Fair Trade vs. Direct Trade, Pt. 1–Which is Which?
(This is part one of a three-part series addressing the debate of Fair Trade vs. direct trade, their political ramifications, and why I prefer direct trade. Read Part 2 here, and Part 3 here.)
If you spend enough time in the coffee industry, it’s almost impossible not to get mixed up in a cause. Coffee is the world’s second-highest traded commodity (behind oil), and that global reach, combined with the inevitable disparities in economy of participating nations, means coffee is by definition political. Be it funding education in poor coffee-producing countries, or lobbying for the right for coffee laborers overseas to unionize, you’ll be hard-pressed to find someone heavily involved in the specialty coffee industry who doesn’t champion a crusade of some kind.
My own banner is hoisted over the current debate about Fair Trade versus what’s called “direct trade”. I prefer the latter, which I see as a systemic solution for many of the industry’s current problems. In an upcoming post I’ll explain why, but before I do I’d like to clear up some confusion surrounding both terms–terms many people have heard, but not everyone clearly understands.
Fair Trade is the trademarked name of a kind of certification, administered an independent monitoring group named TransFair USA. If a coffee is certified to be Fair Trade, that means that the beans meet certain criteria in both quality and economics. Certain quality and labor standards must be met, and in return the producing coffee plantations are guaranteed a minimum floor price for their beans at auction, resulting in a higher wage for the growers. This certification costs money, by way of arbitration fees paid by the growers (this of course has no influence on the actual certification of the beans).
Fair Trade does not mean “organic” coffees, which are coffees produced without pesticides or unnatural processing, though the guaranteed floor price is higher for FT growers who provide organic beans. Coffees may be Fair Trade certified, or organic, or both, or neither.
Direct trade is a general umbrella term for coffees that are imported directly from the growers themselves, rather than brokered in bulk at auction. The roastery develops a direct relationship with the owners of coffee farms, negotiating individual terms and prices. Because there are no middlemen or outside agencies involved to take their cuts, the growers receive a much higher price for their beans.
Think about it like this: typically, a grower will sell his crop to a coffee auctioning agency (or his government, to sell to that agency) all at once, for let’s say–making numbers up here–30 cents per pound. The auctioners sell to an importer for 50 cents per pound, who in turn sells to the roastery for $1.40 per pound. In direct trade, the roastery buys directly from the grower for–still making it up–$1.15 per pound, negotiated down as incentive to trade this way, and barring shipping costs the entire $1.15 goes directly to the grower. In practice it’s a little more complicated, but the gist is that the roastery pays less, and the grower gets considerably more money for his beans.
However, direct trade is a private agreement, one requiring a lot of footwork by both parties, and the only requirements for quality or labor standards are defined by who the roaster or grower chooses to do business with. It is not certification, only a name for a method of doing business.
That said, I much prefer direct trade, and coming this week I’ll explain why I think it’s a better deal for everyone involved in the specialty coffee industry.
13 comments
After I read an article about ‘fair trade’ in Reason magazine, I pretty much wrote it off as a collectivist cock up and refused to feel guilty for not buying or drinking fair trade coffee exclusively.
Here’s the link: http://www.reason.com/news/show/33257.html
Roger–
Thanks for the link. Many of the reasons listed in that article are the very reasons I prefer direct trade, so some of part 2 of this article will probably sound familiar to you–though I plan to add a personal anecdote or two from my years as a roaster/buyer.
-a
Thanks for starting this tao. It’s needed.
And I’d never heard of direct trade, but it makes sense. Can you point us to where we can find direct trade coffees?
Michi–
In Part 3 of this article I’ll point to a few direct trade retailers. They’re not as widespread as conventionally auctioned coffees, but it’s a growing movement so the coffees are getting easier to find.
-a
[...] Trade vs. direct trade, their political ramifications, and why I prefer direct trade. Read Part 1 here, and Part 2 [...]
[...] 2007. “Fair Trade vs. Direct Trade, Part 1.” Coffee Tao. October 15. [...]
[...] found a very good explanation of the differences between Fair Trade vs. Direct Trade on Coffee Tao. Basically, Fair Trade is an official certification system established by TransFair, paid for by [...]
Aric-
Nice article. But are you aware of the farmer-direct model, whereby farmers themselves are selling their roasted coffees in North America? Pachamama Coffee Cooperative, for example, is owned and controlled by more than 150,000 small-scale farmers in Ethiopia, Peru, Guatemala, Nicaragua and Mexico. They are based in California and sell direct to customers, both wholesale and retail. This is true “direct trade”. If you want to help farmers, it is a far more efficient way to do it. Personally, I like the premium organic coffee and the transparency of farmer-direct trade. Check it out http://www.pachamama.coop.
Fair Trade is good. It seems relevant to support Fair Trade where you are certain of the social, economic, and environmental practices; however I think it goes without saying that we the consumer can rarely rest assure that these practices are top notch.
This is why I try to support Direct Trade coffee vendors, who themselves check out the practices and do not simply rely on the Fair Trade seal of approval.
I personally live in Scranton, PA, and here in Scranton we have a coffee importer/roaster by the name of Electric City Roasting. This company also has to local cafes which sells this coffee. Anyways, the owner of this company goes directly to coffee farms and checks out their practices herself. If she deems them to be above the Fair Trade standard she then decides to purchase from the farm. And it is this, that is known as Direct Trade.
From the consumer perspective, I there again can not ensure that the practices are perfect, but I can at least see the farm and staff via the pictures that adorn the cafes, and it seems to be a bit more traceable than even Fair Trade can purport.
So check out Direct Trade vendors, and look into http://www.electriccityroasting.com …. There great!
Direct trade is nothing more then vertical integration and has been around for a very long time!
[...] is a good conversation about Fair Trade v Direct Trade over at the Coffee Tao. He feels that the Fair Trade program is fine and should not go away but that the Direct Trade [...]
Thanks for the enlightening discussion about direct trade. This is waht we are trying to do with our chocolates as well. Check us out at http://www.aequarechocolates.com
My partner and I are currently starting a Direct Trade coffee company, Global CafeNation. We are not ready to sell coffee yet as we are still negotiating terms, but look for us soon at http://www.globalcafenation.com to buy direct trade coffee! We are selling direct trade coffee from Tanzania and donating 70% of our profits to help fund secondary education in Tanzania.
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