The Fairness of Fair Trade Coffee

Do you regularly purchase Fair Trade coffee? Do you feel good about yourself knowing that your purchase helps a poor farmer in a third world country. Well…think again. Fair Trade coffee may not be as fair as we have been led to believe.

We’ve been told that the purpose of it is to ensure that coffee bean farmers receive a fair wage for their work, unlike what many of the large coffee producers pay. New research indicates that fair-trade coffee does very little to assist coffee bean farmers. To better understand the Fair Trade we need let’s examine the process, which is administered by the Fairtrade Labelling Organizations International (FLO) and the US certification group: Fair Trade USA.

Coffee Growers belong to a cooperative. This cooperative assures them a minimum price per pound for the beans. Plus, there is a premium of $0.20 per pound that is sent back for investment in the local community. To become part of the cooperative, farmers must pay to become certified, agree to use certain pesticides and fertilizers, and pay “fair wages” to their workers.

As with many programs, it began with the best of intentions but has veered off track. Here are some of the flaws within the Fair Trade Coffee system and how it actually hurts coffee farmers.

1. The system has cost flaws. For example, in Guatemala, the benefits of participating in the fair-trade system are negated by the price the growers have to pay for certification. A University of California study estimates that fair-trade certification costs approximately $0.03 per pound, which doesn’t seem like much. But in some years it exceeds any price benefit brought by the higher fair-trade price, and this doesn’t even take into account the special fertilizers that must be used. So, the long-term benefit from fair trade is next to nothing.

2. Fair Trade snubs the poorest countries. The poorest coffee-growing countries are all located in Africa: Ethiopia, Kenya, and Tanzania. But these countries only represent less than 10 percent of Fair trade exports. Instead they focus on countries like Brazil, Columbia and Mexico. These farmers cannot even afford to be part of the cooperative to begin with. For Fair Trade to truly make a difference, they should be working more with these African countries.

3. Lack of oversight on community re-investment. Although fair trade pays a premium over the world coffee price to growers for “social and economic investments at the community and organizational level,” there’s no one making sure the funds are allocated properly. The assumption would be that this money is used to build schools and infrastructure that helps raise the quality of life for residents. But research proves that it is used instead to build coffee cooperatives’ buildings and other eyebrow raising expenses.

So, what can be done? Cut out the middle man. Instead of using Fair Trade Cooperatives use Direct Trade. Direct Trade is a better alternative all around. How it works: a coffee buyer contracts directly with a grower and offers them a good price for their product with no “fair trade” labeling as a requirement. The only problem is the burden is then put on the coffee seller / producer. They must convince consumers the “value” of their coffee. And the “Fair Trade” mentality is so far reaching, it will be challenging to convince why Direct Trade is better. Armed with this knowledge, consumers like you, now know to look for coffee companies that use Direct Trade.