Fair trade coffee is coffee that is certified as having been produced to fair trade standards by fair trade organizations, which create trading partnerships that are based on dialogue, transparency and respect, with the goal of achieving greater equity in international trade. These partnerships contribute to sustainable development by offering better trading conditions to coffee bean farmers. Fair trade organizations support producers and sustainable environmental farming practices and prohibit child labor or forced labor.
Prior to fair trade, prices were regulated by the International Coffee Organization according to the regulations set forth by the International Coffee Agreement of 1962. This agreement, which was negotiated at the United Nations by the Coffee Study Group, set limits on the amount of coffee traded between countries so there would be no excess supply and consequent drop in price. The ICA existed for five years and then was renewed in 1968.
The agreement was renegotiated in 1976 due to increasing coffee prices, largely a result of a severe frost in Brazil. The new agreement allowed for the suspension of price quotas if the supply of coffee could not meet the demand, and enabling them if prices dropped too low.
In 1984, the agreement was again redrawn, this time creating a database on coffee trade, and implementing stricter import and export regulations.
Fair trade certification was then introduced in 1988 following a coffee crisis in which the supply of coffee was greater than the demand; since no price quotas had been reimplemented by the International Coffee Act, the market was flooded. Launched in the Netherlands, fair trade certification aimed to artificially raise coffee prices in order to ensure growers sufficient wages to turn a profit. The original name of the organization was "Max Havelaar", after a fictional Dutch character who opposed the exploitation of coffee farmers by Dutch colonialists in the East Indies. [1] The organization created a label for products that met certain wage standards.
Quotas remained a part of the agreement until 1989, when the organization was unable to negotiate a new agreement in time for the next year. It was decided that the 1983 agreement would be extended, but without the quotas because they had not yet been determined. A new agreement could not be negotiated until 1992.
From 1990 to 1992, without the quotas in place, coffee prices reached an all-time low because coffee price quotas could not be decided.
The agreements of 2001 and 2007 aimed to stabilize the coffee economy by promoting coffee consumption, raising the standard of living of growers by providing economic counselling, expanding research to include niche markets and quality relating to geographic area, and conducting studies of sustainability, principles similar to fair trade. [2] [3]
Following the inception of fair trade certification, the "Transfair" label was later launched in Germany, and within ten years three other labeling organizations commenced: The Fairtrade Foundation, TransFair USA, and Rättvisemärkt. In 1997, these four organizations jointly created Fairtrade International (formerly called FLO, or Fairtrade Labelling Organizations International), which continues to set Fairtrade standards, inspecting and certifying growers. [1]
The fair trade labeling organizations having most of the market share and who sell through supermarkets refer to a definition developed by FINE, an association of four international fair trade networks (Fairtrade Labelling Organizations International, World Fair Trade Organization (WFTO), Network of European World shops and European Fair Trade Association (EFTA)). The standards developed by Fairtrade Labelling Organization are the most widely used. [4] Fairtrade Labelling Organization (FLO) International is the overall body that governs the fairtrade system. It aims to achieve high standards within the fairtrade system in terms of credibility, compliance of Fairtrade Standards by producers, traders, and retailers.
FLO's Main Tasks
The certification scheme is run by Fairtrade International (FLO). Fairtrade has become the most dominant Fair Trade label and has attracted a lot of competitors challenging its monopoly as an ethical label. [6] Several labels from competitors have been created using different certification schemes. NGOs and non-profit organizations are the main threats causing enormous headache for Fairtrade International (FLO) regulating authorities. A few examples include Bird-friendly Coffee, which promotes practices that help to protect the habitat of migrating birds, the American NGO Rainforest Alliance, whose mission is to protect ecosystems and to preserve biodiversity and sustainability of modes of production, and UTZ Certified, which focuses on improving the efficiency and market access of producers. However, most of these organizations are criticized for failing to guarantee minimum price, failing to provide pre-financing facilities, favouring plantations at the expense of family farms. [6] The greatest idea about the certification scheme and its competitors is that they all have a logic of innovation they constantly attempt to innovate rather than generating income only but proactively meet the changing needs of different objectives with different ambitions. [6]
Coffee packers pay Fairtrade a fee for the right to use the Fairtrade logo, which gives consumers an assurance that the coffee meets Fairtrade criteria. The coffee with this certification mark must be produced by farmers and cooperatives that meet these criteria. [7]
Coffee retailers are not restricted by Fairtrade to sell Fairtrade coffee as a premium product and charge as much as they like for the coffee. [8]
Importers of Fairtrade coffee have to be registered with Fairtrade and pay a fee. Under the Fairtrade International standards they are obliged to pay a minimum price to the exporting organization, currently $1.40c/lb New York Board of Trade “C” contract, F.O.B. origin for Arabica, and $1.05 for Robusta London “EURONEXT LIFFE” contract, F.O.B origin with 30c/lb extra for organic. [9] When the world price is above this level, they are obliged to pay 20c/lb above the world price.
