Stimulating ethical economics

Coffee. We all know it, most of us drink it and many of us cannot function without it. But coffee is far more than a comforting stimulant. It touches the lives of millions, possibly billions, every day. It is one of the most exported goods coming out of the global south and it has the power to shape the lives of over 25 million families worldwide.

Coffee, a tree crop, first entered Europe in the 17th century, though it did not experience a rise in popularity until the 19th century. Coffee suffers from extended periods of excess production and low prices, making economic sustainability difficult to attain for those involved in the production of the crop worldwide.

More than 500 billion cups of coffee are served worldwide each year. A staggering 146 billion of those cups are consumed in the United States alone. This translates to roughly 400 million cups of coffee consumed every day by our southern neighbours.

“Coffee is the second most valuable legally exported commodity from the global south after oil,” said Gavin Fridell, professor of politics at Trent University and author of Fair Trade Coffee: The Prospects and Pitfalls of Market-Driven Social Justice, in an interview with the Cord last week.

The problem with coffee

According to Business Unusual: Success and challenges of fair trade, published by the Fair Trade Advocacy Office in Brussels, the price of the world’s leading agricultural commodities have fallen between 50 and 86 per cent over the last 20 years, with the price of coffee experiencing some of the most extreme drops.

And when “[coffee] provides an income for 25 million coffee farmer families,” as Fridell explained, the global decline in coffee prices can mean only one thing: poverty for millions. More often than not, this poverty is extreme.

Low international coffee prices ultimately mean that many coffee farmers cannot afford to feed their own families, which makes it even more difficult for them to maintain their land or invest in more efficient farming practices. This results in a cycle of unmanageable poverty.

Before 1989, coffee farmers were protected by the International Coffee Agreement, a document designed to regulate the global price of coffee. The agreement also worked to maintain a reasonable return for the millions of coffee producers worldwide. This agreement protected coffee farmers and the economies of the global south that are heavily reliant on the popular export.

In this same year, the U.S. pulled out of the international agreement, triggering a collapse. The price of coffee is now regulated by the international markets and has been dropping ever since.

The families reliant on coffee exports are no longer protected by international trade regulations. Instead, they are subjected to a market dominated by corporations and public demand.

Each year, coffee farmer families receive less than 10 per cent of the estimated $60 billion that the global coffee industry earns annually.

The collapse of this agreement has contributed to coffee becoming the first fairly traded agricultural product.

Prior to the collapse of the International Coffee Agreement, a group of non-governmental organizations (NGOs) and mission-oriented groups like Ten Thousand Villages, known as Alternative Trading Organizations, were focusing their energies solely on trading handicrafts. Skilled artisans predominantly in the global south were creating crafts to be sold by these fair trade groups.

With the sudden fall in coffee prices internationally, many felt the need to extend fair trade beyond the realm of handicrafts, so coffee and tea were the first agricultural products to be traded fairly.

Defining fair trade

Fair trade is a complex system that places a higher value on the rights of marginalized producers and the environments they work in than what is traditionally available through the global market.
Wilfrid Laurier University global studies professor Alex Latta identified fair trade as “a model of production, distribution and marketing that operates parallel to the global market.” The global market has been described by many as an ideal democratic economic system, one that has the potential to offer equal opportunities to all.

Fridell is a realistic supporter of what fair trade offers the global economy and argues, “The global market does not offer everyone win-win solutions that are ethical. The more you let the market run our society, the less ethical things become.”

It is these ethical trade practices that make up a large portion of the logic and motivation that fuels the fair trade movement.

The official definition of fair trade, as defined by the worlds leading fair trade organizations is: “A trading partnership, based on dialogue, transparency and respect, which seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South.”

In order for coffee to be classified as fair trade it must be grown, processed and purchased under strict regulations that are fair to the producer, the consumer and the environment.

Often, fair trade results in more personal trade partnerships.

By diminishing the distance between producers and consumers, the fair trade movement brings humanity back to consumerism.

The coffee at Ten Thousand Villages in Waterloo is an example of a product that has been produced in ethical and socially responsible ways.

According to the assistant manager Nikki Bakes, 26 per cent of the proceeds from every bag of coffee from the Max Havelaar Foundation sold by Ten Thousand Villages returns to the farmers who produced the beans. 26 percent represents a significant improvement when compared to the 10 per cent that returns to the farmers of coffee on the international market. In terms of the average returns to farmers who benefit from fair trade, 26 per cent is on the higher side of returns.

