain puts pressure on producers to take a lower price.

The Fair Trade model builds stability and fairness into the system by making sure there are no exploitative practices going on within the global supply chain. It first looks at what producers and farmers need to support their families, put food on the table, and invest in their farms. Then it looks for a way to build from the bottom up to address their needs and to fetch a reasonable price in the marketplace on the consumer end halfway around the world that will cover costs and make it profitable for everyone along that chain.

So for example, small-scale farmers in Nicaragua grow coffee—high-quality stuff up in the hills where there’s good soil and under the shade of the rainforest, using natural practices; they’re unlikely to be able to afford fertilizers so it’s probably organic even if it’s not certified that way. They’re looking for a market, and it’s not going to be easy for a small-scale farmer with two acres to find a buyer around the world or 1,000 miles north in Miami. The Fair Trade system allows growers to form cooperatives and have the cooperatives sell directly to importers of coffee or companies that roast coffee themselves. This cuts out the middlemen in the supply chain who take a piece of the profit, and makes sure the farmer gets a fair price and the consumers get what they want, a high-quality cup of coffee.

Who is doing the work to set up this “bottom-up” arrangement, and what policy and other tools do they use?

A lot of the pieces were in place already. Some governments had encouraged the formation of cooperatives because they give small farmers more power in the marketplace. If they get together, they can afford equipment they wouldn’t be able to buy individually, and they can command a higher price.

If it’s each farmer on his own, the trader, known as a coyote in Latin America, shows up at the farm gate, offers 12 cents a pound and says, “Take it or leave it.” The individual farmer may not be able to hold on to the coffee because he needs to feed his family today so he’ll sell it at that price. But in a cooperative, the farmers negotiate for a higher price with the trader.

One of the things a lot of people want to do with international development from rich countries is to help other countries develop more diversified industries. If Fair Trade takes off and farming relationships become really sustainable, is there a risk that this farmer-consumer relationship will be cemented to the point where producers can’t rise out of farming into industry if they want to?

You certainly don’t want to perpetuate the problem of locking a low-income country into a commodity trap. The challenge is figuring out how you can use high-value commodities—versus more conventional “Folgers” stuff—to bring in a nice premium that farmers can invest to help them spread their risk while not increasing dependence.

Here’s an example: a farmer in Rwanda grows coffee or a farmer in India grows tea. That farmer, by getting a higher income, hopefully will spend more on the family, in particular on the children. Educating children, in particular girls, is typically one of the main development interventions which help a country develop. It takes a while to see it happen but you educate girls and as they’re educated, they’ll see more career prospects and have fewer children. That’s part of the demographic transition to becoming a more diverse economy and a more developed one.

On the consumer end in the U.S. we see certification schemes like Fair Trade logos on coffee and other products. These schemes are run by private organizations and not the government. Why is that?

The idea is that governments may be seen more as a part of the problem because governments in the developing world have traditionally played a heavy-handed role in agriculture. They’ve been both a great support and a great burden to farmers. They’ll start a marketing board and then all the farmers have to sell their products through government auction. Plus, there is a concern about corruption and other things that are problematic with governments in the developing world. At the same time, governments deserve credit for what they’ve done to help boost economies.

On this end, in the U.S. it’s been seen as a viable business opportunity for those who bring social consciousness into what they do. It’s also a new realm of entrepreneurship—people bringing business skills to poverty and major social challenges. It is a private initiative that comes out of a spirit of innovation and social awareness, but ultimately, as with the certified organic movement, the government plays a role because you need reliable certification and after a while, it made sense for the Department of Agriculture to certify organic food or to certify the certifiers. That may happen with Fair Trade too, and ultimately there is a whole set of things government can do to encourage Fair Trade, from procuring it for government offices to having a labeling scheme that is more widely recognized.

I know there are many organizations on the consumer end in the U.S. that use Fair Trade Certified coffee. But there are some who do similar programs that are equally fair or even more generous in terms of money that goes to farmers but aren’t certified “Fair Trade.” Does that undermine the certification scheme and challenge the movement or does it push the movement in a more progressive direction?

It does some of both, but it does more of the first. Certification is a way to develop a critical mass of awareness, like with the Energy Star on electronic products, so enough people will know about it. You want people to say, “Okay, I know what that [seal] means.” Once you hit a tipping point where folks are aware, then certification comes to mean something. With the Kosher seal, Jews looking for Kosher food will find the food with the little “K.” It has a certain credible claim that’s universally recognized.

With Fair Trade, that certification scheme is on its way to being widely recognized in the mainstream, but it’s not there yet. So if different companies have different ideas or structures or evolutions and want to go out of the traditional Fair Trade system, you can understand some good reasons why they want to, but it comes at the cost of hitting the tipping point for Fair Trade certification that would have a benefit greater than the sum of the parts when there’s one seal that assures consumers that farmers are getting a fair price.

Clearly there is a long way to go before this expands to the point where a large portion of farmers who supply U.S. consumers are getting a fair price for their work. What are the barriers activists and entrepreneurs are facing and what strategies and tactics are people using to push Fair Trade?

As with every social movement, there is a tremendous amount of energy on campuses. Students were some of the first to catch on to Fair Trade as a progressive use of dollars they were spending buying coffee to stay up late writing term papers.

And a number of anti-poverty organizations have helped promote activism on campuses. Oxfam America is one, Global Exchange is another, and a number of faith-based groups have reached out to campuses. Most recent and most exciting is United Students for Fair Trade. Students really took it upon themselves to say, “If we’re all doing Fair Trade activism on our campuses and we have campaigns to bring more Fair Trade products onto campus, why not network and coordinate between all the different campuses that are doing this across the country?”

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