While activists call for consumers to buy Fairtrade coffee, critics – like the author of the documentary The Bitter Aftertaste – say that the achievements of the Fairtrade movement are too modest. Hostility to the movement is on the rise from right and left alike. As Reason magazine puts it:
The movement has always aroused suspicion on the right, where free traders object to its price floors and anti-globalization rhetoric. Yet critics from the left are more vocal and more angry by half; they point to unhappy farmers, duped consumers, an entrenched Fair Trade bureaucracy, and a grassroots campaign gone corporate.
It has always seemed to me that there is a better, more sustainable approach to raising living standards. That approach is to help farmers move away from just growing coffee and exporting the beans (with very little processing) to the developed world. If coffee-producing countries actually did the processing and packaging, and even stuck their own trademarks on the finished product, developing countries would be able to capture more of the value in a bag of coffee sold in shops in the high street.
When I’ve spoken to Western companies selling Fairtrade produce, they never seemed all that interested in the idea – or they though it was not feasible. So I am delighted to have found a company that actually does it: coffee grown in Peru and Costa Rica where the packaging and processing is also done there too. I went to their UK online store and bought some which I will be tasting in the office on Monday, but it strikes me as a superb way of increasing living standards. More information is here.
I like your idea, Alex.
Equally, I hate Fair Trade, partly for its name. Do not try to subtley brainwash me, thanks. I will decide what is fair trade for my dollar. Not some manipulative little leftie.
nice post, i’ve built upon it here and linked to some Mercatus work
Alex,
As I understood it, the reason very little roasting or further processing happens in developing countries is that corruption and costs of doing business in these countries make it more risky. Is there any empirical evidence on this?
One of the things I’ve heard from coffee drinkers is the Fair Trade stuff tastes bad by coffee standards
Fair trade is not the worst of initiatives; at the very least because they get past the stage of shouting slogans and actually do something. Sometimes they make a real point too: no sensible liberatian would ever deny that corporations sometimes go to far in neglecting or even cooperating with local potentates.
But in the end, fair trade as a philosophy has no future, because it considers justice an economic rather than a legal concept. You cannot embrace trade and adopt high moral ground, if you fundamentally reject the consequences of trading on a market. Markets imply competition for lower prices and this will always affect the players, including the third world farmers. Telling these farmers otherwise is not helping them.
And that is why fair trade offers no future either. It doesn’t matter how much extra we pay on top of the normal market price: no farmer will ever thrive by following orders and specifications, by living in micromanaged communal farms or by rejecting technology because fair trade forces them to share our irrational ecological concerns. The only way to help is by striving for a working legal system and for the end of all tarrifs.
marcus – Absolutely! The way out of poverty is free trade, not some notional kumbayah “fair trade”.
I agree than in the early days especially ‘fair trade’ coffee tasted worse than most other coffee.
My biggest problem with ‘fair trade’ coffee is that you can only easily buy it in supermarkets. I try to support my local independent coffee roaster/importer. God only knows how fairly he trades for his beans.
But the general idea of co-operative schemes that cut out the middleman are good – they make perfect economic sense. I’ve nothing against suppliers in a market getting together to wield collective power – God knows enough buyers do it.
As AJE notes – the Mercatus Center’s Enterprise Africa! project has a good post at this site on branding coffee in Rwanda – http://www.mercatus.org/enterpriseafrica/subcategory.php/339.html
I view the problem of coffee as an information asymmetry problem; coffee is traded internationally and prices are generally known to the major buyers and wholesalers, but many of the farmers do not have access to this pricing information on the spot and futures markets. As a result, there is more room for middlemen and other agents to buy low and sell at market for a higher price.
Conceptually, I don’t really have a problem with this – the middlemen are facilitating the transfer of coffee from the farm to the roaster, but if Fair Trade advocates are truly concerned, they should act to provide market price information to the farmers so the farmers can make more informed decisions regarding the prices they will sell for. If this results in voluntary farmer cooperatives joining together to store and process the beans, great. Fair Traders seem to think they offer a superior alternative to the market, but they could probably work more efficiently towards their goals by devoting their energies to making the coffee market work more efficiently for the farmers.
I don’t hold out much hope for this though – most of the Fair Traders are people who complain that farmers don’t get paid enough for their food, i.e higher prices, and then turn around and complain that the poor cannot afford food because the prices are high.