Fair trade organizations often work in conjunction with farming co-operatives in a democratically structured process that seeks to bridge the gap between consumers and producers.

These organizations assist farmers by offering various types of education in the hopes that it will encourage more effective farming techniques to increase yield, credit support and increase workplace safety.

Because the global demand for coffee is so high, many groups like the Global Exchange Organization argue that all coffee should be fair trade.

However, fair trade does not necessarily imply complete fairness. “I mean, maybe we should all be paying five times what we pay now for coffee, that would probably be closer to what’s fair,” said Fridell.

Fair trade and big business

With such an influx in the fair trade market and consumer response, large corporations such as Starbucks and Nestlé have jumped onto the ethical bandwagon.

“Fair trade is becoming increasingly corporate driven,” Fridell explained. “Now 0.2 per cent of the coffee beans Nestlé uses are fair trade, and they are using this to launch a huge ethically based marketing campaign.”

Ethical business practices have become one of the most popular marketing trends in recent years.
Of course, each company’s definition of ethical is going to differ.

A product that meets the standards of fair trade will be TransFair certified. Meeting these requirements can be costly however. For this reason, countless ethical labels with more flexible standards are making their way onto the products we consume daily.

Nabob Coffee Company, for instance, is Rainforest Alliance Certified. This certification body works to conserve biodiversity by transforming land-use practices. While protecting the environment is immeasurably important, the Rainforest Alliance’s standards for social responsibility are significantly lower than those of TransFair.

Similar to Nabob, Starbucks coffee is CAFÉ certified. Where Nabob has sought out a certification body that has less stringent farming and production standards, Starbucks has chosen to employ their own certification label: CAFÉ.

Fridell refers to this label as “a watered-down version of fair trade, which demands much less of their southern partners.”

Fair only in theory?

A fairer price for a commodity that is a dominant player in the global market seems inevitable, and fair trade has ultimately risen exponentially as a proportion of world sales. However, this rise in success does not mean that fair trade is without its critics.

According to the Fairtrade Labeling Organization International, last year the fair trade market increased its span by 22 per cent, a shocking level of growth compared to traditional markets.
Fair trade certainly has some positive impacts, but the question remains: should you buy fair trade coffee, and does it really matter either way?

“We cannot pretend that a problem doesn’t exist and think that buying fair trade coffee makes up for it,” said Fridell. “Buying fair trade is important and showing solidarity with southern farmers who have the same values as you is important, but it only helps three per cent and at the end of the day we need to find ways to help the other 97 per cent of fair trade farmers.”

Buying fair trade supports a set of values and ideals that place the dignity and rights of those less fortunate ahead of the bottom line. Through supporting these values, the consumer can make a small statement about how they think global trade should be conducted.

On the subject of the limitations surrounding fair trade, Latta stated that “in being an alternative to the system, [fair trade] doesn’t necessarily challenge the system,” though Latta does emphasize the importance of the movement.

“There are fairly few examples in our time of social activist that are able to create alternatives that work,” he explained.

Latta concludes that despite critiques and a lack of enthusiasm by many for fair trade, its market gains are exceptional.

“What is special about fair trade is that it is an organization that works with niche markets. The percentage growth in fair trade products compared to growth across the market is really phenomenal and shouldn’t be ignored,” Latta added.

The world is paying attention to fair trade coffee; this fact has been made clear by corporations’ desperate attempts to present themselves in a similar light to those organizations that truly sell fair trade coffee.

Ultimately, fair trade may not change the situation of everyone, but it makes a big difference to those involved.

While fair trade is growing in popularity, demand is being outpaced by production. Only 20-30 per cent of fair trade famers can find buyers for their product. The rest is sold on global market at a loss to the producers.

Currently, 670,000 families benefit from sale of fair trade coffee. This is undoubtedly a huge number of people, but since over 25 million families produce coffee globally, fair trade benefits less than three per cent of all producers.

Changing these numbers requires far more than a consumer commitment, but no attempt to better the situations of others should be undervalued. So get educated and consider becoming a supporter of fair trade.

Facts and figures

$164.71 – The average amount drinkers spend on coffee annually.

73% – of coffee consumed at home in Canada is purchased at the supermarket.

63% – of Canadians over 18 drink coffee on a daily basis.

25 million – number of coffee-farming families worldwide.

Who gets what on the open market?

10% – goes to farmers.

10% – goes to exporters.

25% – goes to retailers

55% – goes to shippers and roasters.