Certified Fairtrade coffee is normally exported by secondary or tertiary cooperatives, marketing this coffee on behalf of the cooperatives the farmers belong to [10] with arrangements that may be complex. [11] There is not enough demand to take all the certified coffee produced, so most has to be sold as uncertified. In 2001 only 13.6% could be sold as certified [12] so limits were placed on new cooperatives joining the scheme. This plus an increased demand put up sales of certified to around 50% in 2003 [13] with a figure of 37% commonly cited in recent years. Some exporting cooperatives do not manage to sell any of their output as certified, [14] and others sell as little as 8%. [15]
The exporting cooperatives incur costs including certification and inspection fees, additional marketing costs, costs of conforming to standards, and additional costs of cooperative operation, costs which are incurred on all coffee production, even if little or none is marketed as certified, with a higher price, so the cooperatives may make a loss on Fairtrade membership. Weber [14] reports cooperatives not able to cover the extra costs of a marketing team for Fairtrade, with one covering only 70% of these costs after six years of Fairtrade membership.
Any deficit after paying these costs means a lower price for farmers, while any surplus will normally go on “social projects” for “common goals” organized by the exporting cooperative rather than as extra payment for farmers. [16] These may include the building of classrooms, baseball fields, or the establishment of women's groups, for instance.
FLO-CERT, a for-profit business owned by Fairtrade International, handles producer certification, inspecting and certifying producer organizations in more than 50 countries in Africa, Asia, and Latin America. [17] In the fair trade debate there are many complaints of failure to enforce these standards, with farmers, cooperatives, importers and packers.
The marketing system for Fairtrade and non-Fairtrade coffee is identical in the consuming countries, using mostly the same importing, packing, distributing and retailing firms. Some independent brands operate a virtual company, paying the normal importers, packers and distributors and advertising agencies to handle their brand rather than doing it themselves, for cost reasons. [18]
Many fair trade organizations remain that adhere to a greater or smaller degree to the original objectives of fair trade than the mainstream of Fairtrade International and its associate. These market products through alternative channels where possible, and market through specialist fair trade shops, but they have a small proportion of the total market. [19]
Criticisms of fair trade have been made as a result of independent research, and these are summarized in the fair trade debate.
