Fair Trade Trade-Off

In September, Virginia Berman, N96, went to Honduras to visit a group of coffee farmers she had worked with 20 years ago, when she was a Peace Corps volunteer. She was stunned by what the farmers had accomplished by collaborating and sharing farming expertise.

Tall, beautiful citrus, banana and hardwood shade trees now grow among the coffee crops, along with beans that provide nitrogen to the soil. Honey water, a byproduct of coffee milling that used to contaminate the drinking water supply, now runs along a ditch into an area where compost is made. The farmers collect blue, orange and white rocks from a nearby river and strategically place them in the soil; each color of stone feeds the crops a different mineral.

“The yields are better,” and, by extension, so is the farmers’ quality of life, Berman says. “They have roofs that don’t leak. They have more latrines. A few more have trucks. They are sending their children to high school. They’ve become more active in local politics. It’s a passion for improving farming that you see coming out in the green, lush places that are their homes.”

Working together and learning from each others’ mistakes have been a boon for their families and their communities. To Berman, that has been the promise of fair trade, and the reason she has spent the last 15 years working at Massachusetts-based Equal Exchange, a fair-trade food company that buys directly from small farming cooperatives.

A lot has changed in 15 years. Many more Americans have heard the term “fair trade,” especially when it comes to coffee, by far the largest fair-trade industry. When you go to a specialty java shop, chances are you’ll hear someone asking whether this brand or that is fair-trade certified.

The understanding is that buying directly from the small cooperatives means more profits for the farmers, better working conditions and economic stimulus for their communities. 

“That’s the good news—there’s more awareness,” says Berman, who is Equal Exchange’s fundraising program director. “The downside is that [fair trade] has become more watered down in how the companies are using the term.”

The Price of Expansion

The industry is at a crossroads as fair-trade foods such as coffee, cocoa, bananas, sugar, tea, spices and even ice cream and baking mixes are gaining more of a foothold at the grocery store. In September, Fair Trade USA, a California-based nonprofit that certifies products as fair trade and helps American companies find fair-trade ingredients, pledged that it would double the sales of fair-trade goods in the United States by 2015.

Part of its strategy is to allow more large farms to certify their products as fair trade, even though they use hired laborers and farmers who are not in co-ops. Some see this as a way to bring fair trade into the mainstream and reap more benefits for farmers in developing areas.

“We make fair-trade certification available to anyone who wants to participate,” says Stacy Wagner, the communications director for Fair Trade USA. “Everyone is held to the same fair-trade standard.”

Others, including Virginia Berman, see it as leaving small-scale farmers in the dust.

“The real power of fair trade is in the farmers getting to build the relationship with the U.S. buyer and changing the uneven terms of trade,” she says. “And yet more and more fair trade is being boiled down to simply a price.”

She fears that fair trade, in trying to broaden its impact, is straying from its original goals and ideals. The fair-trade movement began after World War II as a way to give people in developing countries access to world markets. Church organizations spearheaded the effort, purchasing baskets, jewelry, pottery and other handicrafts made in South America, Asia and Africa and providing needed income for the artisans. In the 1960s, Alternative Trade Organizations (ATOs) formed to sell the goods through specialty stores and catalogs in Europe.

In the 1980s, the emphasis turned to agriculture. Falling commodity prices worldwide were taking a toll on small-scale farmers who grow crops such as coffee and tea, and the fair-trade movement stepped in, assuring some stability in prices.

Commodities such as dried fruits, cocoa, sugar, rice, spices and nuts quickly followed. Soon, third-party, fair-trade-certification organizations, including Fair Trade USA, were set up to help standardize labeling efforts. (Unlike organic food, the U.S. Department of Agriculture does not regulate what can carry a fair-trade label.)

