North: A fair shake for world farmers

Last week, guest columnist Harry Graver (“The cost of moralizing coffee,” Feb. 15) forcefully argued that Yale and our co-operative, Equal Exchange, were unwittingly hurting the same small-scale coffee farmers we seek to support because there are, he contended, powerful negative unintended consequences to our Fair Trade importing policies.

While we appreciate the vigor of Mr. Graver’s argument and that he shares our concerns for the fate and welfare of small farmers around the world, we strongly disagree.

Thankfully, we can reassure the News’ readers that the Yale community need not worry about the decision to serve our Fair Trade coffee in their dining halls. To the contrary, Yale students, faculty and staff should be proud that your dining services have been one of the leaders among university programs in thinking about the real world ramifications of where and how you source your food and beverages.

As for Mr. Graver’s assertions, most of them seem to be borrowed from the Adam Smith Institute that he cited in his column. Over the years this institute has periodically attacked the efficacy of Fair Trade, but has not taken the time to learn how it actually works. In total his column contained more factual errors than we can address here.

To start, both the Institute and Mr. Graver present an over-simplified picture in which Fair Trade is only about price; where farmers base their production decisions solely on price signals; and in which there is a single homogenous coffee market. In reality, price is only one of five major components of Fair Trade; farmers make their production choices based on dozens of variables; the coffee market is fragmented into many regional, quality and production-method sub-categories; and so on. Consequently, a simple equation of “price signals equals production decisions” actually obscures the situation more than it illuminates it.

Secondly, and more importantly, the prices paid by Fair Trade importers like ourselves apply only to the crops we import, which, with other Fair Trade buyers, collectively represent about a mere 5 percent of global coffee production. The other 95 percent of the global coffee crop is still priced according to traditional free market forces. In most years this means that most farmers make a very meager income — maybe $500 a year or $1,000 a year if they’re lucky. Because of Fair Trade’s targeted impact it is not a “price setter” for the whole market that inadvertently lures farmers into growing the wrong crops. Unlike government price support programs it is not a promise to buy all coffee grown everywhere at a set price. Thus, rather than setting a minimum wage for all the world’s coffee, we and other fair traders are simply promising a fairer price for the coffee we do buy.

And we do this because we know that often markets actually don’t work well enough, and that many of the assumed market elements described in textbooks do not exist in farming communities. In rural Peru, Mexico or Kenya, there is often a great asymmetry between the few well-connected and resource-rich buyers and the many, usually disconnected and physically isolated sellers. There is asymmetry in access to information, markets, credit, insurance, land and labor.

The point is that when we make business and moral decisions we all do so in a specific, real context, not within a stripped-down, theoretical abstraction. For example, a typical coffee farmer grows up on a mountain or hillside, on a plot his or her family has tended to and invested in for a generation or more. The farm is a day’s walk from the nearest town and maybe a four-day drive from the nearest port. This person has very limited economic choices. He/she cannot simply choose to replace their coffee orchard with a cherry or apple orchard. They cannot follow one season’s price signals and switch to soy beans or strawberries, and then switch back again. With very limited schooling in their community they have little or no access to “professional” career paths. Unfortunately, some of the choices they do have before them are to grow drugs, move to the slums around Lima or Nairobi, or migrate illegally to the U.S. or Europe.

The fact is that farmers the world over are usually making prudent decisions in very constrained circumstances. Even at the typically low-market prices, growing coffee is often the most rational, utility-maximizing, risk-minimizing decision among many poor choices. With Fair Trade we make their hard work a little better compensated, a little less risky and a little more sustainable (both economically and ecologically), and in this way we try to make the transaction a little more just.

Rodney North is a worker-owner for Equal Exchange .

Comments

  • RiverC

    Thank you for your work, and for putting this issue in its morally correct context by addressing the real-world constraints faced by farmers.

  • djkumquat

    Thanks to Rodney North for the thoughtful response to last week’s misguided guest column from Harry Graver (“The cost of moralizing coffee,” Feb. 15). For those who would like to read more about fair trade, “The Fair Trade Revolution,” edited by John Bowes, is an excellent book. The Wall Street Journal recently wrote a review of the book that touched on the important difference between voluntarily paying a premium for fair trade (or anything else a customer may deem as higher value) and market manipulation by government. The review can be found here:
    http://online.wsj.com/article/SB10001424052748703555804576102361000834394.html

  • graduate_student

    Mr. North makes exactly the point that was lost on Mr. Graver: it is perfectly in accordance with free market principles to voluntarily pay a higher price for a product.

  • amfergus

    I haven’t read the other article but I think your completely right about fair trade being a ‘little better’ and a ‘little fairer.’ The best way I have heard fair trade coffee summed up is “the minimum an entity has to do to get the public to stop asking about trading practices.” True or False ‘I can pay $0.10 more than C market prices for a pound of coffee and it would be considered fair trade.’ The cost of certification and the fact that the buyer doesn’t need to do any more than +0.10 per pound makes fair trade very misleading. The solution lies in helping a farmer improve their crop while convincing consumers of the quality of the improved crop. It’s direct trade or relationship coffee. Either way it’s how the coffee industry must proceed. Look at companies like Stumptown Coffee and and Counter Culture Coffee selling coffee for 15+ a pound. They are the example for ethical and truly sustainable coffee.

  • djkumquat

    Response to amfergus: False. Simply paying more does not make coffee (or any other product) fair trade. In the case of Equal Exchange, fair trade includes direct trade with farms/co-ops, better working pay and conditions (by extension, farm practices such as shade grown and organic), and farmer ownership (either small family owned or larger farmer owned co-ops). Direct trade merely means that the coffee is purchased directly from a farm, with no differentiation between whether it’s a small family operation or a large, low wage paying plantation. And not-so-fast on the ethical and sustainable reputation of Stumptown. Only some of their coffee is through direct trade, but they offer no fair trade coffee. Claiming direct trade does not have the independent third party certification that qualifies a product to be fair trade. When it comes to being ethical and truly sustainable, Equal Exchange is far ahead of the pack. Their website is a great resource for further study of fair trade practices. Here’s a good starting point: http://www.equalexchange.coop/fair-trade

  • amfergus

    Um. I don’t think Equal Exchange can define fair trade for themselves. As you suggest with “In the case of Equal Exchange, fair trade includes…” To be able to legally use the fair trade logo and name in the United States (as an importer) you have to pay the FLO’s minimum price. This price has actually been less than what the C market has been and has only recently been adjusted.

    http://www.fairtrade.net/single_view1.0.html?&cHash=cc05d2da3c&tx_ttnewstt_news=195

    If Equal Exchange is going above and beyond the strictly economic attempt by FLO then good for them. I’m also linking a study done that comes to the conclusion that fair trade standards as they exist, are not enough.

    http://ageconsearch.umn.edu/bitstream/51717/2/668_IAAE_Beuchelt.pdf