There are also some criticisms of fair trade specific to coffee. Colleen Haight of the Stanford Innovation Review argues that fair trade coffee is merely a way to market the idea of ethical consumerism. [20] Quality and transparency concerns regarding coffee are increasingly common amongst some consumers and coffee companies, as seen through the rise of the third wave coffee movement. Maintaining a balance between ethical and higher-quality coffee may be difficult with fair trade coffee due to what some coffee roasters deem as insufficient quality incentive within many fair-trade certified coffee farms. Deborah Sick's research, involving interviews with coffee farmers in Costa Rica, finds that many farmers often produce more fair trade coffee than they can sell, so will often end up selling to independent buyers that will often pay more than fair trade buyers can. [21] Some scholars are concerned of the artificial stimulation of coffee production, especially since worldwide demand for coffee is relatively inelastic. [22]
Many who believe fair trade coffee is insufficient use the direct trade model, which allows for more control over quality concerns, farmer empowerment, and sustainability issues. [23] It is also valuable in fostering closer farmer to roaster business relationships, which can ultimately increase quality of life and profits for coffee growers and buyers alike. However, direct trade is a new concept that is only utilized by for profit businesses like Counter Culture Coffee and Intelligentsia Coffee and therefore has no third party certification. [24] [25]
Fair trade has become a repetition of free trade rather than being an alternative to the market economy which is dominated by supply and demand. Fair trade is not serving its promises of creating opportunities for economically disadvantaged producers. Poverty has become a commodity through fair trade within its label that labels goods produced by the poor giving it visibility it did not have before leaving the marginalized people in reduced circumstances. [26]
The system could not become a solution to all humanity misfortunes; there are still concerns as the large amounts of profits does not go to the less privileged producers although much of the labor have been provided by these marginalized people. The poor may remain poor if there are no measures implemented to address the inequalities of the market as the poor cannot enjoy decent prices to what they sell to the rich countries. Prices provided by the system do not amount for inflation which can aggravate their conditions. [27]
Fair trade is a term for an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The fair trade movement combines the payment of higher prices to exporters with improved social and environmental standards. The movement focuses in particular on commodities, or products that are typically exported from developing countries to developed countries but is also used in domestic markets, most notably for handicrafts, coffee, cocoa, wine, sugar, fruit, flowers and gold.
Fairtrade International, or Fairtrade Labelling Organizations International E.V. is a product-oriented multistakeholder group aimed at promoting the lives of farmers and workers through trade. Fairtrade's work is guided by a global strategy focused on ensuring that all farmers earn a living income, and agricultural workers earn a living wage. Fairtrade works with farmers and workers of more than 300 commodities. The main products promoted under the Fairtrade label are coffee, cocoa, banana, flowers, tea, and sugar.
The Fairtrade Foundation is a charity based in the United Kingdom that aims to help disadvantaged producers in developing countries by tackling injustice in conventional trade, in particular by promoting and licensing the Fairtrade Mark, a guarantee that products retailed in the UK have been produced in accordance with internationally agreed Fairtrade standards. The foundation is the British member of FLO International, which unites FLO-CERT, 25 National Fairtrade Organisations and 3 Producer Networks across Europe, Asia, Latin America, North America, Africa, Australia and New Zealand.
FLOCERT is one of the world’s leading social auditing and verification bodies and the global certifier for Fairtrade. With a vision of combating poverty and securing sustainable livelihoods for farmers in developing countries, FLOCERT's focus lies on auditing global supply chains and guaranteeing compliance with Fairtrade Standards.
The 'International Fairtrede Certification Mark is an independent certification mark used in over 69 countries. It appears on products as an independent guarantee that a product has been produced according to Fairtrade political standards.
Fair Trade USA, formerly "TransFair USA", is a 501(c)(3) non-profit organization that sets standards, certifies, and labels products that promote sustainable livelihoods for farmers and workers and protect the environment.
Frans van der Hoff, or Francisco VanderHoff Boersma as he is called in Latin America, was a Dutch missionary who, in collaboration with Nico Roozen and ecumenical development agency Solidaridad, launched Max Havelaar, the first Fairtrade label in 1988. Van der Hoff's contacts with Mexican coffee producers were important in securing the supply and ensuring the success of the very first Fairtrade certification initiative.
Fairtrade Canada, formerly TransFair Canada, is a national non-profit certification and public education organization promoting Fairtrade certified products in Canada to improve the livelihood of developing world farmers and workers. It is the Canadian member of FLO International, which unites 24 fair trade producer and certification initiatives across Europe, Asia, Latin America, North America, Africa, Australia and New Zealand.
Fairtrade Nederland formerly known as Max Havelaar StichtingArchived 2022-08-16 at the Wayback Machine is the Dutch member of Fairtrade International, which unites 23 Fairtrade certification producer and labelling initiatives across Europe, Asia, Latin America, North America, Africa, Australia and New Zealand.
