The help could not be more timely. In just four years, prices for a pound of beans have fallen from a peak of $3.18 per pound to a 30-year low that is hovering beneath the 50-cent threshold. The Association of Coffee Producing Countries abandoned its bid to become the industry’s equivalent of OPEC and closed down operations two weeks ago. Tens of thousands of small farmers in Latin America, Asia and Africa have abandoned their plots, and in Colombia and Peru, some have switched to other crops like bananas or coca as a last resort. “People aren’t taking care of their coffee farms anymore,” says Raymond Kimaro, the head of a coffee cooperative representing 100,000 Tanzanian farmers. “All their lives they have been depending on coffee, [but] they say it doesn’t pay.”
The Fairtrade movement began in the Netherlands in 1989 with a simple idea: target socially conscious consumers who would be willing to pay a bit extra at the supermarket in exchange for the assurance that Third World farmers receive a reasonable return for their labor. Organizers have developed marketing channels for seven food products ranging from orange juice and honey to sugar and cocoa, but they focused most of their efforts on coffee as the second most heavily traded commodity in the world after oil. In the rallies that upset world-trade talks in Seattle three years ago, one of the few protest slogans that represented a solution to the problems of globalization–not just a complaint–was “Fairtrade not Free Trade.”
So far, however, the ambitions of the Fairtrade movement fall well short of a global alternative to free trade. Activists have recruited gourmet-coffee importers and roasters in more than a dozen European countries, and more than 130 brands of coffee bearing the Fairtrade seal of approval are now sold in more than 35,000 European supermarkets. Fairtrade sales reached $212 million in Europe last year, just a tiny fraction of the market. Four million pounds were sold in the United States, less than 1 percent of the total.
The obstacles to wider sales for fair trade beans are numerous. The price is too steep for canned coffee companies like Nestle, which rely on high volume. Specialty coffee roasters targeted by the movement account for less than 5 percent of the industry. A 500-gram bag of Fairtrade coffee beans costs an average $5.60 at German supermarkets last year, nearly $2 more than regular beans. And it’s not clear whether even rich consumers, accustomed to high prices for specialty coffee, will pay the same markup for politically correct tea or bananas.
In effect, the Fairtrade movement is trying to sell a kinder, gentler form of capitalism to producers and consumers alike. Its efforts have garnered financial support from both the Dutch government and the European Union. Since its establishment four years ago, the Bonn-based Fairtrade Labelling Organization has become the nerve center of the movement. It has established strict criteria governing both the 550,000 farmers who benefit from the high price as well as the importers who pay it. Coffee growers are expected to own and work their farms and belong to cooperatives that are run on a democratic basis. The importers must pay a price that covers not only production costs but also a “social premium” that can help improve the farmers’ working and living conditions. “Instead of giving people money, give them a fair deal,” argues Fairtrade Labelling Organization chief Luuk Zonneveld. “Our [goal] is covering the cost of sustainable production and sustainable living.”
The corporate response has been to play along under pressure. A concerted letter-writing campaign helped persuade the huge U.S. food conglomerate Sara Lee to add a Fairtrade-stamped brand of coffee called Prebica Rain Forest blend. Starbucks rolled out its own Fairtrade brand of beans a year ago after activists raised some pointed questions at a shareholders’ meeting. It announced plans two weeks ago to buy up 1 million pounds of certified beans, but CEO Orin Smith says the caliber of Fairtrade stocks is not always up to snuff. “Finding quality that meets our standards has been the principal barrier for us,” he says, “and we’re looking at programs with the Fairtrade people to raise those levels.”
Fairtrade has enjoyed some success largely because it is just a niche player. The bigger it gets, the more resistance there will be to a so-called fair price, as set by activists using a complex formula to calculate the “social premium.” Some analysts argue the mark-up can’t be truly fair unless it applies equally to all players in the industry, from farmers to buyers and countries. What of the Peruvian growers who are not protected by Fairtraders? British M.P. Vincent Cable, an international economist by training, worries that the fair price could hurt the countries it’s meant to help, by pricing them out of export markets. At the London-based International Coffee Organisation, economist Denis Seudieu says the industry supports Fairtrade unless it gets so big that consumers “stop buying [other] coffee at all.”
The potential for market distortions can’t be overlooked. Yet it’s impossible to visit the Marmas Valley and simply dismiss this as a half-baked idea. By one estimate, the Fairtrade movement brought in an additional $2.5 million in revenues last year to the 7,000 Peruvian growers in member cooperatives. Guerrero is putting his share to productive use: sending three of his children through college and making improvements on his 10-acre farm. Other Marmas farmers have invested in peeling machines that skin 100 pounds of beans in minutes, rather than the hours it takes by hand. They might survive on less. But why should they? “In effect [Fairtrade] is just getting started, and it hasn’t been a gangbuster in terms of sales,” says Ted Lingle, executive director of the Specialty Coffee Association of America. “But in today’s world, where a lot of coffee farmers are hurting, anything we can do to raise prices at the farm gate is a good thing.” Free marketer, stand warned. There is another way to trade.