Great stuff! The comment about fairtrade coffee not tasting good. You can’t tar them all with the same brush. I drink one. It tastes great. This new arrangement seems infinitely preferable to giving loads of money to some little dealer who isn’t involved in production.
The local imprter/roaster where I live has sublime coffee. I have to travel 30 miles on a certain day to buy it mind you so it isn’t my everyday cup.
The answer to empowering the individual is technology. In India soybean farmers have profited greatly by being able to log on to a computer and see the prices for their product in several markets. Fishermen out at sea can get on their mobile phones and find out the prices at several different ports and choose the best for them. Technology, not kumbayah, is what will set people free.
The problem is the tariff barriers, such as the ones imposed by the EU, in the developed countries to food once it has been turned into the finished product rather than as raw materials. Unlike what the anti-globalisation people say the problem of world poverty is not that the poor countries have been forced to open their markets, but that the rich countries haven’t reciprocated. If there where more Free Trade (which is intrinsically fair) then everybody would be richer and there would be no need for marketing gimmicks like Fair Trade.
Having just been to watch England go down 24-28 to Ireland, with all guns blazing I might add, at Twickenham we adjourned to the admirable Loch Fyne restaurant closeby for scotch and coffee. Our waiter asked us if we wanted real coffee or “that Fair Trade stuff instead”, said more in the style of “you really don’t want to try that muck, Lavazza is much better”
Chris – This is the elephant in the living room. They fiddle around with all these poncy agreements and poncy ideas like Fair Trade, but the answer is staring them in the face: Free trade for all. Open up our markets. Everyone will benefit. The only way these guys are ever going to get a foot on the ladder is to be given access to our markets, as we have access to theirs.
I don’t have much choice in the matter of Fair Trade coffee, as I live with and look after my disabled grandmother, and she insists on buying it. The coffee we get is quite nice, nothing spectacular, but I’ve had worse.
I don’t like the idea of Fair Trade as it seems like it’s just preserving the status quo – ie, it doesn’t require the EU to sort out its bloody stupid tarriffs, as mentioned above, and it doesn’t require the corrupt governments of Third World countries to change in any way.
I think that buying Fair Trade products is often a way for certain people in developed countries to assuage their guilt over having better lives than the people who produce the Fair Trade items. Unfortunately they haven’t followed that thought all the way through and realised that in the long run, it’s not doing much to help at all.
You need to read “The Undercover Economists” FairTrade products have a marginal cost of 1/10 what they sell it for! People who buy Fairtrade products are indeed helping some poor farmer or worker, but they are also VERY heavily lining corporate pockets.
However, atm ‘Fair Trade’ does do more for the producers in the third world and as such, it gets my business.
Personally I, like most others here, would like to see markets without tariff or restraint as it would be the best solution. That being said, I will take what I can get now in the hope that it encourages more positive action in the future.
Rome wasn’t built in a day and all that.
Wrong, Lusiphur – Once you start accepting their standards and going along with their rules – in the hope of changing them – your cause is lost.
It should just be a big NO to Fair Trade coffee. We’ll advance our own system – free trade. Once you begin compromising with these shits, you never get out of the rat maze.
That is a lesson we have to learn. Stop being reasonable. Advance our own agenda and don’t deal.
Way to increase the living standards? Besides promoting the things that people need to do for themselves (justice including property rights, saving and investment, etc), the only other thing we could do down the corner shop that would actually promote living standards in other countries was to buy the products with best value for money. That way their providers would build up their capital bases, which both lowers the real cost of goods as efficiency advances with capital intensity and further allows (necessitates, actually) incremental increases in wages as payroll drops as a proportion of total expenses while labour quality required increases. No need for any targetted campaigns or begging on the sly for that, and departure from that will prove counterproductive as comparative inefficiency and failure to do the other needful things are rewarded.
JJM
Verity
Exactly. Buying Fair Trade products doesn’t say “I’m doing my bit in the absence of tariff abolition” at all. The signal it sends out is “Let’s meddle with the market.” From what I can see it’s a thoroughly anti free-market movement and it won’t ever see a penny of my money.
“Fair Trade” like organic foods, seems to be a scam devised to relieve the dumb lefties of some cash. As such is it a perfectly legitimate scheme. Kudos to the enterpreneurs who came up with the idea.
Indeed, Jacob. “Fair Trade” allows the distribution chain to keep hold of their vast margins while passing on 500%* of the increase for the farmers on to the consumer.
