Fair Trade vs. Direct Trade, Pt. 2: Why Not Fair Trade?

(This is part two 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 1 here, and Part 3 here.)

Many socially-conscious coffee lovers peek into the windows of their local shops looking for the tell-tale sticker with the Fair Trade logo, wanting to balance their beverage with the peace of mind knowing that farmers overseas are getting their fair share. Unfortunately, Fair Trade certification doesn’t automatically guarantee that customers are getting the best coffee for their dollar, or that the growers are getting the maximum profit for their beans.

Before I lay into TransFair USA for what I think keeps Fair Trade certification from being truly effective, I want to make it clear: I’m not arguing for the abolition of FT, or saying that it should never be used. What it’s done for the public consciousness about the status of coffee growers is itself astounding. But I do think that it’s important to know where they’re misstepping and why, and that if you truly want to practice coffee social consciousness by voting with your dollar there are other options that are better for everyone involved.

There are two basic things that keep many of the world’s finest coffees out of Fair-Trade-certified bags: money and size.

1) Certification costs money; for many growers and retailers, too much money. To be certified by TransFair USA costs money from both sides: the growers must pay to have their beans certified, and roasters/retailers must pay yearly licensing fees just to be allowed to carry Fair Trade beans.

For the grower, it costs between $2,000 and $4,000 USD to assess a farm, plus annual recertification fees and a small percentage of the price of each pound of coffee sold. A small estate farm–the kind of farm that produces the highest-quality coffees–might sell an entire year’s crop for under $20,000. That’s a significant barrier to entry. Selva Negra Farms, located in Matagalpa, Nicaragua, produces one of the best coffees in the world, winning the Cup of Excellence in 2003; but their coffee business is only part of the farm, which also produces livestock, flowers, and is a vacation resort. The plantation is widely renowned for sustainability and positive working conditions, but coffee is only part of their overall income–for them, paying $4k out of that coffee revenue isn’t feasible.

For the roaster, putting an FT sticker in the window adds about ten cents a pound to the cost of a coffee in licensing fees. This amounts to about a 10% overall increase in buying costs, on top of paying the higher minimum floor price for the coffee in the first place, all for “participation” in a program in which the roasters have no vote about how that money is being spent.

2) The size and organizational structure required by Fair Trade simply isn’t possible for many growers. Costa Rica’s Hacienda La Minita produces what is generally accepted to be one of the top three or four coffees in the world: Cafe La Minita. The plantation is wealthy, yet the owner William McAlpin is consistently held up as a model of humanism in independent and international business. McAlpin literally coined the term “estate coffees”. Whenever a journalist writes about shocking working conditions on coffee farms overseas, Hacienda La Minita is frequently referred to as the utopian alternative.

But Fair Trade certification requires any participating growers to be part of a farmer co-operative. Any other organizational structure is automatically disqualified from consideration by TransFair. That means family plantations such as La Minita, individual independent farmers, and for that matter any farm that hires outside labor, are all ineligible for certification no matter what the worker conditions are or how good the coffees are. Growing regions where the coffee trade is managed by the government as a matter of economic survival, such as Ethiopia, are also ineligible, meaning entire countries in the coffee-growing world are excluded outright.

The poorest independent farms and estate farms who produce rare varietals who stand the most to gain by increased profit share are by definition excluded from participating in the program that so loudly claims is there to help them.

Fair Trade is a well-intentioned brand that nonetheless leaves behind the best growers in the world, trumpeting “rigid quality control” that ultimately doesn’t actually reflect true working conditions, trade practices, or especially coffee quality. They hemorrhage money: even after six years of net deficits spent in building the brand, their most recent financial report on their site shows them spending $3.2 million in order to collect only $2.9 million in licensing fees.

Fair Trade isn’t bad, it’s just misleading and mismanaged. With some core structural changes it could probably become the agent of change it bills itself as. Nonetheless, there must be a better method of trade practice that doesn’t require a single, worldwide arbiter and doesn’t exclude the very people it’s supposed to empower.

Direct trade is that method, and in Part 3 I’ll explain why.