Bringing Democracy to the Farm

Equal Exchange, itself a worker-owned cooperative, was established in 1986 and became the first U.S. coffee roaster to buy coffee directly from small-scale farmers. Like other ATOs, it guarantees a price per pound, which is always above the world market price. It also pays a portion of the price in advance, so that farmers have capital to buy equipment and raw materials.

But beyond the price premium, Equal Exchange works exclusively with democratic farmer cooperatives, where each farmer has a vote in how the profits are spent. Often, the proceeds go toward basic needs that governments are not providing: constructing better roads so that they can bring their coffee to market, building schools so children don’t have travel for hours to attend middle or high school in a city and developing water purification systems. 

“When farmer groups get money, they invest in their land,” Berman says. “They understand that the money is only good as long as they have healthy children without parasites who can attend school beyond the seventh grade. They are then able to think beyond survival and on a community-wide level.”

But as more food companies enter the fair-trade market, Berman says, too many are paying an above-market price for crops without connecting with democratically run co-ops. Several farmer groups in Latin America, in particular, have complained about fair-trade organizations certifying foods grown not on small farms, but on plantations.

History has given them a reason to be concerned, says Jessica Jones-Hughes, N09, vice president of Equal Exchange’s banana-importing sister enterprise, Oké USA Fair Trade Fruit Co.

In the case of bananas, a few huge multinational companies owned much of the land in the “banana republics” for many decades. Workers on banana farms spent their whole lives living in shacks alongside the plantations and using their meager wages to pay for overpriced staples at the plantation stores. The companies owned the entire supply chain, from the land to the trucks to the boats that brought the bananas to the U.S. or Europe. Their influence on governments—including the organization of coups d’état—was notorious.

From Banana Republics to Banana Reform

Things have improved as governments have re-parceled the land as part of agrarian reform and banana cooperatives have been organized. Jones-Hughes has seen fair trade bring significant change to Peru, where Oké gets some of its bananas.

Critics claim that the fair-trade label is giving too much of a boost to companies that only dabble in the movement. Illustration: Alex Nabaum

Not long ago, 90 percent of the fruit in one area of northern Peru was purchased by Dole. “In the last three years, these growers have banded together in cooperatives, gone out on their own, established markets and hired people to do their own exporting,” Jones-Hughes says. “Many no longer depend on Dole to sell their product, and those who still work with Dole have significantly increased their control of the supply chain.”

With ATOs putting so much effort into finding alternatives to the multinational companies, they see little reason to let those same companies into the fair-trade game. Many complained when Fair Trade USA certified some bananas sold by Dole that were obtained from unionized plantations.

“It goes with the demand increasing,” Berman says. “Their appetite to increase volume and profits from fair trade is growing faster than the pace the small farmers—those who really need to benefit—move.”

Eye on the Label

Shauna Sadowski, N05, a sustainable sourcing expert who has worked with food companies large and small, agrees that volume is an issue: The limited supply of ingredients has kept many food manufacturers away from fair trade.

“It’s one thing if you have a single crop or ingredient, such as a banana, but it is more difficult when you are sourcing for products that have many ingredients,” she says.

For example, a cookie manufacturer may advertise that it is using fairly traded cacao, which it buys from a grower in Ecuador. Sales are great. But if the demand suddenly goes up and the grower can’t meet the need, the manufacturer may have to scramble to find another fair-trade producer. There may be more cacao from another co-op in Peru, but will it be the same quality, flavor and texture the cookie buyers have come to expect?

“If you have a product with 10 different ingredients and half of those are fair trade, you need to ensure those fair-trade suppliers can consistently provide the quantity and quality needed to produce the best product,” Sadowski says.

Fair Trade USA’s Wagner says allowing large estate farms, which employ large numbers of workers, access to fair-trade certification not only increases the flow of fair-trade ingredients, it helps ensure fair wages and safe working conditions for those workers, as well as provides development funds for their communities.

“You have to support different scenarios,” she says, describing a farmer who may belong to a co-op, but who does not have enough land to pass onto his sons, who then find work at the nearest plantation. “If you are in need of the benefits of fair trade, that would be regardless of your farming situation,” Wagner says.

