Fair Trade Coffee and Reducing Poverty

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BAINBRIDGE ISLAND, Washington — Fair trade coffee sits at the forefront of sustainable foreign agriculture, often recognized as a successful way to provide a just market for coffee farmers in developing countries. However, recent research suggests that fair trade may not be as beneficial to helping the poor as once thought.

Four economists from the School of Oriental and African Studies examined living standards in fair trade regions in Uganda and Ethiopia in comparison with similar non fair trade regions and found that Fair Trade workers often earned lower incomes.

The researchers spent four years in the coffee, tea and flower sectors in Ethiopia and Uganda, where they conducted over 100 interviews and gathered 1,700 survey replies. They found that people living in rural, non fair trade communities enjoyed higher living standards than agricultural farmers in fair trade regions, where they reportedly earned lower wages for fair trade products. In addition, women’s wages among farmers participating in fair trade regions were especially low.

Ultimately, the research suggested that fair trade has not made a positive difference in the studied regions, many of which lacked access to health clinics, schools, improved sanitation and other institutions.

If this is the case, what aspects of fair trade are reducing its positive impact? Fair trade coffee is overseen by the Fair trade Labeling Organizations International along with its U.S. affiliate, Fair Trade USA. Coffee growers who belong to a selected group of producer cooperatives abroad receive a minimum price per pound for all coffee that can be sold under the fair trade label.

The minimum price creates a “price floor,” or beginning amount, for fair trade growers. If the market price is higher than the price floor, growers receive the market price, as well as a premium that is sent back for investment in the cooperative or local community.

To be able to participate, growers must go through a paid certification, join a democratically managed cooperative, comply with standards of fertilizer and pesticide use and pay fair wages to their coffee laborers.

Fair Trade USA, the U.S. certification organization for fair trade, aims to “double the impact of fair trade for farmers by 2015, and improve lives throughout the global coffee supply chain.” The recent research shows, however, that the fair trade system’s structure is preventing it from making its intended positive impact.

One of the primary problems with the fair trade system is the costs it imposes on growers. Fair trade growers have to pay large certification fees of approximately $0.03 per pound, according to the University of California. Researchers from U.C. San Diego and U.C. Berkeley found that the overall long-term benefit over time was little to none.

Growers have incentive to put their bad beans from coffee harvests into the fair trade system. If the market price for low-quality beans is lower and market price for high quality beans are more costly, growers have incentive to put the poorer beans into the fair trade system with the idea that they will receive a premium.

The premium that fair trade countries receive is also a vague factor. How countries are actually spending the money they receive for community and education investment is typically not very clear. Oftentimes, the money may go towards salaries and operative structures rather than its intended purpose.

The fact that growers do have incentive to use bad beans sometimes scares away potential buyers, limiting the market for fair trade coffee.

The fair trade system does not reach the coffee growers and countries that would benefit most, either. A large portion of fair trade coffee comes from middle income countries such as Mexico, Brazil and Columbia, rather than the poorest coffee-growing countries: Ethiopia, Tanzania and Kenya.

A study in Costa Rica also showed that the benefits garnered from fair trade tend to go to the most skilled growers, with no positive impacts on coffee laborers and children’s education.

Fair trade focuses on coffee production, rather than improvement in key poverty reduction areas of education, health, infrastructure and entrepreneurship. Though it intends to improve the lives of coffee growers around the world, the fair trade system is complex in how it functions and has unexpected effects on growers.

Julia Thomas

Sources: Huffington Post, Fair Trade USA, Stanford Social Innovation Review, The Economist
Photo: Century House

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About Author

Julia Thomas

Julia is from Bainbridge Island, Washington and writes for The Borgen Project while attending Scripps College in Claremont, California. She has always been interested in the issues behind global poverty, and she is passionate about communicating current stories within these through journalism. In her free time, Julia enjoys running, hiking and skiing.

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