This reminds me of the dairy farmer issue in the UK. They compain about being exploited, so why don’t the farmers gang up on the supermarkets? Nope, they want the State to subsidise them!
Transparent, consistent, timely and trustworthy information is a VITAL part of markets, as anyone in the financial services will know. Without it, markets are inefficient, unfair and open to abuse.
* Sometimes an exageration, but not always.
Farmers will get a jolt very soon as there are new regulations coming in. These regulations are to do with polluting practices on each farm and if the farmers don’t meet the required standards they start to lose their subsidies on a sliding scale.
Organic food is only a “scam” insofar as the middle men charge too much money for it. Remember, everything was organic before the widespread use of manmade fertiliser.
“Remember, everything was organic before the widespread use of manmade fertiliser.”
Remember also that at that time the total agricultural output was maybe 1/10 of what is needed to feed current world population, but probably much less.
Oh, those good old times !…
1/10 of what is needed to feed current world population….and now if all food production turned away from manmade fertilisers would it still be only 1/10? I think not. Back in the “good old days” people grew some of their own food themselves. People don’t really do that much anymore unfortunately.
On the organic subject I met a guy this weekend who’s partner, Mark, has been given the job of running an organic urban farm in Newcastle. His previous gig was running one at Bede’s world in Jarrow. This was done using Anglo-Saxon techniques. He plans on retaining them at the new farm. These include plowing with oxen – he’s already got them on order. The council are paying him 20k a year with the farmhouse thrown in and 75% of all domestic utility bills paid for. So while Indian farmers are checking the price of soy on the internet, a Geordie will be deliberately running a farm using first millenium techniques at the Newcastle tax-payers expense. Apparently this enterprise is currently breaking-even, but that’s because it’s kept afloat by people paying to stable their horses there.
Truly, we have gone mad.
The main problem I can see with roasting and processing (grinding and packaging for retail, I imagine) in the source countries, is that ideally coffee should be roasted as soon as possible before drinking, and ground immediately before, for maximum tastiness.
Now, obviously this isn’t a fatal flaw, as demonstrated by the popularity of five-pound cannisters of pre-ground coffee, but I really doubt any small-to-medium concern in, say, Costa Rica can compete on price with Folger’s… and with the flavour losses and lost quality signals from bulk pre-ground coffee, that’s all they really have.
Their real advantage is in the boutique market, and the coffee conoisseur. The best bet I can see for them would be to get enough capital to open a roaster/processor in the end-market country, to provide a superior quality fresh coffee on demand (and also secure the profits from retail).
Oh, and by amazing good fortune, I appear to be confirmed in the plausibility of my plan by people actually doing it with some success.
(The “market a better coffee for more money” part, that is, not the “roast and grind it in the country-of-destination” part, which may come with larger quality-based cooperatives and greater capital.)
The main problem I can see with roasting and processing (grinding and packaging for retail, I imagine) in the source countries, is that ideally coffee should be roasted as soon as possible before drinking, and ground immediately before, for maximum tastiness.
Yup. There isn’t a whole lot of processing that can be done to coffee in the country of origin without diminishing it’s market value.
‘Green’ bean will keep for around a year before it becomes stale. Once it’s been roasted, you’ve got about a week before it starts to turn. Once the roasted beans have been ground, the beans need to rest for 12-24 hours before the water will penetrate the grind and make a decent cup- try to use them sooner, and you’ll have some problems as the water will tend to just sit on top of the grounds.
I’ve got some relatives in the coffee business.
[snip]
It’s amazing how the Samizdatistas are experts in every possible field, from space ventures, through Balkan politics, to cofee beans !
I, for one, am content to let the cofee business run it’s own chosen course without the benefit of my learned advise (I don’t drink cofee at all !).
A pitty those cofee and business ignorant people engage in politically or ideologically driven campaigns.
The cofee business, like any other, could benefit most from being left alone !
A pitty those cofee and business ignorant people engage in politically or ideologically driven campaigns.
Well, that relative does carry a few varieties of ‘fair trade’ beans, but it’s strictly because some customers ask for them- he’s responding to demand, which is how things should be.
As a coffee roaster in Colorado I am trapped in the Arabica Bean market because of the high prices in the Organic Fair Trade model. We have sustained a 100% price increase that is killing us as roasters. Our margins are decreased as we need to scale our wholesale pricing. Can anyone see relief in the near future ??