Critics also claim that the fair-trade label is giving too much of an image boost to companies that only dabble in the movement. Starbucks and Walmart carry the fair-trade label on some, but not all, of their products. The Honest Tea brand of ready-to-drink beverages, which uses fair-trade ingredients, was recently acquired by the Coca-Cola Co.

Wagner points out that Fair Trade USA certifies products, not companies, echoing the organization’s policy that “the fair trade certification model cannot and does not attempt to monitor a company’s broader business practices or motives for involvement in fair trade.”

Consumer Confusion

Fair trade is certainly growing. Fair-trade-certified sales at mainstream grocery stores climbed 87 percent in the second quarter over the previous quarter in 2011. Overall, fair-trade food accounts for an estimated $4.7 billion in global sales.

Yet fair trade is still a tiny, tiny fraction of the food market—less than one-tenth of 1 percent of global food and beverage sales. Fair-trade coffee, the biggest part of the business, accounted for only about 4 percent of coffee purchased in the United States in 2009. Fair-trade bananas account for less than 0.01 percent of those purchased in America.

Fair trade is still much better known in Europe, which has closer connections with developing nations from its colonial days, and where food in general gets closer scrutiny. Fair Trade USA reports that 80 percent of European consumers are aware of fair trade, but only 34 percent of Americans are.

Sadowski says there are indeed Americans who know about fair trade, care passionately about it and actively look for the label. But they are in the minority.

“What we know from consumer research, as well as from watching the market trends overall, is that consumers are motivated by that which affects their health—their personal health and their children’s personal health,” Sadowski says. Although fair trade ultimately could improve the health of communities worldwide, its connection to wellness is not as apparent as “high fiber” or “contains antioxidants.” It becomes one more label competing for a consumer’s attention.

“If you have someone going into a grocery store who has 30 minutes to get all his groceries for the week, fair trade is not necessarily going to be top of mind,” Sadowski says.

Plus, she says, there is still a lot of consumer confusion about what exactly fair trade is. It may take years for the public to fully absorb its meaning, she says.

More, Please

Ironically, Sadowski says, consumers may demand more fair-trade products if food manufacturers start offering them first. Once consumers see the fair-trade labels on foods they enjoy, they may say, “Hey, why don’t you offer this more?”

And once they do, consumers will have to sort out which fair-trade products deserve their dollars, and which aren’t worth paying a premium. In September, Fair Trade USA introduced a new policy on ingredients, which it says will make it easier for consumers to know how much of a product is fairly sourced.

Products that are at least 25 percent fair-trade-sourced (by weight) can carry a “Fair Trade Certified” label on the front of their packages; between 10 and 24 percent gets you a “Fair Trade Certified Ingredients” label. Less than that, and you can still put a note in the ingredients list, such as “Fair Trade Certified Sugar.” Jones-Hughes argues that the new rules give no encouragement for companies to include fair-trade ingredients beyond that 25 percent mark.

On its website, Fair Trade USA writes that it strongly supports “conscious consumerism” and encourages people to “educate themselves about the companies from which they buy, the origins of the products they consume and the business practices of the stores where they shop.”

Berman gives similar advice. While it sounds complicated, it is not that different from what consumers already have to do when sorting out the legitimacy of organic foods or “green” products, she says.

“A lot has to do with the principals of the company, namely the importers and the exporters,” she says. For people with a critical eye, websites and packaging can provide some transparency.

And, as we are talking about pleasures like coffee and chocolate here, it’s OK to consider the quality of the product. Berman notes that fair-trade coffees routinely win awards in cupping competitions. When a farm is tended with care, she says, it improves the soil and the flavor of crops.

“For many people, it is about the taste,” she says.

This article first appeared in the Winter 2012 issue of Tufts Nutrition magazine.