The Fair Trade Association of Australia and New Zealand is a member-based organization that supports two systems of fair trade. The first is the Australia and New Zealand member of FLO International, which unites Fairtrade producer and labeling initiatives across Europe, Asia, Latin America, North America, Africa, Australia and New Zealand. The second, is the World Fair Trade Organization (WFTO), of over 450 worldwide members, to which the Fair Trade Association is one. Fairtrade refers to FLO certified commodity and associated products. Fair trade encompasses the wider Fair Trade movement, including the Fairtrade commodities and other artisan craft products.
The fair trade movement has undergone several important changes like the operation for ten thousand villages to open their businesses since early days following World War II. Fair trade, first seen as a form of charity advocated by religious organizations, has radically changed in structure, philosophy and approach. The past fifty years have witnessed massive changes in the diversity of fair trade proponents, the products traded and their distribution networks.
The fair trade debate concerns the ethics and economic implications of fair trade, a term for an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships. The benefits of fair trade for farmers and workers can vary considerably and the social transformation impacts also vary around the world. However the main concerns from critics is that fair trade may give an unfair advantage to some producers over others.
UTZ, formerly called UTZ Certified, is a program and a label for sustainable farming. The organization was founded as a non-profit in the Netherlands in 2002. The UTZ label is featured on more than 10,000 product packages in over 116 countries. In 2014, UTZ was reported to be the largest program for sustainable farming of coffee and cocoa in the world. The UTZ program addresses agricultural practices, social and living conditions, farm management, and the environment. In January 2018, UTZ officially merged with the Rainforest Alliance in response to the increasing challenges of deforestation, climate change, systemic poverty, and social inequity.
The Max Havelaar Foundation is a non-profit certification and public education organization promoting Fairtrade products in Switzerland to improve the livelihood of developing world farmers and workers. The Max Havelaar Foundation is the Swiss member of FLO International, which unites 23 Fairtrade producer and labelling initiatives across Europe, Asia, Latin America, North America, Africa, Australia and New Zealand. Several of these corresponding organizations in other European countries also use the Max Havelaar name. The Swiss Max Havelaar organization was founded in 1992 by the Third World aid organisations Brot für alle, Caritas, Fastenopfer, HEKS, Helvetas and Swissaid.
Direct trade is a form of sourcing practiced by certain coffee roasters, chocolate makers, tea sellers, gemologists and more who build direct relationships with the farmers, artisanal miners and processors who sell their products. There is no single set of direct trade standards, and specific trade practices vary as a reflection of business and ethical priorities of the roaster or maker. Generally speaking, however, direct trade practitioners view their model as one of mutually-beneficial and transparent trade relationships.
A fair trade certification is a product certification within the market-based movement of fair trade. The most widely used fair trade certification is FLO International's, the International Fairtrade Certification Mark, used in Europe, Africa, Asia, Australia and New Zealand. Fair Trade Certified Mark is the North American equivalent of the International Fairtrade Certification Mark. As of January 2011, there were more than 1,000 companies certified by FLO International's certification and a further 1,000 or so certified by other ethical and fairtrade certification schemes around the world.
The Union of Indigenous Communities of the Isthmus Region is a farmer's cooperative in the state of Oaxaca, Mexico. It was established in 1982 to assist in production, marketing and distribution of locally produced coffee and other products. UCIRI was a pioneer of organic coffee production and one of the first fair trade suppliers.
Sustainability standards and certifications are voluntary guidelines used by producers, manufacturers, traders, retailers, and service providers to demonstrate their commitment to good environmental, social, ethical, and food safety practices. There are over 400 such standards across the world.
Fair trade cocoa is an agricultural product harvested from a cocoa tree using a certified process which is followed by cocoa farmers, buyers, and chocolate manufacturers, and is designed to create sustainable incomes for farmers and their families. Companies that use fair trade certified cocoa to create products can advertise that they are contributing to social, economic, and environmental sustainability in agriculture.
Fairtrade bananas was a marketing initiative which focused on increasing the price paid to small banana growers and the wages of agricultural workers. This is not a commercial brand, but a marketing strategy. Fair trade is based on higher prices paid by consumers that allow an equitable distribution of gains from trade over the chain partners.
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